-When it comes to deduction of TDS while remitting any payment to Non Resident the beneficial provisions of DTAA & Income Tax Act
-Provisions in the DTAA clearly ovveride the provisions of the Act, to the extent the provisions are more favourable to the
-As per section 206AA, the deductee whose TDS is deducted must furnish PAN
O If such person does not furnish PAN to the deductor, the deductor will deduct tax at source higher of the following rates:
1. The rate prescribed
2. At the rate in
3. At the rate 20%.
O Now, assuming that for a particular remittance to a non resident which is chargeable to tax in India the rate of TDS is as per the provisions of DTAA entered between India and Country of non resident. In such case, if the non resident furnishes PAN then the tax payer can adopt the DTAA rate and deduct TDS but in case the non resident doesn’t hold PAN in India and if the DTAA rate is less than 20% then a question arises as to whether the TDS is required to be deducted at 20% or the rate as per DTAA.
O However, in Dy. DIT (International Taxation) v. Serum Institute Of India Ltd.  56 taxmann.com 1/68 SOT 254 (Pune-Trib.) it was held that TDS on payments made to Non Resident who did not furnish their PAN can be deducted as per prescribed in DTAA and section 206AA cannot be invoked to insist on tax deduction at rate 20%.
O It is not automatic that a flat rate of 20% shall be applied wherever PAN is not furnished.
O In Wipro Ltd v. ITO (International Taxation)  47 ITR (Trib.) 404 (Bang. – Trib.) it was held that the provisions of TDS should be read along with provisions of DTAA for computing tax liability of non-resident ; when non- resident is eligible for benefit of DTAA on sum in question, there is no scope for deduction of tax at source at 20% as provided under provisions of section 206AA.
O Hence, when tax is required to be deducted as per the provisions of respective DTAA then the provisions of section 206AA shall not apply.