Income Tax Appellate Tribunal - Ahmedabad
Dy. Commissioner Of Income Tax ... vs M/S. Adani Wilmar Ltd.,, Ahmedabad on 14 March, 2018
ITA Nos.2244, 2245, 2246, 2047, 2248, 2254, 2249, 2250, 2251
2252, 2253, 2260, 2261, 2262, 2263, 2264 & 2265/Ahd/2016
Assessment Years: 2016-17
Page 1 of 6
IN THE INCOME TAX APPELLATE TRIBUNAL,
AHMEDABAD A BENCH, AHMEDABAD
[Coram: Pramod Kumar AM and Rajpal Yadav JM]
ITA Nos.2244, 2245 & 2246/Ahd/2016
Assessment Years: 2016-17
Income Tax Officer (International Taxation)-I,
Ahmedabad. .....................Appellant
Vs.
Adani Power Limited, ................. Respondent
Shikhar, Near Adani House,
Mithakhali Six Road,
Navrangpura,
Ahmedabad - 380 009.
[PAN: AHMAO 1102 D]
ITA Nos.2047, 2248 & 2254/Ahd/2016
Assessment Years: 2016-17
Income Tax Officer (International Taxation)-I,
Ahmedabad. .....................Appellant
Vs.
Adani Power Maharashtra Limited, ................. Respondent
Adani House,
Nr. Mithakhali Six Road,
Navrangpura,
Ahmedabad - 380 009.
[PAN: AHMAO 7282 C]
ITA Nos.2249, 2250 & 2251/Ahd/2016
Assessment Years: 2016-17
Income Tax Officer (International Taxation)-I,
Ahmedabad. .....................Appellant
Vs.
Adani Bunkering Pvt. Ltd., ................. Respondent
(Formerly known as chemoil Adani P. Ltd.),
Adani House,
Nr. Mithakhali Six Road,
Navrangpura,
Ahmedabad - 380 009.
[PAN: AHMCO 2747 D]
ITA Nos.2244, 2245, 2246, 2047, 2248, 2254, 2249, 2250, 2251
2252, 2253, 2260, 2261, 2262, 2263, 2264 & 2265/Ahd/2016
Assessment Years: 2016-17
Page 2 of 6
ITA Nos.2252 & 2253/Ahd/2016
Assessment Years: 2016-17
Income Tax Officer (International Taxation)-I,
Ahmedabad. .....................Appellant
Vs.
Karnvati Aviation Pvt. Ltd., ................. Respondent
Adani House,
Nr. Mithakhali Six Road,
Navrangpura,
Ahmedabad - 380 009.
[PAN: AADCG 0689 B]
ITA Nos.2260, 2261 & 2262/Ahd/2016
Assessment Years: 2016-17
Dy. Commissioner of Income Tax (International Taxation)-I,
Ahmedabad. .....................Appellant
Vs.
Adani Port & SEZ Limited, ................. Respondent
Ground Floor, Adani House,
Nr. Mithakhali Six Road,
Navrangpura,
Ahmedabad - 380 009.
[PAN: AAACG 7917 K]
ITA Nos.2263, 2264 & 2265/Ahd/2016
Assessment Years: 2016-17
Dy. Commissioner of Income Tax (International Taxation)-I,
Ahmedabad. .....................Appellant
Vs.
Adani Wilmar Limited, ................. Respondent
2 nd Floor, Near Fortune House,
Nr. Mithakhali Six Road,
Navrangpura,
Ahmedabad - 380 009.
[PAN: AABCA 8056OP]
Appearances by
Saurabh Singh for the appellant
P M Mehta for the respondent
Dates of hearing of the appeal : March 13, 2018
Date of pronouncing this order : March 14, 2018
ITA Nos.2244, 2245, 2246, 2047, 2248, 2254, 2249, 2250, 2251
2252, 2253, 2260, 2261, 2262, 2263, 2264 & 2265/Ahd/2016
Assessment Years: 2016-17
Page 3 of 6
O R D E R
Per Pramod Kumar, AM:
1. The short issue that requires our adjudication in these appeals is whether the learned CIT(A) was justified in holding that section 206AA of the Income Tax Act, 1961 do not override the provisions of a double taxation avoidance agreement entered into by the Government of India under section 90 of the Act. The common grievances raised in all these appeals are as follows:
"1. The ld. CIT(A) has erred in law and on facts of the case in coming to the conclusion that Sec.206AA of Income Tax Act does not override the provision of Sec.90(2) of the Act, despite the fact that Sec.206AA of the Act starts with a non- obstinate clause ?
