The ITO, TDS-3, Ahmedabad V. Sichuan Fortune Projects Management Ltd., Ahmedabad

ITA 3555/AHD/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8593 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-04-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 29-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V K SINGH
• Keywords: Recovery proceedings; Double taxation relief
• Section: 206AA; 90

Judgement Text

, M MM MH HH H IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD EKUHK CKSJM BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER AND SHRI, MANISH BORAD, ACCOUNTANT MEMBER I.T.A. NOS.3554, 3555 & 3556/AHD/2016 ( !' ASSESSMENT YEARS:2011-12, 2012-13 & 2013-14) THE ITO, TDS-3, AHMEDABAD. VS. SICHUAN FORTUNE PROJECTS MANAGEMENT LTD., 302, MANGALYA APARTMENT, OPP. KRUPA PETROL PUMP, JUNA SHRDA MANDIR ROAD, ELLIS BRIDGE, AHMEDABAD 380 006 # $% PAN/GIR NO. : AHMS 14614 F ( #& / APPELLANT ) .. ( '#& RESPONDENT ) #&( APPELLANT BY : SHRI V. K. SINGH, D.R. '#&)( / RESPONDENT BY : SHRI IRA KAPOOR, A.R. * +),- / DATE OF HEARING 05 /0 4 /201 8 ./'!),- / DATE OF PRONOUNCEMENT 09 / 0 4 /201 8 0 O R D E R PER MAHAVIR PRASAD, JUDICIAL MEMBER : THESE THREE CAPTIONED APPEALS HAVE BEEN FILED AT THE INSTANCE OF THE REVENUE AGAINST THE SEPARATE APPELLATE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-8, AHMEDABAD [CIT(A) IN ITA NOS. 3554, 3555 & 3556/AHD/2016 ITO VS. SICHUAN FORTUNE PROJECTS MANAGEMENT LTD.. ASST.YEAR 2011-12, 2012-13 & 2013-14 - 2 - SHORT] DATED 04/10/2016 ARISING IN THE ORDER PASSED UNDER S.154 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO A S 'THE ACT') DATED 08/04/2015 RELEVANT TO ASSESSMENT YEAR (AY) 2011-12 , 2012-13 & 2013-14 RESPECTIVELY. 2. SINCE IN ALL THREE APPEALS ISSUES AND GROUNDS AR E COMMON ONLY FIGURES AND ASSESSMENT YEARS ARE DIFFERENT. THEREFO RE, FOR THE SAKE OF CONVENIENCE, WE WOULD LIKE TO DISPOSE OF THESE THRE E APPEALS ALTOGETHER. 3. IN ITA NO.3554/AHD/2016 FOR THE ASST. YEAR 2011- 12, FOLLOWING GROUNDS HAVE TAKEN BY THE REVENUE: 1. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING THE DEMAND RAISED AS PER SECTION 306AA OF THE I.T ACT F OR MENTIONING WRONG PAN WHICH ATTRACTS APPLICABILITY OF TAX @20% ON THE GROUND THAT PROVISION OF TDS ARE TO BE READS ALONG WITH DTAA FOR COMPUTING THE TAX LIABILITY UTT ERLY IGNORING THE FACT THAT THE ASSESSEE HAS MENTIONED W RONG PAN AT THE TIME OF FILING OF ORIGINAL TDS RETURN IN FOR M 27Q AND AGAIN WHILE FILING RECTIFICATION APPLICATION U/S.15 4 WHICH ATTRACTS APPLICABILITY OF TAX @20% AS PER SECTION 2 06AA OF THE I.T ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE A.O. PASSED 2 01(1). 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY HAD MADE A PAYMENT OF RS.6,25,290/- IN QUARTER 4 OF FIN ANCIAL YEAR 2010-11 TO SHANGHAI ELECTRIC GROUP COMPANY, CHINA ( 'SEC'), A NON- RESIDENT. THE PAYMENT IS MADE AGAINST THE CONSULTAN CY SERVICES RECEIVED FROM SEC ON WHICH THE APPELLANT HAS DEDUCT ED TDS AT THE RATE OF 10% AS PER THE TREATY RATE I.E. INDIA-CHINA DTAA. IN THIS RESPECT THE TDS RETURN WAS FILED IN FORM 27Q VIDE T OKEN NUMBER 4100XXXXXXX9844 . THE ASSESSEE SUBMITS THAT AS PER THE PROVISIONS OF SECTION 90(2) OF THE ACT, THE PROVISIONS OF INCOME TAX ACT OR THE TREATY WHICHEVER ARE MORE BENEFICIAL WOULD APPLY. T HE RELEVANT ITA NOS. 3554, 3555 & 3556/AHD/2016 ITO VS. SICHUAN FORTUNE PROJECTS MANAGEMENT LTD.. ASST.YEAR 2011-12, 2012-13 & 2013-14 - 3 - EXTRACT OF SECTION INDIA - CHINA DTAA AS WELL AS PR OVISIONS OF SECTION 90 ARE REPRODUCED AS UNDER: 'INDIA-CHINA DTAA ARTICLE 12 - ROYALTIES AND FEES FOR TECHNICAL SERVICES 1. ROYALTIES OR FEES FOR TECHNICAL SERVICES ARISING IN A CONTRACTING STATE AND PAID TO A RESIDENT OF THE OTHER CONTRACTI NG STATE MAY BE TAXED IN THAT OTHER CONTRACTING STATE. 