Appeal details
Counselvise Citation
[2020] 110 COUNSELVISE.COM (IT) 9051 (ITAT-BANGALORE)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
3 year(s) 4 month(s) 25 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
05-08-2020
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
C
Next Hearing Date
30-07-2020
Assessment Year
2011-2012
Appeal Filed On
10-03-2017
Judgement Text
IT(IT)A NOS.562 TO 564 & ITA NO.1418 OF 2018 M/S. HONEYWELL TECHNOLOGY SOLUTIONS PVT. LTD., BANG ALORE THE INCOME TAX APPELLATE TRIBUNAL C BENCH: BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENTAND SHRI B.R. BASKARAN, ACCOUTANT MEMBER IT(IT)A NOS.562 TO 564/BANG/2017 ASSESSMENT YEARS : 2011-12 TO 2013-14 DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE-2(1) INTERNATIONAL TAXATION BANGALORE VS. M/S. HONEYWELL TECHNOLOGY SOLUTIONS LTD. 151/1, BANNERGATTA, DORAISANIPALYA BANGALORE-560 076 PAN NO : AAACH4151J APPELLANT RESPONDENT ITA NO.1418/BANG/2018 ASSESSMENT YEAR: 2014-15 DEPUTY COMMISSIONER OF INCOME-TAX (IT) CIRCLE-1(2) INTERNATIONAL TAXATION BANGALORE VS. M/S. HONEYWELL TECHNOLOGIES SOLUTIONS LAB PVT. LTD. SURVEY NO.19/2, DEVARABISANAHALLI VILLAGE, VARTHUR HOBLI, BENGALURU EAST TALUK BENGALURU-560103 APPELLANT RESPONDENT APPELLANT BY : SHRI K.V. ARAVIND, ADVOCATE, STANDING COUNSEL FOR REVENUE RESPONDENT BY : SMT. SHREYA LOYALKA, A.R. DATE OF HEARING : 30.07.2020 DATE OF PRONOUNCEMENT : 05.08.2020 IT(IT)A NOS.562 TO 564 & ITA NO.1418 OF 2018 M/S. HONEYWELL TECHNOLOGY SOLUTIONS PVT. LTD., BANG ALORE PAGE 2 OF 6 O R D E R PER BENCH: ALL THE FOUR APPEALS FILED BY THE REVENUE ARE DIREC TED AGAINST THE ORDER PASSED BY LD. CIT(A)-12, BENGALURU AND TH EY RELATE TO THE ASSESSMENT YEARS 20111-12 TO 2014-15. THE COMMON I SSUE URGED IN THIS APPEAL IS ABOUT THE APPLICABILITY OF PROVIS IONS OF SECTION 206AA OF THE INCOME-TAX ACT,1961 ['THE ACT' FOR SHO RT] TO THE PAYMENTS MADE TO NON-RESIDENT ENTITIES. 2. WE HEARD THE PARTIES AND PERUSED THE RECORD. TH E PROVISIONS OF SECTION 206AA OF THE ACT WAS INTRODUCED FROM FIN ANCIAL YEAR 2010-11 AND IT REQUIRES EVERY TAX PAYER WHO RECEIVE S TAXABLE INCOME TO FURNISH HIS PAN NUMBER TO THE PAYER OF IN COME. IF THE RECIPIENT OF INCOME DOES NOT FURNISH PAN NUMBER, TH EN PAYMENT SO RECEIVED SHALL SUFFER TDS AT HIGHER RATE AS SPECIFI ED IN SECTION 206AA OF THE ACT. IN ALL THESE CASES, THE A.O. HAD ALSO INVOKED SECTION 206AA OF THE ACT WHILE INITIATING PROCEEDIN GS U/S 201(1) AND 201(1A) OF THE ACT. THE LD. CIT(A) HELD THAT S ECTION 206AA OF THE ACT IS NOT APPLICABLE TO NON-RESIDENT ENTITIES TO WHOM PROVISIONS OF DTAA IS APPLICABLE. AGGRIEVED, THE REVENUE HAS FILED THESE APPEALS BEFORE US. 3. AT THE TIME OF HEARING, BOTH THE PARTIES AGREE D THAT THE ABOVE SAID ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE BANGALORE BENCH OF ITAT IN THE CASE OF M/S. BHARATH FRITZ WERNER LTD IN IT(IT)A NO.1360/BANG/2019 DATED 26.6.2020. THE LD. A.R. ALSO POINTED OUT THAT THE TAX EFFECT INVOLVED IN TH E APPEALS OF THE REVENUE IN ASSESSMENT YEAR 2011-12 TO 2013-14 ARE L ESS THAN THE MONETARY LIMITS PRESCRIBED BY THE CBDT. SINCE IDEN TICAL ISSUE IS IT(IT)A NOS.562 TO 564 & ITA NO.1418 OF 2018 M/S. HONEYWELL TECHNOLOGY SOLUTIONS PVT. LTD., BANG ALORE PAGE 3 OF 6 BEING URGED IN ALL THESE APPEALS, WE PREFER TO DISP OSE OF THE APPEALS ON MERITS. 4. WE HAVE NOTICED THAT THE ISSUE OF APPLICABILIT Y OF PROVISIONS OF SEC.206AA TO A RECIPIENT OF INCOME TO WHOM THE PROV ISIONS OF DTAA ARE ALSO APPLICABLE WAS DECIDED BY THE BANGALORE BE NCH OF ITAT IN THE CASE OF M/S. BHARATH FRITZ WERNER LTD (SUPRA). FOR THE SAKE OF CONVENIENCE, WE EXTRACT BELOW THE DECISION RENDERED BY THE COORDINATE BENCH IN THE ABOVE SAID CASE: 3. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS O F MANUFACTURING METAL CUTTING GRINDING MACHINES, SPAR ES, ACCESSORIES AND RELATED SERVICES. THE DCIT, INTL. T AXATION, CIRCLE 1(1), BANGALORE [DCIT] RECEIVED INFORMATION FROM TH E ACIT, TDS CIRCLE 1(1), BANGALORE THAT AS PER THE TAX AUDIT RE PORT IN FORM 3CD, IT HAS BEEN MENTIONED THAT THE ASSESSEE HAD NO T DEDUCTED TAX AT SOURCE ON A PAYMENT OF RS.2,63,08,939 TOWARD S DESIGN CHARGES AND RS.29,11,816 ON PAYMENT OF EXHIBITION F EES, BOTH PAYMENTS HAD BEEN MADE TO THE NON-RESIDENTS (TAX RE SIDENTS OF GERMANY) AND THEREFORE THE DCIT PASSED AN ORDER U/S . 201(1) & 201(1A) OF THE INCOME-TAX ACT, 1961 [THE ACT] DATED 31.03.2018 HOLDING THE ASSESSEE TO BE AN ASSESSEE IN DEFAULT F OR NON- DEDUCTION OF TAX AT SOURCE. THE RATE OF TAX WAS ALS O APPLIED BY THE DCIT @ 21.115% IN TERMS OF SECTION 206AA OF THE ACT AT A HIGHER RATE BECAUSE OF THE PROVISIONS OF SEC.206AA OF THE ACT. SECTION 206AA WAS INTRODUCED FROM FY 2010-11. SECTION 206AA REQUIRES EVERY TAXPAYER WHO RECEIVES TAXABLE INCOME TO FURNI SH THEIR PAN TO THE PAYER OF SUCH INCOME. THIS APPLIES TO BOTH THE RESIDENT AS WELL AS NON-RESIDENT RECIPIENTS. THE PAYMENTS IN CASE OF RESIDENTS WOULD INCLUDE SALARY, RENT, PROFESSIONAL RECEIPTS, CONTRACTUAL RECEIPTS AND SO ON. IN THE CASE OF NON-RESIDENT, TH ESE WOULD INCLUDE ALL RECEIPTS THAT ARE TAXABLE IN INDIA. A RECIPIENT OF TAXABLE INCOME SHOULD FURNISH PAN TO COMPLY WITH THE PROVISIONS OF TDS UNDER THE INCOME TAX ACT. UPON FURNISHING OF THE PAN, PAYMENT S MADE TO THE RECIPIENT WOULD BE TAXED AT THE RATE OF TDS SPECIFI ED UNDER THE VARIOUS TDS PROVISIONS OF THE ACT. A RECIPIENT WHO DOES NOT FURNISH PAN WOULD SUFFER TDS AT THE HIGHER RATES SPECIFIED IN SECTION 206AA. THE RECIPIENT IS ALSO REQUIRED TO FURNISH HI S PAN TO THE PAYER AND BOTH OF