THE COMMISSIONER OF INCOME TAX vs. M/S WIPRO LTD

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ITA/181/2019HC KarnatakaKAHC01034218201929 November 2022Bench: P.S.DINESH KUMAR,T.G. SHIVASHANKARE GOWDA8 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that DTAA provisions have overriding effect and that Section 206AA should be read down to mean that where a DTAA exists, the rate of taxation is dictated by the treaty. The court agreed with the Delhi High Court's decision in Danisco India Pvt. Ltd.

What were the facts?

The Revenue appealed against an ITAT order concerning the assessment year 2011-12. The appeals related to the taxability of payments for technical services, specifically the applicability of TDS provisions versus Double Taxation Avoidance Agreements (DTAA). The assessee contended that TDS should be in line with DTAA rates, while the Revenue argued for Section 206AA of the Income Tax Act.

What were the issues?

Whether Section 206AA of the Income Tax Act overrides the provisions of a Double Taxation Avoidance Agreement (DTAA) when determining TDS rates for technical services.

Which sections of the Income-tax Act were involved?

Section 206AA,Section 200A

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(1)Show list

Detected automatically from the text. Citations are also linked where they appear in the judgment. The count shows how many other judgments on BharatTax rely on the same authority.

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ITA No. 181 of 2019

C/W ITA No. 182 of 2019 ITA No. 183 of 2019 ITA No. 184 of 2019

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 29TH DAY OF NOVEMBER, 2022 PRESENT THE HON'BLE MR JUSTICE P.S.DINESH KUMAR AND THE HON'BLE MR JUSTICE T G SHIVASHANKARE GOWDA INCOME TAX APPEAL NO. 181 OF 2019 C/W INCOME TAX APPEAL NO. 182 OF 2019 INCOME TAX APPEAL NO. 183 OF 2019 INCOME TAX APPEAL NO. 184 OF 2019

BETWEEN: 1. THE COMMISSIONER OF INCOME-TAX INTERNATIONAL TAXATION 7TH FLOOR, BMTC BUILDING 80 FEET ROAD, KORMANAGALA BENGALURU - 560 095.

2.

THE INCOME-TAX OFFICER INTERNATIONAL TAXATION WARD-1(3), 4TH FLOOR, BMTC BUILDING 80 FEET ROAD, KORMANAGALA BENGALURU - 560 095. … COMMON APPELLANTS (BY SRI. ARAVIND K.V., STANDING COUNSEL) AND: 1. M/S WIPRO LTD DODDAKANNELLI, SARJAPUR ROAD, BENGALURU - 560 025 PAN: AACW 0387R … COMMON RESPONDENT (BY SRI. R B KRISHNA, ADVOCATE)

Digitally signed by VIJAYA P Location: HIGH COURT OF KARNATAKA

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ITA No. 181 of 2019

C/W ITA No. 182 of 2019 ITA No. 183 of 2019 ITA No. 184 of 2019

INCOME TAX APPEAL NO.181/2019 IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 12/02/2016 PASSED IN ITA NO.1544/BANG/2013, FOR THE ASSESSMENT YEAR 2011-2012. PRAYING TO: 1. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED

ABOVE; 2. ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY

THE INCOME TAX APPELLATE TRIBUNAL, BENGALURU IN ITA

NO.1544/BANG/2013 DATED 12/02/2016 FOR ASSESSMENT

YEAR 2011-2012 ANNEXURE-C AND CONFIRM THE ORDER OF

THE APPELLATE COMMISSIONER CONFIRMING THE ORDER

PASSED BY THE INCOME TAX OFFICER, INTERNATIONAL

TAXATION, WARD-1(3), BENGALURU. 3. TO PASS SUCH OTHER SUITABLE ORDERS AS THIS HON'BLE

COURT DEEMS FIT TO GRANT IN THE FACTS AND

CIRCUMSTANCES OF THE CASE IN THE INTEREST OF JUSTICE

AND EQUITY.

INCOME TAX APPEAL NO.182/2019 IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 12/02/2016 PASSED IN ITA NO.1545/BANG/2013, FOR THE ASSESSMENT YEAR 2011-2012. PRAYING TO: 1. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED

ABOVE; 2. ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY

THE INCOME TAX APPELLATE TRIBUNAL, BENGALURU IN ITA

NO.1545/BANG/2013 DATED 12/02/2016 FOR ASSESSMENT

YEAR 2011-2012 ANNEXURE-C AND CONFIRM THE ORDER OF

THE APPELLATE COMMISSIONER CONFIRMING THE ORDER

PASSED BY THE INCOME TAX OFFICER, INTERNATIONAL

TAXATION, WARD-1(3), BENGALURU. 3. TO PASS SUCH OTHER SUITABLE ORDERS AS THIS HON'BLE

COURT DEEMS FIT TO GRANT IN THE FACTS AND

CIRCUMSTANCES OF THE CASE IN THE INTEREST OF JUSTICE

AND EQUITY.

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ITA No. 181 of 2019

C/W ITA No. 182 of 2019 ITA No. 183 of 2019 ITA No. 184 of 2019

INCOME TAX APPEAL NO.183/2019 IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 12/02/2016 PASSED IN ITA NO.1546/BANG/2013, FOR THE ASSESSMENT YEAR 2011-2012. PRAYING TO: 1. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED

ABOVE; 2. ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY

THE INCOME TAX APPELLATE TRIBUNAL, BENGALURU IN ITA

NO. 1546/BANG/2013 DATED 12/02/2016 FOR ASSESSMENT

YEAR 2011-2012 ANNEXURE-C AND CONFIRM THE ORDER OF

THE APPELLATE COMMISSIONER CONFIRMING THE ORDER

PASSED BY THE INCOME TAX OFFICER, INTERNATIONAL

TAXATION, WARD-1(3), BENGALURU. 3. TO PASS SUCH OTHER SUITABLE ORDERS AS THIS HON'BLE

COURT DEEMS FIT TO GRANT IN THE FACTS AND

CIRCUMSTANCES OF THE CASE IN THE INTEREST OF JUSTICE

AND EQUITY.

INCOME TAX APPEAL NO.184/2019 IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 12/02/2016 PASSED IN ITA NO.1547/BANG/2013, FOR THE ASSESSMENT YEAR 2011-2012. PRAYING TO: 1. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED

ABOVE; 2. ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY

THE INCOME TAX APPELLATE TRIBUNAL, BENGALURU IN ITA

NO. 1547/BANG/2013 DATED 12/02/2016 FOR ASSESSMENT

YEAR 2011-2012 ANNEXURE-C AND CONFIRM THE ORDER OF

THE APPELLATE COMMISSIONER CONFIRMING THE ORDER

PASSED BY THE INCOME TAX OFFICER, INTERNATIONAL

TAXATION, WARD-1(3), BENGALURU. 3. TO PASS SUCH OTHER SUITABLE ORDERS AS THIS HON'BLE

COURT DEEMS FIT TO GRANT IN THE FACTS AND

CIRCUMSTANCES OF THE CASE IN THE INTEREST OF JUSTICE

AND EQUITY.

THESE APPEALS COMING ON FOR ORDERS THIS DAY, P.S. DINESH KUMAR J., DELIVERED THE FOLLOWING:

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JUDGMENT

These appeals by the Revenue challenging the common order dated 12.02.2016 passed in S.P.Nos. 175 to 178/Bang/2013 (in I.T.(I.T.)A.Nos. 1544 to 1547/Bang/2013) (Assessment year: 2011-12), have been admitted to consider following substantial question of law: "Whether on the facts and in the circumstances of the case and in law, the Tribunal is right in law holding that the TDS provisions in the Act has to be read along with DTAA for computing the tax liability on the sum in question and therefore when the recipient is eligible for benefit of DTAA then there is no scope for deduction of tax @ 20% under Section 206AA of the Act when the assessing authority has rightly invoked said provision as conditions set out in said provisions are satisfied in case of assessee?

3.

At the outset, Shri. R.B.Krishna, learned advocate for the respondent submitted that the assessee has paid fee for technical services to various entities in the four quarters during the assessment year 2011-12. He contended that the Tax Deducted at Source shall be in terms of the relevant Article in

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ITA No. 181 of 2019

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respective agreements for Avoidance of Double Taxation in various countries. Adverting to one such agreement with Germany, annexed with the written submission, he pointed out that the rate of tax shall not exceed 10% in the case of Germany.

4.

Placing reliance on the case of Danisco India Pvt. Ltd., Vs. Union of India and Others1, Shri. Krishna, submitted that Double Taxation Avoidance Agreement (for short 'DTAA') has overriding effect and any subsequent amendment to nullify the effect of provision prior to the amendment has been read down by the Delhi High Court, whereas the Assessing Officer has applied provision of Section 200-A of the Income Tax Act (for short 'the Act') and has raised a demand for the remaining 10%. In substance, he submitted that the issue is covered by the decision in the case of Danisco (Supra) against the revenue.

1 (2018) 404 ITR 539 (Delhi)

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5.

Shri. Aravind, learned Standing Counsel for the Revenue adverting to Section 206-AA of the Act submitted that every payee is required to furnish a Permanent Account Number and in the absence of the same, the rate of tax applicable shall be 20% in terms of Section 206-AA(1)(iii). He argued that admittedly PAN numbers have not been furnished. Therefore, the authority in Danisco is not applicable to the facts of this case.

6.

We have carefully perused the rival contentions and perused the records.

7.

It is not in dispute that the assessee has made payment towards technical services to various recipients in different countries as per DTAA with different countries. In the case of Danisco, the Delhi High Court has held that Section 206AA cannot be understood to override the charging Sections 4 and 5 of the Act. It has further held that the provision in Section 206-AA has to be read down to mean that where the deductee i.e., the overseas resident business concern conducts

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its operation from a territory, whose Government has entered into a Double Taxation Avoidance Agreement with India, the rate of taxation would be as dictated by the provisions of the treaty.

8.

Thus, we are in respectful agreement with the view taken by the Delhi high Court. As per the DTAA, the maximum deduction shall not exceed 10% which the assessee has deducted. Any other interpretation to permit the taxing authority to raise a demand beyond 10% would be incongruous.

9.

Shri Aravind, also contended that if the law laid down in Danisco is to be applied, Section 206-AA of the Act would be rendered redundant.

10.

In our view, such contention is untenable in the facts of this case because there exists DTAA and tax deduction has been made at source as mandated by the said agreement.

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11.

In view of the above, these appeals fail and they are accordingly, dismissed. The question of law is answered in favour of the assessee and against the revenue.

No costs.

In view of the disposal of the appeals, all pending interlocutory applications stand disposed of.

Sd/- JUDGE

Sd/- JUDGE

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