2. HOWEVER, SUCH ROYALTIES OR FEES FOR TECHNICAL SE RVICES MAY ALSO BE TAXED IN THE CONTRACTING STATE IN WHICH THEY ARISE, AND ACCORDING TO THE LAWS OF THAT CONTRACTING STATE, BUT IF THE RECI PIENT IS THE BENEFICIAL OWNER OF THE ROYALTIES OR FEES FOR TECHNICAL SERVIC ES, THE TAX SO CHARGED SHALL NOT EXCEED 10 PER CENT OF THE GROSS AMOUNT OF THE ROYALTIES OR FEES FOR TECHNICAL SERVICES. ' 5. ACCORDINGLY, WHILE MAKING PAYMENT TO SEC, TDS IS DEDUCTED AT THE RATE OF 10%. 'SECTION90. AGREEMENT WITH FOREIGN COUNTRIES OR SPEC IFIED TERRITORIES (1)........ (2) WHERE THE CENTRAL GOVERNMENT HAS ENTERED INTO A N AGREEMENT WITH THE GOVERNMENT OF ANY COUNTRY OUTSIDE INDIA OR SPECIFIED TERRITORY OUTSIDE INDIA, AS THE CASE MAY BE, UNDER SUB-SECTION (1) FOR GRANTING RELIEF OF TAX, OR AS THE CASE MAY BE, AVOI DANCE OF DOUBLE TAXATION, THEN, IN RELATION TO THE ASSESSEE TO WHOM SUCH AGREEMENT APPLIES, THE PROVISIONS OF THIS ACT SHALL APPLY TO THE EXTEN T THEY ARE MORE BENEFICIAL TO THAT ASSESSEE. 6. IN ORDER TO GET THE BENEFIT OF TAX TREATIES, NON -RESIDENT ARE REQUIRED TO SHARE TAX RESIDENCY CERTIFICATE (TRC') , OR OTHERWISE THE NORMAL RATE OF TAX AS PER THE ACT WOULD APPLY. SEC HAS OBTAINED TRC, ON THE BASIS OF WHICH TDS IS DEDUCTED AS PER THE TR EATY RATE. THE COPY OF TRC IS SUBMITTED VIDE ANNEXURE-1 . 7. THIS APPEAL LIES AGAINST THE INTIMATION U/S.200A R.W.S. 154 FROM CPC-TDS VIDE CPC REFERENCE NUMBER TDS/1011/27Q/D/100014342031 DATED 8-APR-15. IN THE AFORESAID ITA NOS. 3554, 3555 & 3556/AHD/2016 ITO VS. SICHUAN FORTUNE PROJECTS MANAGEMENT LTD.. ASST.YEAR 2011-12, 2012-13 & 2013-14 - 4 - INTIMATION, CPC-TDS HAS OBSERVED THAT THE APPELLANT HAS SHORT DEDUCTED BY 10% WHILE MAKING PAYMENT TO SEC. A TAX DEMAND ON SHORT DEDUCTION OF TDS OF RS.3,12,645/- IS ALSO RAI SED ON THE APPELLANT ALONG WITH INTEREST ON SHORT DEDUCTION OF TDS OF RS.1,53,174/-. BEING AGGRIEVED OF THE SAID DEMAND, THE APPELLANT HAS PREFERRED AN APPEAL BEFORE YOUR HONOR UNDER SECTION 246A(L)(A) OF THE ACT. 8. THE DEMAND ARISES IN THE APPELLANT'S CASE BECAUS E THE CPC-TDS HAS PROCEEDED TO COMPUTE THE TDS BY TAKING RATES AS PER SECTION 206AA OF THE ACT, RATES OF TDS WHEN PAN IS NOT FURN ISHED BY THE DEDUCTEE. HOWEVER THE APPELLANT HAS DEDUCTED THE TD S BY APPLICATION OF BENEFICIAL PROVISIONS OF SECTION 90( 2). SINCE THE PROVISIONS OF SECTION 90 ARE THE SPECIAL PROVISIONS UNDER THE ACT TO AVOID THE DOUBLE TAXATION, THEREFORE THEY HAVE AN O VERRIDING EFFECT OVER THE OTHER PROVISIONS OF THE ACT. THE APPELLANT SUBMITS THAT SECTION 206AA IS INTRODUCED TO CHECK THE REVENUE LO SS IN ORDER TO COMPLY WITH THE PROVISIONS OF TDS UNDER CHAPTER XVI I-B. IN ORDER TO CORRECTLY UNDERSTAND THE SCOPE AND PURPOSE OF THE I NSERTION OF SECTION 206AA, BY THE FINANCE (NO.2) ACT, 2009, IT WILL BE NECESSARY TO EXAMINE THE PROVISIONS THEREOF, IN DETAIL. FOR T HE SAKE OF READY REFERENCE, THE PROVISIONS OF SECTION 206AA ARE REPR ODUCED, AS FOLLOWS: REQUIREMENT TO FURNISH PERMANENT ACCOUNT NUMBER. 