Case Law Details

Case Name : Mantri Technology Constellations Pvt. Ltd. Vs DCIT (ITAT Bangalore)
Appeal Number : IT(IT) No. 130/Bang/2018
Date of Judgement/Order : 24/08/2020
Related Assessment Year : 2014-15
Courts : All ITAT (7472) ITAT Bangalore (440)

Mantri Technology Constellations Pvt. Ltd. Vs DCIT (ITAT Bangalore)

The issue under consideration is whether the architectural services provided to Singapore Entity taxable at 10% or 20% when the benefit of Double Taxation Avoidance Agreement (DTAA) is available?

ITAT states that, Non-Resident —TDS—Rate of deduction—Beneficial provision of DTAA—Assessee in normal course of its business remitted payments to Company D which was a non-resident company, located in Singapore—Company D was not tax assessee in India—Tax relationship between two countries was regulated in terms of IndoSingapore DTAA—Revenue held that having regard to section 206A, tax deduction at source was required to be made at 20% in absence of furnishing of PAN by recipient non-residents—Assessee’s case was that Section 206AA (i) had effect of undoing provisions of DTAA, besides being in violation of Article 265 of Constitution of India—Assessee took plea that levy of 20% rate was unconstitutional—Held, in case of Azadi Bachao Andolan Vs. Union of India, (2003) 263 ITR 706 (SC) supreme court held that provisions made in DTAAs prevail over general provisions contained in the Act to extent they were beneficial to assessee—DTAAs entered into between India and other relevant countries in present context provide for scope of taxation and/or a rate of taxation which was different from the scope/rate prescribed under the Act—Thus, in so far as applicability of the scope/rate of taxation with respect to impugned payments made to non-residents was concerned, no fault could be found with rate of taxation invoked by assessee based on DTAAs which prescribed for beneficial rate of taxation—Though charging section 4 and section 5 dealing with ascertainment of total income were subordinate to principle enshrined in section 90(2) but provisions of Chapter XVII-B governing tax deduction at source were not subordinate to section 90(2)—Section 206AA was not charging section but was part of a procedural provisions dealing with collection and deduction of tax at source—Provisions of section 195 which casted duty on assessee to deduct tax at source on payments to a non-resident could not be looked upon as a charging provision—Where tax had been deducted on strength of beneficial provisions of section DTAAs, provisions of section 206AA could not be invoked by AO to insist on tax deduction @ 20%, having regard to overriding nature of provisions of section 90(2)—Provision in Section 206AA (as it existed) had to be read down to mean that where deductee i.e overseas resident business concern conducted its operation from a territory, whose Government had entered into a DTAA with India, rate of taxation would be as dictated by provisions of treaty. In the above case, the payments are made to Singapore based entity and liable for TDS at 10%.

FULL TEXT OF THE ITAT JUDGEMENT

These are the cross appeals filed by the assessee and the revenue against the order of Commissioner of Income Tax (Appeals)-12, Bangalore passed u/s.201(1) and 201(1A) and u/s. 250 of the Income Tax Act, 1961 (the Act). For the sake of convenience,we shall take up the assessee appeal in IT(IT)A No.130/Bang/2018 and facts narrated therein.

2. The assessee has raised the following grounds of appeal :

[1] The orders of the authorities below in so far as they are against the appellant are opposed to law, equity, weight of evidence, probabilities, facts and circumstances of the case.

[2] The appellant denies itself liable to be considered as an assessee in default in terms of Sec. 79:1[1] of the Act for the alleged failure to deduct tax u/s. 195 of the Act in respect of the payments made to M/s. Space Matrix Design Consultants Pte.Ltd., under the facts and in the circumstances of the appellant’s case.

[2.1] The authorities below failed to appreciate that the payments made to M/s. Space Matrix Design Consultants Pte.Ltd., was not in the nature of any payment for technical services and therefore, the same cannot be regarded as fees for technical services u/s. 9[1][vii] of the Act.

[2.2] The authorities below failed to appreciate that the payments made to M/s. Space Matrix Design Consultants Pte.Ltd., could not be regarded as fees for technical in terms of the provisions of article 12[4][c] of the India-Singapore DIM as even the said provisions require that the recipient of the service must be able to apply the technology that was developed and transferred in the shape of a technical plan or technical design as contemplated under the said clause and thus the reference to the Memorandum of Understanding and protocols in the India-USA DIM cannot be pressed into service since the scope of the expression “fees for technical services” under the aforesaid 2 DTAA’s were different. [2.3] The authorities below failed to appreciate that the payment made to M/s. Space Matrix Design Consultants Pte.Ltd., could not be regarded as fees for technical in terms of the provisions of article 12[4][b] of the India-Singapore DTAA since there was no “make available” technical knowledge, experience, skill, know-how or process that enables the recipient to apply the technology under the facts and in the circumstances of the appellant’s case.

