CIT (International Taxation And Transfer Pricing) Vs Adani Wilmar Ltd. (Gujarat High Court)
Gujarat High Court held that provisions of DTAA would prevail over general provisions contained in the Act to the extent they are beneficial to the assessee. Accordingly, assessee duly deduct maximum TDS @10% [as per DTAA provisions] instead of 20% on payments to non-resident where PAN is not provided.
Facts- The issue involved in this group of appeals pertains to alleged short deduction of TDS and raising demand by invoking provisions of section 206AA of the Act. The respondent has deducted TDS at the rate mentioned in DTAA treaty between India and respective countries or as per the rate mentioned in the Income Tax Act,1961 whichever is more beneficial to the assessee and even in the cases where recipient of the payments who are non resident parties and did not furnish PAN. The appellant Revenue therefore by invoking section 206AA of the Act held the assessee liable for obligation to deduct TDS at higher rate on payment made to non residents, who did not have PAN, at the rate of 20%.
Conclusion- Held that that as per DTAA, maximum deduction shall not exceed 10% which the assessee has deducted and any other interpretation to permit the taxing authority to raise a demand beyond 10% would be incongruous. Thus, held that the assessee was not liable to deduct tax at the rate of 20% as per the provisions of section 206AA of the Act in view of DTAA read with section 90(2) of the Act.