206AA. (1) NOTWITHSTANDING ANYTHING CONTAINED IN AN Y OTHER PROVISIONS OF THIS ACT, ANY PERSON ENTITLED TO RECE IVE ANY SUM OR INCOME OR AMOUNT, ON WHICH TAX IS DEDUCTIBLE UNDER CHAPTER XVIIB (HEREAFTER REFERRED TO AS DEDUCTEE) SHALL FURNISH H IS PERMANENT ACCOUNT NUMBER TO THE PERSON RESPONSIBLE FOR DEDUCT ING SUCH TAX (HEREAFTER REFERRED TO AS DEDUCTOR), FAILING WHICH, FAX SHALL BE DEDUCTED AT THE HIGHER OF THE FOLLOWING RATES, NAME LY:- (I) AT THE RATE SPECIFIED IN THE RELEVANT PROVISION OF THIS ACT; OR (II) AT THE RATE OR RATES IN FORCE; OR (III) AT THE RATE OF TWENTY PER CENT. ITA NOS. 3554, 3555 & 3556/AHD/2016 ITO VS. SICHUAN FORTUNE PROJECTS MANAGEMENT LTD.. ASST.YEAR 2011-12, 2012-13 & 2013-14 - 5 - (2) NO DECLARATION UNDER SUB-SECTION (1) OR SUB-SE CTION (1A) OR SUB-SECTION (1C) OF SECTION 197A SHALL BE VALID UNL ESS THE PERSON FURNISHES HIS PERMANENT ACCOUNT NUMBER IN SU CH DECLARATION. (3) IN CASE ANY DECLARATION BECOMES INVALID UNDER SUB-SECTION (2) THE DEDUCTOR SHALL DEDUCT THE TAX AT SOURCE IN ACCO RDANCE WITH THE PROVISIONS OF SUB-SECTION (1). (4) NO CERTIFICATE UNDER SECTION 197 SHALL BE GRAN TED UNLESS THE APPLICATION MADE UNDER THAT SECTION CONTAINS THE PE RMANENT ACCOUNT NUMBER OF THE APPLICANT. (5) THE DEDUCTEE SHALL FURNISH HIS PERMANENT ACCOU NT NUMBER TO THE DEDUCTOR AND BOTH SHALL INDICATE THE SAME IN AL L THE CORRESPONDENCE, BILLS, VOUCHERS AND OTHER DOCUMENTS WHICH ARE SENT TO EACH OTHER. (6) WHERE THE PERMANENT ACCOUNT NUMBER PROVIDED TO THE DEDUCTOR IS INVALID OR DOES NOT BELONG TO THE DEDUCTEE, IT S HALL BE DEEMED THAT THE DEDUCTEE HAS NOT FURNISHED HIS PERMANENT ACCOUN T NUMBER TO THE DEDUCTOR AND THE PROVISIONS OF SUB-SECTION (1) SHAL L APPLY ACCORDINGLY. 9. THE PURPOSE BEHIND INTRODUCING S. 206AA(1) HAS BEEN STATED IN THE MEMORANDUM EXPLAINING THE PROVISION OF THE FINANCE (NO. 2) BILL, 2009 AS UNDER: 'D. IMPROVING COMPLIANCE WITH PROVISIONS OF QUOTING PAN THROUGH THE TDS REGIME. STATUTORY PROVISIONS MANDATING QUOTING OF PERMANENT ACCOUNT NUMBER (PAN) OF DEDUCTEES IN TAX DEDUCTION AT SOURCE (TDS) STATEMENTS EXIST SINCE 2001 DULY BACKED BY PE NAL PROVISIONS. THE PROCESS OF ALLOTMENT OF PAN HAS BEEN STREAMLINE D SO THAT OVER 75 LAKH PANS ARE BEING ALLOTTED EVERY YEAR. PUBLICITY CAMPAIGNS FOR QUOTING PAN ARE BEING RUN SINCE THE LAST THREE YEAR S. THE AVERAGE TIME OF ALLOTMENT OF PAN HAS COME DOWN TO 10 CALEND AR DAYS, THEREFORE, NON-AVAILABILITY OF PAN HAS CEASED TO BE AN IMPEDIMENT. IN A NUMBER OF CASES, THE NON-QUOTING OF PAN'S BY DEDU CTEES IS CREATING PROBLEMS IN THE PROCESSING OF RETURN OF INCOME AND IN GRANTING CREDIT FOR TAX DEDUCTED AT SOURCE, LEADING TO DELAYS IN IS SUE OF REFUNDS. IN ORDER TO STRENGTHEN THE PAN MECHANISM, IT IS PRO POSED TO MAKE AMENDMENTS IN THE INCOME-TAX ACT TO PROVIDE THAT AN Y PERSON WHOSE ITA NOS. 3554, 3555 & 3556/AHD/2016 ITO VS. SICHUAN FORTUNE PROJECTS MANAGEMENT LTD.. ASST.YEAR 2011-12, 2012-13 & 2013-14 - 6 - RECEIPTS ARE SUBJECT TO DEDUCTION OF TAX AT SOURCE I.E., THE DEDUCTEE, SHALL MANDATORILY FURNISH HIS PAN TO THE DEDUCTOR, FAILING WHICH THE DEDUCTOR SHALL DEDUCT TAX AT SOURCE AT HIGHER OF TH E FOLLOWING RATES (I) THE RATE PRESCRIBED IN THE ACT; (II) AT THE RATE IN FORCE, I.E., THE RATE MENTIONE D IN THE FINANCE ACT; OR (III) AT THE RATE OF 20%.' 10. THE OBJECT OF S. 206AA(1) IS TO ENSURE COMPLIAN CE WITH THE PAN MECHANISM, TO ADDRESS PROBLEMS ASSOCIATED WITH NON- QUOTING/NON-OBTAINING OF PAN IN PROCESSING OF RETUR NS, CLAIMING CREDIT FOR TDS AND GRANTING OF REFUND, IT IS TO FUR THER ENSURE THAT ASSESSEE DO NOT GIVE REASON LIKE NON-ISSUANCE OF PA N AS A REASON FOR NOT FURNISHING IT, KEEPING IN MIND THAT THE PAN ALL OTMENT MACHINERY HAS BEEN FULLY STRENGTHENED AND STREAMLINED. 