2. The ld. CIT(A) has erred in law and on facts of the case in ignoring the memorandum explaining the provisions of the Finance (No.2) Bill, 2009 which clearly states that the Sec.206AA of Income Tax Act applies to Non-Residents and also ignoring the Press Release of CBDT No.402/92/2006-MC (04 of 2010) dated 20.01.2010 which reiterates that Sec.206AA of Income Tax Act will also apply to all Non-Residents in respect of payments/remittances liable to TDS where PAN is not provided to the deductor ?
3. The ld. CIT(A) has erred in law and on facts of the case in relying upon the decisions which were rendered before the introduction of Sec.206AA of the I.T. Act ?"
2. The issue in appeal lies in a very narrow compass of material facts. The assessee has made various payments to certain non-residents who did not have a permanent account number (PAN) issued by the Income Tax Department. The tax deductions at source in these cases was made in accordance with the provisions of the respective double taxation avoidance agreement entered into by the Government of India with the country of which the recipients were tax residents. However, in the course of processing of the TDS returns filed by the assessee, section 206AA was held to be applicable on the ground that the recipients did not have the PAN. Accordingly, demand under section 201(1) was raised for short deduction of tax at source, as also a consequential demand for interest under section 201(1A) on account of delay in depositing tax deductible at source. Aggrieved, assessee carried the matter in appeal before the CIT(A). In his well-reasoned order, learned CIT(A) reversed the action of the Assessing Officer and observed as follows:
"5. Appellate findings:
I have considered the facts of the case and submission filed by the appellant carefully. The AR submitted the justification report received from CPC TDS which shows that the demand of short deduction has been raised on the basis of non availability of PAN in ITD PAN master data. Due to non availability of PAN, the tax rate of 20% as per section 206AA has been applied.
ITA Nos.2244, 2245, 2246, 2047, 2248, 2254, 2249, 2250, 2251 2252, 2253, 2260, 2261, 2262, 2263, 2264 & 2265/Ahd/2016 Assessment Years: 2016-17 Page 4 of 6 As per the facts of the case of the appellant, the provisions of section 90(2) of the Act are the beneficial provisions provided to the tax payers and accordingly the provisions of Act or the treaty, whichever are more beneficial to the appellant are applicable. Further, it is settled legal position that even though the Section 206AA begins with the obstinate clause, still it can in no case override the provisions of the Treaty. The AR also mentioned that the deductees from the foreign countries have obtained TRC (Tax Residency Certificate) on the basis of which TDS is deducted as per treaty rate which is 10% in appellant's case.
It is also noted that the provisions of Section 206AA which provides to deduct TDS at a higher rate because of non-availability of PAN are not attracted here because appellant cannot compel non-resident to obtain PAN when they are not liable to tax in India. The decisions of Hon'ble ITAT Pune in case of Deputy Director of Income Tax vs. Serum institute of India Ltd. [2015] 56 Taxmann.com 1(Pune Trib.) and Hon'ble ITAT Bangalore in case f DCTT vs. Infosys BPO Ltd. [2015] 60 Taxmann.com 465 (Bangalore - Trib.) also make the issue in question very clear. In both the cases Hon'ble ITATs decided that the provision of section 206AA cannot be invoked by the AO to insist on tax deduction at rate of 20%, having regard to overriding nature of provisions of section 90(2), where tax has been deducted in respect of payments made to non residents who do not furnish their PAN on strength of provisions of DTAA. The AR has given the detail of the cases decided by these ITATs in his above quoted submission.
As the provision of TDS are to be read along with DTAA for computing the tax liability on the sum in question and therefore when the recipient is eligible for the benefit of DTAA, there is no scope for deduction of tax at source @ 20% as provided under the provisions of section 206AA. In view of the facts of the case of the appellant and legal position, the addition on the ground of short deduction of TDS applying the provisions of section 206AA is not correct. The AO is directed to delete the demand raised on the basis of application of section 206AA. He is also directed to delete the interest which is consequential to the demand of short deduction. Accordingly, all grounds of appeal are allowed."