THEM ARE REQUIRED TO INDICATE THE SAME IN ALL CORRESPONDENCE, BILLS, VOUCHERS AND OTHER DOCUMENTS WHICH ARE SENT TO EACH OTHER. A RECIPIENT WHO FAILS TO FURNIS H PAN TO THE PERSON MAKING A PAYMENT WOULD SUFFER TDS AT THE HIG HER OF THE RATES MENTIONED BELOW: IT(IT)A NOS.562 TO 564 & ITA NO.1418 OF 2018 M/S. HONEYWELL TECHNOLOGY SOLUTIONS PVT. LTD., BANG ALORE PAGE 4 OF 6 AT THE RATE SPECIFIED IN THE RELEVANT PROVISION OF THE ACT; AT THE RATE OR RATES IN FORCE, I.E., THE RATE PRESC RIBED IN THE FINANCE ACT.; AT THE RATE OF 20% 4. IN AN APPEAL AGAINST THE AFORESAID ORDER, THE ASSES SEE CONTENDED BEFORE THE CIT(APPEALS) THAT THE RATE OF TAX AT WHICH TDS SHOULD BE MADE BY THE ASSESSEE IS 10% IN ACCORD ANCE WITH THE TREATY FOR AVOIDANCE OF DOUBLE TAXATION BETWEEN INDIA AND GERMANY (DTAA) AND NOT AT THE HIGHER RATE OF TAX @ 20% BY INVOKING THE PROVISIONS OF SECTION 206AA OF THE ACT . THIS SUBMISSION WAS ACCEPTED BY THE CIT(A) AND ON THE BA SIS OF THE DECISION OF THE PUNE BENCH OF THE ITAT IN THE CASE OF SERUM INSTITUTE OF INDIA LTD. IN ITA NO.792/PN2013. AGGRI EVED BY THE AFORESAID PART OF THE ORDER OF THE CIT(APPEALS) ALL OWING RELIEF TO THE ASSESSEE, THE REVENUE HAS PREFERRED THE PRESENT APP EAL BEFORE THE TRIBUNAL. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS. AT THE TIME OF HEARING IT WAS NOT DISPUTED THAT THE ISSUE RAISED BY THE RE VENUE IN ITS APPEALS ARE ALREADY DECIDED BY A SPECIAL BENCH OF I TAT, HYDERABAD. THE ISSUE REGARDING THE APPLICABILITY OF PROVISIONS OF SECTION 206AA OF THE ACT, IN CASES OF TAX TO BE DED UCTED AT SOURCE, WHEN THE INCOME IS EXIGIBLE TO TAX UNDER DTAA AND T HE PAYEES ARE UNABLE TO PROVIDE VALID PERMANENT ACCOUNT NUMBERS, CAME UP FOR CONSIDERATION BEFORE THE SPECIAL BENCH, ITAT HYDERA BAD IN THE CASE OF NAGARJUNA FERTILIZERS & CHEMICALS LTD. VS. AC IT (2017) 78 TAXMANN.COM 264 (HYDERABAD-TRIBUNAL) (SB). THE QUES TION BEFORE THE SPECIAL BENCH WAS WHETHER THE PROVISIONS OF SEC TION 206AA HAD OVERRIDING EFFECT FOR ALL OTHER PROVISIONS OF THE A CT, WHETHER THE ASSESSEE HAS TO DEDUCT TAX AT SOURCE AT THE RATES P RESCRIBED IN SECTION 206AA IN CASE THE PAYEES ARE UNABLE TO FURN ISH THEIR PANS, EVEN IN CASES WHERE TAX LIABILITY ARISES OUT OF THE TREATY. THE DTAA PROVIDES FOR A RATE OF 10% WHEREAS AS PER . THE PROVISIONS OF SEC.206AA OF THE ACT, THE RATE OF TAX DEDUCTION AT SOURCE IS 20%. 