11. FURTHER TO CORRECTLY EXAMINE THE SCOPE OF THE S ECTION 206AA IT WOULD BE PERTINENT TO UNDERSTAND THE PROVISIONS REL ATED TO OBTAIN PERMANENT ACCOUNT NUMBER ('PAN') UNDER THE ACT. 12. IN THE INTIMATION THE DEMAND WAS RAISED IN ALL THREE YEARS FOR SHORT DEDUCTION OF TDS AND INTEREST ON SUCH SHORT D EDUCTION AS UNDER: DEFAULT TYPE AS PER INTIMATION A.Y. 2011 - 12 A.Y. 2012 - 13 A.Y. 2013 - 14 SHORT DEDUCTION OF TDS 3,12,645 40,39,461 1,09,80,379 INTEREST ON SHORT DEDUCTION 1,53,174 15,43,813 28,35,075 TOTAL 4,65,819 55,83,274 1,38,15,454 13. AGAINST THE PROCESSING BY THE CPC FOR RAISING A ND REVISED DEMAND CHALLENGED BEFORE THE LD. CIT(A), LD. CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE. ITA NOS. 3554, 3555 & 3556/AHD/2016 ITO VS. SICHUAN FORTUNE PROJECTS MANAGEMENT LTD.. ASST.YEAR 2011-12, 2012-13 & 2013-14 - 7 - 14. NOW DEPARTMENTS APPEAL IS BEFORE US. 15. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IM PUGNED ORDER. IT IS FACT THAT ASSESSEE COMPANY IS A FOREIG N COMPANY AND SECTION 206AA, WHICH PROVIDES TO DECADE TDS AT A HI GHER RATE BECAUSE NON AVAILABILITY OF PAN ARE NO ATTRACTED HE RE BECAUSE RESPONDENT/NON-RESIDENT CANNOT BE COMPELLED TO OBTA IN PAN NO. WHEN THEY ARE ALLOWABLE TO TAX IN INDIA. 16. IN THIS REGARD, LD. AR CITED AN ORDER OF CO-ORD INATE BENCH IN ITA NOS.2244, 2245 & 2246/AHD/2016, IN WHICH, SIMILAR M ATTER WAS DISMISSED WITH FOLLOWING OBSERVATION: 5. WE FIND THAT, IN THE CASE OF DDIT VS SERUM INSTITUTE OF INDIA PVT. LTD. [(2015) 40 ITR TRIB 684 (PUNE)], A COORDINATE BENCH OF THE TRIBUNAL HAS, INTER ALIA, OBSERVED AS FOLLOWS: 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSION S. SECTION 206AA OF THE ACT HAS BEEN INCLUDED IN PART B OF CHAPTER XVII DEALING WITH COLLECTION AND RECOVERY O F TAX DEDUCTION AT SOURCE. SECTION 206AA OF THE ACT DEALS WITH REQUIREMENTS OF FURNISHING PAN BY ANY PERSON, ENTIT LED TO RECEIVE ANY SUM OR INCOME ON WHICH TAX IS DEDUCTIBLE UNDER CHAPTER XVII-B, TO THE PERSON RESPONSIBLE FOR DEDUCTING SUCH TAX. SHORN OF OTHER DETAILS, IN SO F AR AS THE PRESENT CONTROVERSY IS CONCERNED, IT WOULD SUFFICE TO NOTE THAT SECTION 206AA OF THE ACT PRESCRIBES THAT WHERE PAN IS NOT FURNISHED TO THE PERSON RESPONSIBLE FOR DEDUCTI NG TAX AT SOURCE THEN THE TAX DEDUCTOR WOULD BE REQUIRED T O DEDUCT TAX AT THE HIGHER OF THE FOLLOWING RATES, NA MELY, AT THE RATE PRESCRIBED IN THE RELEVANT PROVISIONS OF T HIS ACT; OR AT THE RATE/RATES IN FORCE; OR AT THE RATE OF 20 %. IN THE PRESENT CASE, ASSESSEE WAS RESPONSIBLE FOR DEDUCTIN G TAX ON PAYMENTS MADE TO NON-RESIDENTS ON ACCOUNT OF ROYAL TY AND/OR FEE FOR TECHNICAL SERVICES. THE DISPUTE BEFO RE US RELATES TO THE PAYMENTS MADE BY THE ASSESSEE TO SUCH NON- ITA NOS. 3554, 3555 & 3556/AHD/2016 ITO VS. SICHUAN FORTUNE PROJECTS MANAGEMENT LTD.. ASST.YEAR 2011-12, 2012-13 & 2013-14 - 8 - RESIDENTS WHO HAD NOT FURNISHED THEIR PANS TO THE ASSESSEE. THE CASE OF THE REVENUE IS THAT IN THE AB SENCE OF FURNISHING OF PAN, ASSESSEE WAS UNDER AN OBLIGATION TO DEDUCT TAX @ 20% FOLLOWING THE PROVISIONS OF SECTIO N 206AA OF THE ACT. HOWEVER, ASSESSEE HAD DEDUCTED TH E TAX AT SOURCE AT THE RATES PRESCRIBED IN THE RESPECTIVE DTAAS BETWEEN INDIA AND THE RELEVANT COUNTRY OF THE NON- RESIDENTS; AND, SUCH RATE OF TAX BEING LOWER THAN T HE RATE OF 20% MANDATED BY SECTION 206AA OF THE ACT. THE CI T(A) HAS FOUND THAT THE PROVISIONS OF SECTION 90(2) COME TO THE RESCUE OF THE ASSESSEE. SECTION 90(2) PROVIDES THAT THE PROVISIONS OF THE DTAAS WOULD OVERRIDE THE PROVISIO NS OF THE DOMESTIC ACT IN CASES WHERE THE PROVISIONS OF D TAAS ARE MORE BENEFICIAL TO THE ASSESSEE. THERE CANNOT BE ANY DOUBT TO THE PROPOSITION THAT IN CASE OF NON-RESIDE NTS, TAX LIABILITY IN INDIA IS LIABLE TO BE DETERMINED IN AC CORDANCE WITH THE PROVISIONS OF