[2.4] Without prejudice to the above, the extent of tax demanded from the appellant u/s. 201 [1] of the Act is highly excessive and the same is liable to be reduced substantially.

[3] Without prejudice to the right to seek waiver with the Hon’ble CCIT/DG, the appellant denies itself liable to be charged to interest u/s.201[1A] of the Act, which under the facts and in the circumstances of the appellant’s case and the levy deserves to be cancelled.

[4] For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and Justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs.

3. The Brief facts of the case are that the assessee Company is engaged in the business of real estate development, construction of residential apartments and has issued debentures to certain overseas entities and engages M/s. Space Matrix Design Consultants Pte. Ltd., Singapore for architectural services to the proposed project at Chennai. The revenue found that the assessee has made payments to Space Matrix Design Consultants Pte. Ltd without deduction of tax at source and similarly for interest on debentures to non-residents, the assessee has not applied the rate as prescribed in Section 206AA of the Act as the PAN was not provided by the recipients.The assessee has made interest payments to debenture holders @10% rate as per Double Taxation Avoidance Agreements (DTAA) as the recipients are residents of foreign country. Whereas in respect of payments made to M/s. Space Matrix Design Consultants Pte. Ltd., Singapore, the assessee has not deducted the TDS as services are in the nature of architectural services and the payments were made to recipient company of Singapore as per Article 12 of the India-Singapore DTAA.The assessee has submitted the details of payments and explained the reasons for non-deduction of tax by letter dt. 3.9.2016 and filed the copy of agreement with M/s. Space Matrix Design Consultants Pte. Ltd., Singapore in respect of architectural services and tax residency certificate and exemptions and such payments to M/s. Space Matrix Design Consultants Pte. Ltd., Singapore are exempted from tax under the DTAA. In respect of payment of interest to nonresident debenture holders, the assessee has deducted tax at 10% as per the terms of DTAA and the provisions of Section 206AA of the Act. The Assessing Officer is of the opinion that the assessee should have deducted tax at 20% as per the provisions of the Act. Further, the Assessing Officer found as per agreement that the services rendered by the Singapore company are in the nature of Fees for Technical Services (FTS) and cannot be categorized as architectural services. The Assessing Officer observed that the agreement was entered by the assessee with M/s. Space Matrix Design Consultants Pte. Ltd., Singapore, where the services rendered by the aforesaid entity are technical services within the meaning of Expln. 2 to Section 9(1)(vii) of the Act and further observed that the payments made to the Singapore entity are FTS, Which fall within the scope of clause (c) of Article 12(4) and India-Singapore DTAA. The ld. A.O. examined the payments in the context of make available clause and concluded that the provisions of designs and drawings by M/s. Space Matrix Design Consultants Pte. Ltd., Singapore would amount to make available of the technology and would be regarded as FTS under Clause 12(4)(b) of Singapore-India DTAA. Similarly, in respect of interest payments made to debenture holders, the Assessing Officer is of the opinion that the assessee should deduct the tax at 20% in terms of Section 206AA of the act as PAN is not provided, and the assessee has not furnished the Tax Residency Certificate of the debenture holders.The provisions of Section 206AA of the Act overrides the provisions of Section 90(2) of the Act and calculated the short deduction of TDS and interest and has determined the total liability payable by the assessee at Rs. 1,18,07,272/-including interest under Section 201(1A) of Rs.28,28,251/- and passed the order under Section 201&201(1A) of the Act Dt. 29.02.2016. Aggrieved by the assessment order, the assessee has filed an appeal with the CIT (Appeals). The CIT (Appeals) considered the grounds of appeal, findings of the Assessing Officer and submissions of the assessee and DTAA provisions in respect of payments made to M/s. Space Matrix Design Consultants Pte. Ltd., Singapore, but has concurred with the action of the Assessing Officer and confirmed the liability of deduction of TDS. In respect of payment of interest on debentures to the non-residents, the CIT (Appeals) find that the assessee has deducted TDS at 10% as per provisions of Section 260AA of the Act and relied on the Tribunal decision and has observed that the deduction of TDS by the assessee is in accordance with the law and partly allowed the assessee appeal. Aggrieved by order of CIT (Appeals), the assessee has filed an appeal with the Tribunal.

