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Income Tax Appellate Tribunal, DELHI BENCH “G”: NEW DELHI
PER PRASHANT MAHARISHI, A. M. 1. This appeal is preferred by assessee against the order of the Ld. CIT (Appeals) -43, New Delhi dated 16/10/2015, wherein following grounds of appeal have been raised:- “1. It is contended that the provisions of section 206AA of the Income Tax Act, 1961 (the Act) are not applicable. 2. The lower authorities have erred in applying the Tax Deduction rates as specified in Section 206AA of the Act in preference to the Tax Deduction Rates specified in the Double Taxation Avoidance Agreement between India and New Zealand. 3. It is contended that the appellant is entitled to the benefits of Double Taxation Avoidance Agreement in preference to the provisions of the Act. 4. That the above grounds of appeal are independent and without prejudice to one another.”
Only issue before us in this appeal is whether the payment made by the assessee to a foreign entity who does not have a permanent account number and tax has been deducted by the Indian payer applying the rates provided under double taxation avoidance agreement with that country, whether the tax is required to be deducted in accordance with provisions of section 206AA of the income tax act or not.
Pureera India Pvt. Ltd Vs ITO(TDS)(International Taxation), ITA No. 6689/Del/2015 (Assessment Year: 2011-12) 3. The assessee is a private limited company who filed its return of tax deduction at source for quarter for the financial year 2010-11 in form No. 27Q on 29/09/2010. The assessee has paid Rs. 3875070/- on account of licensee fees to New Zealand company after deducting tax of Rs. 387507/- at the rate of 10% as per the rates mentioned in clause 12 of double taxation avoidance agreement between the government of India and New Zealand. As the recipient of the income did not have any permanent establishment in India, they did not have any Permanent Account Number. The above return was processed under section 200A and the demand of Rs. 387510/- was raised as the tax was not deducted at source at the rate of 20% as per the section 206AA(1) of the income tax act and therefore the Income Tax Officer, TDS (International Taxation), Delhi passed and intimation under section 200A of the Act holding that shorter deduction of tax of Rs. 387510/- and interest thereon of Rs. 65880/-. It was further held that till the date of deposit of the tax late payment interest of Rs. 6010/- was also charged. Consequently, a total demand of tax and interest was determined at Rs. 460840/- vide order dated 01.11.2011. Against this order assessee preferred an appeal before the Ld. CIT (A) who confirmed the order of the Ld. assessing officer and therefore assessee is in appeal before us. 4. Before us the Ld. authorised representative submitted that the issue is now squarely covered in favour of the assessee by the decision of the Special Bench of ITAT, Hyderabad in case of Nagarjuna Fertilisers and Chemicals Ltd Vs. ACIT, wherein it has been held that if the rate of tax applicable under DTAA is lower than the 20% tax rate prescribed Under Section 206AA, then tax would have to be deducted at such lower rate. Even if the non-resident does not have Permanent Account Number. He therefore stated that now the issue is squarely covered in favour of the assessee. 5. Ld. departmental representative vehemently relied upon the orders of the Ld. assessing officer as well as the Ld. CIT (A.). 6. We have carefully considered the rival contention and also perused the orders of the lower authorities. We have also perused the order of the special bench in 78 Taxmann.com 264 wherein it has been held that provisions of section 206AA of the act will not have an overriding effect over all other provisions of the act and the provisions of the Double Taxation Avoidance Agreement (DTAA) to the extent they are beneficial to the assessee will override section 206 AA by virtue of Section 90 (2) of the act. In the present case, the demand arose in only because of the reason that the
Pureera India Pvt. Ltd Vs ITO(TDS)(International Taxation), ITA No. 6689/Del/2015 (Assessment Year: 2011-12) recipient of the income, a New Zealand company does not have a Permanent Account Number, therefore according to the revenue, the provisions of section 206 AA will apply. In view of the decision of the special bench as stated above, the issue is now squarely settled in favour of the assessee. In view of this we direct the Ld. assessing officer to cancel the demand raised of Rs. 460840/- by applying provisions of section 206 AA of the income tax act. 7. In the result appeal of the assessee is allowed. Order pronounced in the open court on 11/12/2017. -Sd/- -Sd/- (H.S.SIDHU) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated:11/12/2017 A K Keot