THE ACT OR THE DTAA BETWEEN INDIA AND THE RELEVANT COUNTRY, WHICHEVER IS MORE BENEFICI AL TO THE ASSESSEE, HAVING REGARD TO THE PROVISIONS OF SE CTION 90(2) OF THE ACT. IN THIS CONTEXT, THE CIT(A) HAS C ORRECTLY OBSERVED THAT THE HONBLE SUPREME COURT IN THE CASE OF AZADI BACHAO ANDOLAN AND OTHERS VS. UOI, (2003) 263 ITR 706 (SC) HAS UPHELD THE PROPOSITION THAT THE PROVIS IONS MADE IN THE DTAAS WILL PREVAIL OVER THE GENERAL PRO VISIONS CONTAINED IN THE ACT TO THE EXTENT THEY ARE BENEFIC IAL TO THE ASSESSEE. IN THIS CONTEXT, IT WOULD BE WORTHWHILE T O OBSERVE THAT THE DTAAS ENTERED INTO BETWEEN INDIA AND THE O THER RELEVANT COUNTRIES IN THE PRESENT CONTEXT PROVIDE F OR SCOPE OF TAXATION AND/OR A RATE OF TAXATION WHICH WAS DIF FERENT FROM THE SCOPE/RATE PRESCRIBED UNDER THE ACT. FOR TH E SAID REASON, ASSESSEE DEDUCTED THE TAX AT SOURCE HAVING REGARD TO THE PROVISIONS OF THE RESPECTIVE DTAAS WHICH PRO VIDED FOR A BENEFICIAL RATE OF TAXATION. IT WOULD ALSO BE RELEVANT TO OBSERVE THAT EVEN THE CHARGING SECTION 4 AS WELL AS SECTION 5 OF THE ACT WHICH DEALS WITH THE PRINCIPLE OF ASCERTAINMENT OF TOTAL INCOME UNDER THE ACT ARE ALSO SUBORDINATE TO THE PRINCIPLE ENSHRINED IN SECTION 9 0(2) AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF AZA DI BACHAO ANDOLAN AND OTHERS (SUPRA). THUS, IN SO FAR AS THE APPLICABILITY OF THE SCOPE/RATE OF TAXATION WITH RE SPECT TO ITA NOS. 3554, 3555 & 3556/AHD/2016 ITO VS. SICHUAN FORTUNE PROJECTS MANAGEMENT LTD.. ASST.YEAR 2011-12, 2012-13 & 2013-14 - 9 - THE IMPUGNED PAYMENTS MAKE TO THE NON-RESIDENTS IS CONCERNED, NO FAULT CAN BE FOUND WITH THE RATE OF T AXATION INVOKED BY THE ASSESSEE BASED ON THE DTAAS, WHICH PRESCRIBED FOR A BENEFICIAL RATE OF TAXATION. HOWEV ER, THE CASE OF THE REVENUE IS THAT THE TAX DEDUCTION AT SO URCE WAS REQUIRED TO BE MADE AT 20% IN THE ABSENCE OF FURNISH ING OF PAN BY THE RECIPIENT NON-RESIDENTS, HAVING REGAR D TO SECTION 206AA OF THE ACT. IN OUR CONSIDERED OPINION , IT WOULD BE QUITE INCORRECT TO SAY THAT THOUGH THE CHA RGING SECTION 4 OF THE ACT AND SECTION 5 OF THE ACT DEALI NG WITH ASCERTAINMENT OF TOTAL INCOME ARE SUBORDINATE TO THE PRINCIPLE ENSHRINED IN SECTION 90(2) OF THE ACT BUT THE PROVISIONS OF CHAPTER XVII-B GOVERNING TAX DEDUCTIO N AT SOURCE ARE NOT SUBORDINATE TO SECTION 90(2) OF THE ACT. NOTABLY, SECTION 206AA OF THE ACT WHICH IS THE CENT RE OF CONTROVERSY BEFORE US IS NOT A CHARGING SECTION BUT IS A PART OF A PROCEDURAL PROVISIONS DEALING WITH COLLEC TION AND DEDUCTION OF TAX AT SOURCE. THE PROVISIONS OF S ECTION 195 OF THE ACT WHICH CASTS A DUTY ON THE ASSESSEE T O DEDUCT TAX AT SOURCE ON PAYMENTS TO A NON-RESIDENT CANNOT BE LOOKED UPON AS A CHARGING PROVISION. IN-FACT, IN TH E CONTEXT OF SECTION 195 OF THE ACT ALSO, THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. ELI LILY & CO., (2009) 312 ITR 225 (SC) OBSERVED THAT THE PROVISIONS OF TAX WITHHOLDING I.E . SECTION 195 OF THE ACT WOULD APPLY ONLY TO SUMS WHICH ARE OTHERWISE CHARGEABLE TO TAX UNDER THE ACT. THE HON BLE SUPREME COURT IN THE CASE OF GE INDIA TECHNOLOGY CE NTRE PVT. LTD. VS. CIT, (2010) 327 ITR 456 (SC) HELD THA T THE PROVISIONS OF DTAAS ALONG WITH THE SECTIONS 4, 5, 9 , 90 & 91 OF THE ACT ARE RELEVANT WHILE APPLYING THE PROVISIO NS OF TAX DEDUCTION AT SOURCE. THEREFORE, IN VIEW OF THE AFOR ESAID SCHEMATIC INTERPRETATION OF THE ACT, SECTION 206AA O F THE ACT CANNOT BE UNDERSTOOD TO OVERRIDE THE CHARGING SECTIONS 4 AND 5 OF THE ACT. THUS, WHERE SECTION 90 (2) OF THE ACT PROVIDES THAT DTAAS OVERRIDE DOMESTIC LAW I N CASES WHERE THE PROVISIONS OF