4. At the time of hearing, the ld. AR submitted that the CIT (Appeals) has erred in confirming the deduction of TDS in respect of payments made to M/s. Space Matrix Design Consultants Pte. Ltd., Singapore and held as Fees for Technical Services (FTS), irrespective of the fact that the assessee has entered into an agreement with the company for architectural services, which are not within the purview of FTS and relied on the agreements of DTAA between the two countries and supported with judicial decisions and filed Paper Book. Further the ld. AR emphasized that the assessee has submitted complete information before the lower authorities but the lower authorities have overlooked to the facts and referred only to the Head Note and not on the basic services, which are in the nature of architectural services and vital evidences supporting the services were ignored and prayed for allowing the appeal. Contra, the learned Departmental Representative supported the orders of the lower authorities.

5. We heard the rival submissions of the parties and perused the material on record. The sole matrix of the issue in respect of non-deduction of TDS by the assessee on the payments made to M/s. Space Matrix Design Consultants Pte. Ltd., Singapore. The contentions of the LdAr are that the payments are not in the nature of FTS and also Memorandum of Understanding for Indo-US DTAA could not apply to the India-Singapore DTAA and there is no technical knowledge, experience, skill, knowhow and process are made available. The Assessing Officer has dealt on the clauses of the agreement, whereas the assessee has explained that M/s. Space Matrix Design Consultants Pte. Ltd., Singapore has entered into architectural design services agreement in respect of residential projects in Chennai and has developed drawings, designs and transferred the same to the assessee. Whereas, the Assessing Officer has observed that the assessee has made available technical knowledge, skill, knowhow and therefore the payments made to the nonresident company in Singapore are in the nature of Fees for Technical Services (FTS) is taxable in terms of Section 5(2) and Section 9(1)(vii) of the Act. The learned Authorized Representative emphasized that the payments made to Singapore based entity are not in the nature of payments for technical services and cannot be treated as FTS as defined in Section 9(1)(vii) of the Act. Further the learned Authorized Representative submitted that the payments made to Singapore entity are not for FTS as defined in Section 12(4)(b) of Indo-Singapore DTAA as no technical knowledge, skill, know how or process was made available. Similarly, the ld. AR referred to the paper book and the reply submitted by the assessee in response to the notices issued and the explanations furnished before the Assessing Officer. We, on considering the provisions of law, information and submissions of the assessee are of the opinion that the matter required further examination of the facts in respect of services rendered by the Singapore based entity since the Assessing Officer is of the opinion that the services are in the nature of FTS. The ld. AR submitted the material evidences and the DTAA supporting that the services are out of the purview of FTS and are of architectural services.We found that there are no specific findings on the submissions. Accordingly, in the interest of justice, we restore the disputed issue to the file of Assessing Officer for limited purpose to verify and examine the specific nature of services. Further, the assessee should be provided with adequate opportunity of hearing and shall co-operate in submitting information and allow the grounds of appeal of the assessee for statistical purposes.

6. Now we shall take up the Revenue’s appeal in IT(IT)A No.384/Bang/2018. The Revenue has raised the following grounds of appeal:

1. The learned Commissioner of Income Tax (Appeals) has erred in law and facts of the case in allowing the appeal of the assessee on the issue of applicability of section 206AA of the Income-tax Act, 1961, in respect of payments made to non- resident entities.

2. For that, the IA. Commissioner of Income Tax (Appeals) erred in law as well as on facts in holding that there is no scope for deduction of tax at the rate of 20%, as provided under the provisions of Section 206AA when the benefit of DTAA is available, despite the overriding effect of Section 206AA of the Income-tax Act, 1961 due to the presence of a non-obstante clause in the Section and a plain reading of the section indicates that it overrides other provisions of the Act including Section 90(2).

3. For that, the learned Commissioner of Income Tax (Appeals) erred in law as well as on facts in allowing the appeal of the assessee by wrongly/ incorrectly placing reliance on the decision of the Hon’ble ITAT, Bangalore, in the case of Bosch Ltd Vs ITO (20 12) 14 1 ITD 3 8(Bang) which dealt with the grossing up issue u/ s 195 of the Income-tax Act, and not the issue of applicability of Section 206AA of the Income-tax Act.

