Reliance Commercial Dealers Limited Vs CIT (ITAT Mumbai)
Facts- The assessee is a company engaged in the business of Air Transport of Passengers and is a holder of Non-Scheduled Air Transport (Passenger) Services (NSOP) permit granted by the Director General of Civil Aviation / Ministry of Civil Aviation.
During the Financial Year 2015-16, the assessee had made payment of USD 61,200 (amounting to Rs.40,30,020) to Flight Safety International Inc, USA for availing training of pilots. However, in the absence of PAN of deductee, the assessee deducted tax at being grossed up rate of 20% under Section 195A and accordingly made payments. The assessee filed an appeal before the CIT(A) under Section 248 contending that the deductee, being a tax resident of the USA and Double Taxation Avoidance Agreement between India and USA are applicable to the transaction in question and claimed as per Article 12 of DTAA, the rate of tax on “fees for included services” shall not exceed 15%. However, the CIT(A) dismissed assessee’s appeal as not maintainable, Aggrieved, the assessee appealed before the tribunal.
Conclusion- Held that the word no tax was required to be deducted in Section 248 should be interpreted in such a manner so as to include claim of the deductor that no tax was required to be deducted in excess of deductible at rates in force.
The words, “no tax was required to be deducted on such income” would mean that there is denial of liability to the extent of excess tax deducted at source compared to rates in force as per Section 195(1). Thus, intention of the legislature would not render the deductor remediless merely because it admits deductibility of tax at source but disputes the rate of deduction. Thus, in our opinion, the judgment of the Hon‟ble Supreme Court and principle laid down therein in the case of CIT vs. Wesman Engg (supra) would also apply to the amendment to Section 248 of the Act.
Further, the claim of the assessee is that as per Article 12 of the DTAA between India and France, the rate of tax shall not exceed 10% and accordingly it filed appeal before the CIT (A) claiming that rate of tax to be deducted shall be 10%. However, the aforesaid finding will also apply mutatis mutandis for this appeal also. Hence, the appeal was allowed.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The aforesaid appeals have been filed by the assessee against two separate orders of even date 31/10/2019 passed by ld. CIT (A)-Mumbai both in the A.Y.2016-17. In both the appeals, the common grounds raised reads as under:-
Ground No. 1: On the facts and circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) [CIT(A)] has erred in holding that the jurisdiction to decide the claim under section 248 of the Income-tax Act, 1961 (Act) is absent and thereby not admitting the appeal filed.
Ground No. 2: On the facts and circumstances of the case and in law, the learned CIT(A) has erred in holding that the relief sought by the Appellant is impermissible to be granted under section 248 of the Act
Ground No. 3: On the facts and circumstances of the case and in law, the learned CIT(A) should have held that sum payable to Flight Safety International Inc, USA (FSII) for availing training services should be subject to withholding tax at the rate of 10% as per the provisions of India-USA Double Taxation Avoidance Agreement (DTAA) read with section 195 and section 11 5A of the Act and not at the rate of 20% (plus applicable surcharge and education cess) under section 206AA of the Act.
2. The facts in brief are that the assessee is a company engaged in the business of Air Transport of Passengers and is a holder of Non-Scheduled Air Transport (Passenger) Services (NSOP) permit granted by the Director General of Civil Aviation / Ministry of Civil Aviation. During the Financial Year 2015- 16, the assessee had made payment of USD 61,200 (amounting to Rs.40,30,020) to Flight Safety International Inc, USA (hereinafter referred to as “FSII” or “Deductee” for availing training of pilots. As per the arrangement between the foreign entity and the assessee, the taxes, if any, payable on said training of pilots were to be borne by the assessee. Since the services were in the nature of technical services, therefore, as per the provision of Section 115A of the Act (as stood at the relevant time), the applicable rate of tax was 10%. However, in the absence of PAN of deductee, the assessee deducted tax at source u/s. 195 r.w.s. 206AA of the Act @25.94% being grossed up rate of 20% u/s. 195A. Accordingly, the assessee made the following payments and deposited Rs. 10,45,390/- to the credit of the Government on 08/09/20 15.