DTAAS ARE MORE BENEFI CIAL TO THE ASSESSEE AND THE SAME ALSO OVERRIDES THE CHA RGING SECTIONS 4 AND 5 OF THE ACT WHICH, IN TURN, OVERRID E THE DTAAS PROVISIONS ESPECIALLY SECTION 206AA OF THE AC T WHICH IS THE CONTROVERSY BEFORE US. THEREFORE, IN O UR VIEW, ITA NOS. 3554, 3555 & 3556/AHD/2016 ITO VS. SICHUAN FORTUNE PROJECTS MANAGEMENT LTD.. ASST.YEAR 2011-12, 2012-13 & 2013-14 - 10 - WHERE THE TAX HAS BEEN DEDUCTED ON THE STRENGTH OF THE BENEFICIAL PROVISIONS OF SECTION DTAAS, THE PROVISI ONS OF SECTION 206AA OF THE ACT CANNOT BE INVOKED BY THE ASSESSING OFFICER TO INSIST ON THE TAX DEDUCTION @ 20%, HAVING REGARD TO THE OVERRIDING NATURE OF THE PROVI SIONS OF SECTION 90(2) OF THE ACT. THE CIT(A), IN OUR VIEW, CORRECTLY INFERRED THAT SECTION 206AA OF THE ACT DOES NOT OVE RRIDE THE PROVISIONS OF SECTION 90(2) OF THE ACT AND THAT IN THE IMPUGNED CASES OF PAYMENTS MADE TO NON-RESIDENTS, ASSESSEE CORRECTLY APPLIED THE RATE OF TAX PRESCRIB ED UNDER THE DTAAS AND NOT AS PER SECTION 206AA OF THE ACT B ECAUSE THE PROVISIONS OF THE DTAAS WAS MORE BENEFICIAL. THU S, WE HEREBY AFFIRM THE ULTIMATE CONCLUSION OF THE CIT(A) IN DELETING THE TAX DEMAND RELATABLE TO DIFFERENCE BET WEEN 20% AND THE ACTUAL TAX RATE ON WHICH TAX WAS DEDUCT ED BY THE ASSESSEE IN TERMS OF THE RELEVANT DTAAS. AS A CONSEQUENCE, REVENUE FAILS IN ITS APPEALS. 6. THE VIEWS SO EXPRESSED BY THE COORDINATE BENCH N OW STAND APPROVED BY HONBLE DELHI HIGH COURTS JUDGMENT IN THE CASE OF DANSICO INDIA PVT. LTD. (SUPRA). NO JUDICIAL PRECEDENT TO THE CONTRARY HAS BEEN BROUGHT TO OUR NOTICE. IN THIS VIEW OF THE MATTER, AND RESPECTFUL LY FOLLOWING THE BINDING JUDICIAL PRECEDENTS, WE APPROVE THE CONCLUSIONS ARR IVED AT BY THE CIT(A) AND DECLINE TO INTERFERE IN THE MATTER. 7. IN THE RESULT, THE APPEALS ARE DISMISSED. 17. IN ITA NO.792/PN/2013, BENCH DISMISSED THE APPE AL OF THE REVENUE WITH FOLLOWING OBSERVATION: 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. SECTION 206AA OF THE ACT HAS BEEN INCLUDED IN PART B OF CHAPTER XVII DEALING WITH COLLECTION AND RECOVERY OF TAX - DEDUCTION AT SOURCE. SECTION 206AA OF THE ACT DEALS WITH REQUIREMENTS OF FURNISHING P AN BY ANY PERSON, ENTITLED TO RECEIVE ANY SUM OR INCOME ON WH ICH TAX IS DEDUCTIBLE UNDER CHAPTER XVII-B, TO THE PERSON RESP ONSIBLE FOR DEDUCTING SUCH TAX. SHORN OF OTHER DETAILS, IN SO F AR AS THE PRESENT CONTROVERSY IS CONCERNED, IT WOULD SUFFICE TO NOTE THAT SECTION 206AA OF THE ACT PRESCRIBES THAT WHERE PAN IS NOT FURNIS HED TO THE PERSON RESPONSIBLE FOR DEDUCTING TAX AT SOURCE THEN THE TAX DEDUCTOR ITA NOS. 3554, 3555 & 3556/AHD/2016 ITO VS. SICHUAN FORTUNE PROJECTS MANAGEMENT LTD.. ASST.YEAR 2011-12, 2012-13 & 2013-14 - 11 - WOULD BE REQUIRED TO DEDUCT TAX AT THE HIGHER OF TH E FOLLOWING RATES, NAMELY, AT THE RATE PRESCRIBED IN THE RELEVANT PROV ISIONS OF THIS ACT; OR AT THE RATE/RATES IN FORCE; OR AT THE RATE OF 20%. IN THE PRESENT CASE, ASSESSEE WAS RESPONSIBLE FOR DEDUCTING TAX ON PAYME NTS MADE TO NON- RESIDENTS ON ACCOUNT OF ROYALTY AND/OR FEE FOR TECH NICAL SERVICES. THE DISPUTE BEFORE US RELATES TO THE PAYMENTS MADE BY T HE ASSESSEE TO SUCH NON-RESIDENTS WHO HAD NOT FURNISHED THEIR PANS TO THE ASSESSEE. THE CASE OF THE REVENUE IS THAT IN THE ABSENCE OF F URNISHING OF PAN, ASSESSEE WAS UNDER AN OBLIGATION TO DEDUCT TAX @ 20% FOLLOWING THE PROVISIONS OF SECTION 206AA OF THE ACT. HOWEVER, ASSESSEE HAD DEDUCTED THE TAX AT SOURCE AT THE RATES PRESCRIBED IN THE RESPECTIVE DTAAS BETWEEN INDIA AND THE RELEVANT COUNTRY OF THE NON-RESIDENTS; AND, SUCH RATE OF TAX BEING LOWER THAN