4. For these and such other grounds that may be urged at the time of hearing, it is prayed that the order of the AO be restored and that of the CIT(A) be cancelled.

7. The learned Departmental Representative submitted that the CIT (Appeals) has erred in not confirming the action of the Assessing Officer, irrespective of the fact that the provisions of Section 90(2) overrides the provisions of Section 206AA of the Act and prayed for allowing the appeal. Contra, the learned Authorized Representative supported the orders of CIT(A) on this disputed issue and relied on the judicial decision of Hon’ble Delhi High Court in the case of M/s Danisco India Pvt. Ltd. Vs. Union of India and Others 404 ITR 539 (Del) and Special Bench decision of Tribunal in the case of M/s. Nagarjuna Fertilisers and Chemicals Limited Vs. ACIT in ITA Nos.1187 & 1188/Bang/2014 Dt.13.02.2017.

8. We heard the rival contentions of the parties and perused the material on record. We found that the CIT (Appeals) has dealt on the disputed issue in respect of deduction of TDS at 10% made by the assessee, irrespective of the fact that there is no scope for deduction of tax at 20% as provided under Section 206AA of the Act. We found the CIT (Appeals) has dealt on the submissions, provisions of law and relied on the tribunal decision in the case of Infosys BPO Ltd. in IT(IT)A No.143/Bang/2013 and observed at page 12 Para 5 as under :

5. TAXATION AT THE RATE OF 10% IN TERMS OF SECTION 206AA (Grotuu13)

The appellant is aggrieved that AO has applied higher rate of taxation since the payees did not produce PAN. The appellant placed heavy reliance on the decision of jurisdictional ITAT in case of Infosys BPO (ITA 143/(B)/20131.

The issue is covered in favour of the appellant by the aforesaid decision. The relevant extract from the judgment is reproduced below:

“7. We have considered the rival submissions as well as the relevant material on record. In the case in hand, the assessee made payment to the non-resident on account of royalty in some cases and on account of fee for einilical services in some other cases. The assesee deducted TD Sat the rate of 10% in some cases and at the rate of 10.56% in some other cases as per the provisions of Sec.115A(1)(b) of the IT Act. There is no dispute that the benefit of DTAA is available to the recipients of the payments in question. Therefore, the tax liability of the recipients could not be more than the rate prescribed under the DTAA or the income tax Act, whichever is lower. In the case in hand, the AO while issuing the intimation u/s 200A has computed the tax liability at the rate of 20%, as provided/s 206AA of the Act. Since the benefit of DTAA is available to recipient Therefore, in any case, the scope of deduction of tax at source cannot be more than the tax liability under DTAA. In the latest decision of the Pune Bench of the Tribunal in the case of Institute of India Ltd. (Supra) an identical issue has been considered by the Tribunal in para-7 as under;

“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 men India and the relevant country of the non-residents; and, such rate of tax being lower than the rate of 20% mandated by section206AA of the Act. The CIT(A) has found that the provisions of section90(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 DTAA5 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 DTAA5 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 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 trentne 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 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. Bill& & 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 tie 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 DTAA5 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 DTAA5 provisions especially section206AA 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 regiard 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 section90(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 DTAA5 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 dpi rorance between 20% and the actual tax rate on which tax was deducted by the assessee in terms of the relevant DTAA5. As a consequence, revenue fails in its appeals.

8. A similar view has been taken by the Co-ordinate Bench of this Tribunal in case of Bosch Vs ITO Supra, in para-22 & 23 as under;

’22. As regards the grossing up u/s 195A of the Income tax Act is concerned, we find that the provision reads asunder;

“In a case other than that referred to in subsection (1A)of sec.192, where under an agreement or other arrangement ,the tax chargeable on any income referred to in the foregoing provisions of this Chapter is to be borne by the person by whom the income is payable, then for the purposes of deduction of tax under those provisions such income shall be increased to such amount as would, after deduction of tax thereon at the rates in force for the financial year in which such income is payable, be equal to the net amount payables under such agreement or arrangement”.23. Thus, it can be seen that the income shall be increased to such amount as would after deduction of tax thereto at the rate in force for the financial year in which such income is payable, be equal to the net amount payable under such agreement or arrangement. A literal reading of sec. implies that the tax is to be withheld by the assessee. The Hon’ble Apex Court in the ease of GE India Technology Centre (P) Ltd (cited Supra) has held that the meaning and effect has to be given to the expression used in the section and while interpreting a section, one has to give weightage to every word used in that section. In view of the same, we are of the opinion that the grossing up of the amount is to be done at the rats in force for the financial year in which such income is payable and not at 20% as specified u/s 206AA of the Act”.