6. THE PLEA OF THE REVENUE WAS THAT SECTION 206AA STAR TS WITH A NON-OBSTANTE CLAUSE AND THEREFORE IT OVERRIDES AL L OTHER PROVISIONS OF THE ACT INCLUDING 90(2), 115A AND 139A. THE PLEA OF THE ASSESSEE WAS THAT DTAA WAS SUPREME AND IN THIS REGA RD RELIANCE WAS PLACED ON THE HON'BLE SUPREME COURT DECISION IN THE CASE OF AZADI BACHAO ANDOIAN (2003) 263 ITR 706 (SC), WHERE BY IT WAS HELD THAT DTAA, EVEN IF INCONSISTENT, WILL PREVAIL OVER THE ACT. RELIANCE WAS ALSO PLACED ON THE DECISIONS OF THE HO N'BLE ANDHRA PRADESH HIGH COURT IN THE CASE OF SANOFI PASTEUR (2 013) 354 ITR 316 (AP) WHEREIN IT WAS OBSERVED THAT DTAA BEING A SOVEREIGN MATTER, THE MACHINERY PROVISIONS CANNOT OVERRIDE OR CONTROL THAT. RELIANCE WAS ALSO PLACED ON THE DECISION OF THE HON 'BLE KARNATAKA HIGH COURT IN THE CASE OF KAUSHALLAYA BAI AND OTHER S (2012) 346 ITR 156 (KAR) WHEREIN IT HAS HELD THAT THE PROVISIO NS OF SECTION 206AA ARE TO BE READ DOWN. 7. THE SPECIAL BENCH HELD THAT DTAA OVERRIDES THE ACT, EVEN IF IT IS INCONSISTENT WITH THE ACT. DTAAS ARE ENTERED INTO BETWEEN TWO IT(IT)A NOS.562 TO 564 & ITA NO.1418 OF 2018 M/S. HONEYWELL TECHNOLOGY SOLUTIONS PVT. LTD., BANG ALORE PAGE 5 OF 6 NATIONS IN GOOD FAITH AND ARE SUPPOSED TO BE INTERP RETED IN GOOD FAITH. OTHERWISE IT WOULD AMOUNT TO THE BREACH OF A RTICLE 253 OF THE CONSTITUTION. 8. THE HON'BLE DELHI HIGH COURT IN THE CASE OF DANISCO INDIA PRIVATE LIMITED VS. UNION OF INDIA & ORS. (DELHI HI GH COURT) IN W.P.(C) 5908/2015 JUDGEMENT/ORDER DATED 05/02/2018 HELD THAT WHERE RECIPROCATING STATES MUTUALLY AGREE UPON ACCE PTABLE PRINCIPLES FOR TAX TREATMENT, THE PROVISION IN SECT ION 206AA (AS IT EXISTED) HAS TO BE READ DOWN TO MEAN THAT WHERE THE DEDUCTEE I.E., THE OVERSEAS RESIDENT BUSINESS CONCERN CONDUCTS ITS OPERATION FROM A TERRITORY, WHOSE GOVERNMENT HAS ENTERED INTO A DO UBLE TAXATION AVOIDANCE AGREEMENT WITH INDIA, THE RATE OF TAXATIO N WOULD BE AS DICTATED BY THE PROVISIONS OF THE TREATY. 9. IN VIEW OF THE AFORESAID DECISIONS ON THE ISSUE, WE ARE OF THE VIEW THAT THERE IS NO MERIT IN THE APPEALS OF THE REVENU E. 10. IN THE RESULT, THE APPEAL BY THE REVENUE IS DISMISS ED. 5. IT CAN BE NOTICED THAT THE COORDINATE BENCH HAS FOLLOWED THE DECISION RENDERED BY SPECIAL BENCH OF HYDERABAD ITA T IN THE CASE OF NAGARJUNA FERTILISERS & CHEMICALS LTD. (SUPRA) AND ALSO THE DECISION RENDERED BY HONBLE DELHI HIGH COURT IN TH E CASE OF DANISCO INDIA PRIVATE LTD. (SUPRA) IN HOLDING THAT THE PROVISIONS OF SEC.206AA OF THE ACT WOULD NOT APPLY TO A RECIPIENT OF INCOME, WHO IS BY THE DTAA ENTERED BY INDIA AND HIS COUNTRY. W E NOTICE THAT THE LD CIT(A) HAS DECIDED THIS ISSUE ON IDENTICAL L INES. ACCORDINGLY, WE UPHOLD THE VIEW TAKEN BY LD. CIT(A) ON THIS ISSU E. 6. IN THE RESULT, ALL THE APPEALS OF THE REVENUE AR E DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 05.08.20 20. SD/- (N.V. VASUDEVAN) VICE PRESIDENT SD/- (B.R. BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED 05 TH AUG, 2020. VG/SPS IT(IT)A NOS.562 TO 564 & ITA NO.1418 OF 2018 M/S. HONEYWELL TECHNOLOGY SOLUTIONS PVT. LTD., BANG ALORE PAGE 6 OF 6 COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.
