I.T.A. No.1974/Ahd/2015 Assessment Year: 2014-15 Page 1 of 3 IN INCOME TAX APPELLATE TRIBUNAL, AHMEDABAD I BENCH, AHMEDABAD [Coram: Pramod Kumar AM and S S Godara JM] I.T.A. No.1974/Ahd/2015 Assessment year: 2014-15 Uniphos Envirotronic Private Limited ..........Appellant GIDC Estate, Vapi, Valsad. [PAN: AABCU 0216 A] Vs Dy. Commissioner of Income Tax ......Respondent CPC-TDS - Ghaziabad. Appearances by S.N. Soparkar and Parin Shah, for appellant James Kurian for respondent Order reserved on : 31/08/2016 Order pronounced on : 30/09/2016 O R D E R Per Pramod Kumar, AM: [1] By way of this appeal, assessee appellant has challenged correctness of order dated 28.05.2015 passed by learned CIT(A) in matter of rectification of mistake under section 154 r.w.s 200A of Income Tax Act, 1961, for assessment year 2014-15, on following grounds: 1. On facts and in circumstances of case and in law, CIT(A) erred in upholding action of DCIT, CPC, IDS passed under section 200A of Act by relying on Press Release No. 402/92/2006-MC (04 of 2010) dated 20.01.2010 issued by CBDT requiring that all deductors who are liable to deduct tax are required to deduct tax at higher rate in all transactions not having PAN of deductee on or after 1st April 2010. 2. In doing so, Hon'ble Commissioner of Income Tax (Appeals) erred in following respects: 2.1 In not appreciating fact that appellant grossed up consideration payable to MSA AUER Gmbh ("MSA") German Limited Liability Company towards purchase of technical I.T.A. No.1974/Ahd/2015 Assessment Year: 2014-15 Page 2 of 3 knowhow and deducted tax @ 10% as fee for technical services under Article 12 of Tax Treaty, following beneficial provisions contained in section 90(2) of Act 2.2 In not appreciating fact that section 206AA of Act is not charging section and provisions of Chapter XVII-B governing TDS are not subordinate to section 90(2) of Act. [2] To adjudicate on this appeal, only few material facts need to be taken note of. assessee has made remittance to German tax resident, and, in accordance with provisions of Indo German Double Taxation Avoidance Agreement, payment so made by assessee is taxable @10% on gross basis in hands of German entity. There is no dispute on these aspects. Accordingly, assessee deducted tax at source @ 10% under section 195 and made remittance of net amount accordingly. However, when related TDS return was processed under section 200A, short deduction demand was raised on ground that tax withholding rate was to apply @ 20%, in terms of provisions of Section 206AA, as German entity had not obtained permanent account number (PAN) from Indian tax authorities. assessee objected to this treatment and filed rectification petition. Not successful, assessee carried matter in appeal before CIT(A) but without any success. Learned CIT(A), relying upon press release dated 20th January 2010 issued by Central Board of Direct Taxes, held that, in terms of provisions of Section 206AA, in case in which recipient foreign entity has not obtained PAN from Indian tax authorities, tax will be deducted at higher rate of 20%. assessee is not satisfied and is in further appeal before us. [3] We have heard rival contentions, perused material on record and duly considered facts of case in light of applicable legal position. I.T.A. No.1974/Ahd/2015 Assessment Year: 2014-15 Page 3 of 3 [4] It is only elementary that, under scheme of Income Tax Act 1961- as set out under section 90(2) of Act, provisions of applicable tax treaties override provisions of Income Tax Act 1961- except when provisions of Act are more beneficial to assessee. provisions of applicable tax treaty, in present case, prescribe tax rate @ 10%. This rate of 10% is applicable on related income whether or not assessee has obtained permanent account number. In effect, therefore, even when foreign entity does not obtain PAN in India, applicable tax rate is 10% in this case. Section 206AA, which provides higher tax burden- i.e. taxability @ 20% in event of foreign entity not obtaining permanent account number in India, therefore, cannot be pressed into service, as has been done in course of processing of return under section 200A. To that extent, short deduction of tax at source demand, raised in course of processing of TDS return under section 200A, is unsustainable in law. We quash this short deduction of tax at source demand. grievance of assessee is indeed justified, merits acceptance and is hereby upheld. [5] In result, appeal is allowed. Pronounced in open Court today on 30th day of September, 2016. Sd/- Sd/- S S Godara Pramod Kumar (Judicial Member) (Accountant Member) Ahmedabad, 30 th day of September, 2016. Copies to: (1) appellant (2) respondent (3) CIT (4) CIT(A) (5) DR (6) Guard File By order Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad Uniphos Envirotronic Private Limited v. Dy. Commissioner of Income Tax, CPC-TDS - Ghaziabad