9. It is pertinent to note the obligation of deducting tax at source arises only when there is a sum chargeable under the Act. The Hon’ble jurisdictional High Court in the case of M/s Bharti Airtel Ltd Vs DCIT Supra, has observed in para-39 as under;

“39. The provisions for deduction of TAS (tax at source)which are in Chapter XVII dealing with collection of taxes and the charging provisions of the Income-tax from one single integral, inseparable Code. Therefore, the provisions relating to TDS apply only to those sums which are “Chargeable to tax” under the Income-tax Act. While interpreting the provisions of the Income-tax Act one cannot read the charging sections of that Act de hors the machinery sections. The Act is to be

read as an integral Code. In order to deduct tax at source the amount being paid out must necessarily be ascertainable as income chargeable to tax in the hands of the payee. TDS is a vicarious liability and it presupposes existence of primary liability. Therefore, the TDS provisions have to be read in conformity with the charging provisions Le section 4.5 and 9″.

Thus, the provisions of TDS has to be read along with the machinery provisions of computing the tax liability on the sum in question. Following the decisions of Co-ordinate Benches Supra, as well as the judgment of I lon’ble jurisdictional High Court in the case of M/s Bharti Airtel Ltd Supra, we do not find any error or illegality in the order of the CTI(A) that there is no scope for deduction of tax at the rate of 20% as provided under the provisions of Section 206AA of the IT Act when the benefit of DTAA is available.

Respectfully following the decisions of the jurisdictional Tribunal, this ground is allowed.

The learned Authorized Representative also relied on the decision in the case of Denisco India Pvt. Ltd. Vs. Union of India & Others (supra), and the Headnote read as under :

“Non-resident—TDS—Rate of deduction—Beneficial provision of DTAA—Assessee in normal course of its business remitted payments to Company D which was a non-resident company, located in Singapore—Company D was not tax assessee in India—Tax relationship between two countries was regulated in terms of IndoSingapore DTAA—Revenue held that having regard to section 206A, tax deduction at source was required to be made at 20% in absence of furnishing of PAN by recipient non-residents—Assessee’s case was that Section 206AA (i) had effect of undoing provisions of DTAA, besides being in violation of Article 265 of Constitution of India—Assessee took plea that levy of 20% rate was unconstitutional—Held, in case of Azadi Bachao Andolan Vs. Union of India, (2003) 263 ITR 706 (SC) supreme court held that provisions made in DTAAs prevail over general provisions contained in the Act to extent they were beneficial to assessee—DTAAs entered into between India and other relevant countries in present context provide for scope of taxation and/or a rate of taxation which was different from the scope/rate prescribed under the Act—Thus, in so far as applicability of the scope/rate of taxation with respect to impugned payments made to non-residents was concerned, no fault could be found with rate of taxation invoked by assessee based on DTAAs which prescribed for beneficial rate of taxation—Though charging section 4 and section 5 dealing with ascertainment of total income were subordinate to principle enshrined in section 90(2) but provisions of Chapter XVII-B governing tax deduction at source were not subordinate to section 90(2)—Section 206AA was not charging section but was part of a procedural provisions dealing with collection and deduction of tax at source—Provisions of section 195 which casted duty on assessee to deduct tax at source on payments to a non-resident could not be looked upon as a charging provision—Where tax had been deducted on strength of beneficial provisions of section DTAAs, provisions of section 206AA could not be invoked by AO to insist on tax deduction @ 20%, having regard to overriding nature of provisions of section 90(2)—Provision in Section 206AA (as it existed) had to be read down to mean that where deductee i.e overseas resident business concern conducted its operation from a territory, whose Government had entered into a DTAA with India, rate of taxation would be as dictated by provisions of treaty—Assessee’s petition partly allowed.”

In the above case, the payments are made to Singapore based entity and liable for TDS at 10%. The ld. DR could not controvert the findings of the CIT (Appeals) with cogent material or any new information and relied on the order of AO. Accordingly, we are not inclined to interfere with the order of the CIT (Appeals) on this disputed issue and upheld the same and dismiss the grounds of appeal of revenue.

9. In the result, the revenue’s appeal is dismissed and the assessee appeal is allowed for statistical purposes Pronounced in the open court on the date mentioned on the caption page.

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