THE RATE OF 20% MANDATED BY SECTION 206AA OF THE ACT. THE CIT(A) HAS FOUND THAT THE PROVISIO NS OF SECTION 90(2) COME TO THE RESCUE OF THE ASSESSEE. SECTION 90(2) PROVIDES THAT THE PROVISIONS OF THE DTAAS WOULD OV ERRIDE THE PROVISIONS OF THE DOMESTIC ACT IN CASES WHERE THE P ROVISIONS OF DTAAS ARE MORE BENEFICIAL TO THE ASSESSEE. THERE CANNOT B E ITA NOS.1601 TO 1604/PN/2014 ANY DOUBT TO THE PROPOSITION THAT IN C ASE OF NON- RESIDENTS, TAX LIABILITY IN INDIA IS LIABLE TO BE D ETERMINED IN ACCORDANCE WITH THE PROVISIONS OF THE ACT OR THE DT AA BETWEEN INDIA AND THE RELEVANT COUNTRY, WHICHEVER IS MORE BENEFIC IAL TO THE ASSESSEE, HAVING REGARD TO THE PROVISIONS OF SECTION 90(2) OF THE ACT. IN THIS CONTEXT, THE CIT(A) HAS CORRECTLY OBSERVED THAT THE HON'BLE SUPREME COURT IN THE CASE OF AZADI BACHAO ANDOLAN AND OTHERS VS. UOI , (2003) 263 ITR 706 (SC) HAS UPHELD THE PROPOSITION THAT TH E PROVISIONS MADE IN THE DTAAS WILL PREVAIL OVER THE GENERAL PROVISIO NS CONTAINED IN THE ACT TO THE EXTENT THEY ARE BENEFICIAL TO THE ASSESS EE. IN THIS CONTEXT, IT WOULD BE WORTHWHILE TO OBSERVE THAT THE DTAAS ENTER ED INTO BETWEEN INDIA AND THE OTHER RELEVANT COUNTRIES IN THE PRESE NT CONTEXT PROVIDE FOR SCOPE OF TAXATION AND/OR A RATE OF TAXATION WHI CH WAS DIFFERENT FROM THE SCOPE/RATE PRESCRIBED UNDER THE ACT. FOR T HE SAID REASON, ASSESSEE DEDUCTED THE TAX AT SOURCE HAVING REGARD T O THE PROVISIONS OF THE RESPECTIVE DTAAS WHICH PROVIDED FOR A BENEFICIA L RATE OF TAXATION. IT WOULD ALSO BE RELEVANT TO OBSERVE THAT EVEN THE CHARGING SECTION 4 AS WELL AS SECTION 5 OF THE ACT WHICH DEALS WITH THE PRINCIPLE OF ASCERTAINMENT OF TOTAL INCOME UNDER THE ACT ARE ALS O SUBORDINATE TO THE PRINCIPLE ENSHRINED IN SECTION 90(2) AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF AZADI BACHAO ANDOLAN A ND OTHERS (SUPRA). THUS, IN SO FAR AS THE APPLICABILITY OF TH E SCOPE/RATE OF ITA NOS. 3554, 3555 & 3556/AHD/2016 ITO VS. SICHUAN FORTUNE PROJECTS MANAGEMENT LTD.. ASST.YEAR 2011-12, 2012-13 & 2013-14 - 12 - TAXATION WITH RESPECT TO THE IMPUGNED PAYMENTS MAKE TO THE NON- RESIDENTS IS CONCERNED, NO FAULT CAN BE FOUND WITH THE RATE OF TAXATION INVOKED BY THE ASSESSEE BASED ON THE DTAAS, WHICH P RESCRIBED FOR A BENEFICIAL RATE OF TAXATION. HOWEVER, THE CASE OF T HE REVENUE IS THAT THE TAX DEDUCTION AT SOURCE WAS REQUIRED TO BE MADE AT 20% IN THE ABSENCE OF FURNISHING OF PAN BY THE RECIPIENT NON-R ESIDENTS, HAVING REGARD TO SECTION 206AA OF THE ACT. IN OUR CONSIDERED OPINION, IT WOULD BE QUITE INCORRECT TO SAY THAT THOUGH THE CHARGING SECTION 4 OF THE ACT AND SECTION 5 OF THE ACT DEALING WITH ASCERTAINMENT OF TOTAL INC OME ARE SUBORDINATE TO THE PRINCIPLE ENSHRINED IN SECTION 90(2) OF THE ACT BUT THE PROVISIONS OF CHAPTER ITA NOS.1601 TO 1604/ PN/2014 XVII-B GOVERNING TAX DEDUCTION AT SOURCE ARE NOT SUBORDINA TE TO SECTION 90(2) OF THE ACT. NOTABLY, SECTION 206AA OF THE ACT WHICH IS THE CENTRE OF CONTROVERSY BEFORE US IS NOT A CHARGING SECTION BUT IS A PART OF A PROCEDURAL PROVISIONS DEALING WITH COLLECTION AND D EDUCTION OF TAX AT SOURCE. THE PROVISIONS OF SECTION 195 OF THE ACT WHICH CASTS A DUTY ON THE ASSESSEE TO DEDUCT TAX AT SOURCE ON PAYMENTS TO A NON-RESIDENT CANNOT BE LOOKED UPON AS A CHARGING PROVISION. IN-F ACT, IN THE CONTEXT OF SECTION 195 OF THE ACT ALSO, THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. ELI LILY & CO ., (2009) 312 ITR 225 (SC) OBSERVED THAT THE PROVISIONS OF TAX WITHHOLDING I.E. SECTION 195 OF THE ACT WOULD APPLY ONLY TO SUMS WHICH ARE OTHERWISE CHARGEABLE TO TAX UNDER THE ACT. THE