3. The Assessing Officer is aggrieved and is in appeal before us.
4. Learned representatives fairly agree that the issue in appeal is now covered, in favour of the assessee, by a large number of judicial precedents in favour of the assessee, even though learned Departmental Representative has, nevertheless, relied upon the stand taken in the grounds of appeal. Learned counsel for the assessee also invites our attention to a rather recent judgment of Hon'ble Delhi High Court in the case of Dansico India Pvt. Ltd. Vs. Union of India & Ors [judgment dated 5th February 2018 in WP(C) 5908 of 2015], and submits that, as is elementary, the provisions of a DTAA override the provisions of the Income Tax Act -except to the extent such statutory provisions are more beneficial to the assessee. In effect, thus, in a situation covered by the provisions of the DTAA, the statutory provisions of the Income Tax Act ITA Nos.2244, 2245, 2246, 2047, 2248, 2254, 2249, 2250, 2251 2252, 2253, 2260, 2261, 2262, 2263, 2264 & 2265/Ahd/2016 Assessment Years: 2016-17 Page 5 of 6 can never be put against the assessee. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position.
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 submissions. 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 PAN by any person, entitled 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 far 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 deducting tax at source then the tax deductor would be required to deduct tax at the higher of the following rates, namely, at the rate prescribed in the relevant provisions 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 payments made to non-
residents on account of royalty and/or fee for technical services. The dispute before us relates to the payments made by the 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 furnishing 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 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 provisions of the domestic Act in cases where the provisions of DTAAs are more beneficial to the assessee. There cannot be any doubt to the proposition that in case of non-residents, tax liability in India is liable to be determined in accordance with the provisions of the Act or the DTAA between India and the relevant country, whichever is more beneficial 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 the provisions made in the DTAAs will prevail over the general provisions contained in the Act to the extent they are beneficial to the assessee. In this context, it would be worthwhile to observe that the DTAAs entered into between India and the other relevant countries in the present context provide for scope of taxation and/or a rate of taxation which was different from the scope/rate prescribed under the Act. For the said reason, assessee deducted the tax at source having regard to the provisions of the respective DTAAs which provided 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 90(2) as held by the Hon'ble Supreme Court in the case of Azadi Bachao Andolan and Others (supra). Thus, in so far as the applicability of the scope/rate of 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 prescribed for a beneficial rate of taxation. However, the case of the 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-residents, 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 income are subordinate to the principle enshrined in section 90(2) of the Act but the provisions of Chapter XVII-B governing tax deduction at source are not subordinate 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 deduction of tax at source. The provisions of section 195 of the Act which casts a duty on the ITA Nos.2244, 2245, 2246, 2047, 2248, 2254, 2249, 2250, 2251 2252, 2253, 2260, 2261, 2262, 2263, 2264 & 2265/Ahd/2016 Assessment Years: 2016-17 Page 6 of 6 assessee to deduct tax at source on payments to a non-resident cannot be looked upon as a charging provision. In-fact, 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 source. Therefore, in view of the aforesaid schematic interpretation of the 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 cases where the provisions of DTAAs are more beneficial to the assessee 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 our view, where the tax has been deducted on the strength of the beneficial provisions of section DTAAs, the provisions 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 provisions of section 90(2) of the Act. The CIT(A), in our view, correctly inferred that section 206AA of the Act does not override 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 prescribed under the DTAAs and not as per section 206AA of the Act because the provisions of the DTAAs was more beneficial. Thus, we hereby affirm the ultimate conclusion of the CIT(A) in deleting the tax demand relatable to difference between 20% and the actual tax rate on which tax was deducted 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 now stand approved by Hon'ble Delhi High Court's 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 respectfully following the binding judicial precedents, we approve the conclusions arrived at by the CIT(A) and decline to interfere in the matter.
7. In the result, the appeals are dismissed. Pronounced in the open court today on the 14th day of March, 2018.
Sd/- Sd/-
Rajpal Yadav Pramod Kumar
(Judicial Member) (Accountant Member)
Ahmedabad, Dated the 14 th day of March, 2018
Copies to: (1) The appellant (2) The respondent
(3) CIT (4) CIT(A)
(5) DR (6) Guard File
By order
Assistant Registrar
Income Tax Appellate Tribunal
Ahmedabad benches, Ahmedabad