HON'BLE SUPREME COURT IN THE CASE OF GE INDIA TECHNOLOGY CENTRE PVT. LTD. VS. CIT , (2010) 327 ITR 456 (SC) HELD THAT THE PROVISIONS OF DTAAS ALONG WITH THE SECTIONS 4 , 5 , 9 , 90 & 91 OF THE ACT ARE RELEVANT WHILE APPLYING THE PROVISIONS OF TAX DEDUCTION AT S OURCE. THEREFORE, IN VIEW OF THE AFORESAID SCHEMATIC INTERPRETATION OF T HE ACT, SECTION 206AA OF THE ACT CANNOT BE UNDERSTOOD TO OVERRIDE THE CHARGING SECTIONS 4 AND 5 OF THE ACT. THUS, WHERE SECTION 90(2) OF THE ACT PROVIDES THAT DTAAS OVERRIDE DOMESTIC LAW IN CA SES WHERE THE PROVISIONS OF DTAAS ARE MORE BENEFICIAL TO THE ASSE SSEE AND THE SAME ALSO OVERRIDES THE CHARGING SECTIONS 4 AND 5 OF THE ACT WHICH, IN TURN, OVERRIDE THE DTAAS PROVISIONS ESPECIALLY SECTION 206AA OF THE ACT WHICH IS THE CONTROVERSY BEFORE US. THEREFORE, IN O UR VIEW, WHERE THE TAX HAS BEEN DEDUCTED ON THE STRENGTH OF THE BENEFI CIAL PROVISIONS OF SECTION DTAAS, THE PROVISIONS OF SECTION 206AA OF THE ACT CANNOT BE INVOKED BY THE ASSESSING OFFICER TO INSIST ON THE T AX DEDUCTION @ 20%, HAVING REGARD TO THE OVERRIDING NATURE OF THE PROVI SIONS OF SECTION 90(2) OF THE ACT. THE CIT(A), IN OUR VIEW, CORRECTLY INF ERRED THAT SECTION 206AA OF THE ACT DOES NOT OVERRIDE THE PROVISIONS ITA NOS. 3554, 3555 & 3556/AHD/2016 ITO VS. SICHUAN FORTUNE PROJECTS MANAGEMENT LTD.. ASST.YEAR 2011-12, 2012-13 & 2013-14 - 13 - OF SECTION 90(2) OF THE ACT AND THAT IN THE IMPUGNED CASES OF PAYMENTS MADE TO NON-RESIDENTS, ASSESSEE CORRECTLY APPLIED THE RATE OF TAX PRESCRIBED UNDER THE DTAAS AND NOT AS PER SECTION 206AA OF THE ACT BECAUSE ITA NOS.1601 TO 1604/PN/2014 THE PROVIS IONS OF THE DTAAS WAS MORE BENEFICIAL. THUS, WE HEREBY AFFIRM T HE ULTIMATE CONCLUSION OF THE CIT(A) IN DELETING THE TAX DEMAND RELATABLE TO DIFFERENCE BETWEEN 20% AND THE ACTUAL TAX RATE ON W HICH TAX WAS DEDUCTED BY THE ASSESSEE IN TERMS OF THE RELEVANT D TAAS. AS A CONSEQUENCE, REVENUE FAILS IN ITS APPEALS. 8. RESULTANTLY, THE CAPTIONED APPEALS OF THE REVENU E ARE DISMISSED, AS ABOVE. 18. IN OUR CONSIDERED VIEW, CIT(A) HAS PASSED DETAI LED AND REASONED ORDER BY DIRECTING THE ASSESSING OFFICER T O DELETE THE DEMAND RAISED ON THE BASIS OF APPLICATION OF SECTIO N 206AA IN ALL THREE APPEALS. THUS, WE DO NOT FIND ANY INFIRMITY I N THE ORDER PASSED BY THE LD. CIT(A), THEREFORE, THESE THREE APPEALS A RE DISMISSED. 19. IN THE RESULT, ALL THREE APPEALS FILED BY THE R EVENUE ARE DISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 09/04/2018 SD/- SD/ - EKUHK CKSJM EKUHK CKSJM EKUHK CKSJM EKUHK CKSJM EGKOHJ IZLKN EGKOHJ IZLKN EGKOHJ IZLKN EGKOHJ IZLKN YS[KK LNL; YS[KK LNL; YS[KK LNL; YS[KK LNL; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; ( MANISH BORAD ) (M AHAVIR PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 09/04/2018 PRITI YADAV, SR. PS ITA NOS. 3554, 3555 & 3556/AHD/2016 ITO VS. SICHUAN FORTUNE PROJECTS MANAGEMENT LTD.. ASST.YEAR 2011-12, 2012-13 & 2013-14 - 14 - ! ' COPY OF THE ORDER FORWARDED TO : 1. #& / THE APPELLANT 2. '#& / THE RESPONDENT. 3. 12 , * 3, / CONCERNED CIT 4. * 3, 45 / THE CIT(A)-8, AHMEDABAD. 5. 678 ,2 -2 ! 1 / DR, ITAT, AHMEDABAD 6. 89:+ GUARD FILE. # $ / BY ORDER, '6, , //TRUE COPY// P %/$ &' ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION 05/04/2018 (DICTATION-PAD 2 PAGE S ATTACHED AT THE END OF THIS APPEAL- FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 06/04/2018 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED PDRAFT COMES TO THE SR.P .S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S. 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER