Case Law Details
Brief of the Case
ITAT Bangalore held In the case of M/s. Wipro Ltd. vs. ITO that an identical issue has been considered and decided by the co-ordinate bench of this Tribunal in case of Infosys BPO Ltd. ITA No.1143 and 8 & 9/bang/2014. In this case, it was held that it is not a simple case of deduction of tax at source by applying the rate only as per the provisions of Act, when the benefit of DTAA is available to the recipient. Therefore, the question of applying the rate of 20% as provided u/s 206AA is an issue which requires a long drawn reasoning and finding. Hence, applying the rate of 20% without considering the provisions of DTAA and consequent adjustment while framing the intimation u/s 200A is beyond the scope of the said provision. In absence of any contrary judgment, we decide this issue in favour of the assessee on both grounds that the provisions of TDS has to be read along with DTAA for computing the tax liability and therefore when the recipient is eligible for the benefit of DTAA then there is no scope for deduction of tax at source @ 20% u/s 206AA. Similarly, on the issue of jurisdiction, the question of computing the rate of 20% u/s 206AA is a debatable issue when the recipient is eligible for the benefit of provisions of DTAA and therefore the Assessing Officer cannot proceed to make the adjustment while issuing the intimation under Section 200A. This is beyond the scope of the said provisions.
Facts of the Case
The assessee has filed its quarterly E-TDS returns in Form No.27Q in respect of the payment to non-residents. The Assessing Officer issued an intimation giving the summary of short deduction and interest payable for delayed deposit of tax. The Assessing Officer along with intimation under Section 200A has also issued a Demand Notice under Section 156 of the Act. Therefore, the assessee challenged the action of the Assessing Officer before the CIT (Appeals) on the ground that without giving an opportunity of hearing to the assessee, the Assessing Officer raised the demand under Section 200A including interest.
The assessee further contended before the CIT (Appeals) that the computation has been done without giving effect to the provisions of section 90A(2) r.w. relevant provisions of DTAA is entered into with respective countries which provides that one will be governed by the DTAA or the provisions of I.T. Act which is more beneficial to the assessee. Thus the assessee contended before the CIT (Appeals) that the assessee has deducted the tax in accordance with the provisions of the respective DTAA and therefore there was no shortfall in the deduction of tax at source in respect of the payments made to non-residents.
Contention of the Assessee
The ld counsel of the assessee submitted that the demand of tax has been raised by the Assessing Officer vide intimation under Section 200A on the ground that the assessee has not furnished PAN of non-residents / recipients and accordingly as per the provisions of section 206AA of the Act, the TDS should have been deducted @ 20%. The learned Authorised Representative has submitted that the tax liability of the non-resident recipients cannot be more than as provided under DTAA and therefore payment to non residents is eligible for the benefit of DTAA and consequently the tax deduction cannot be more than the tax liability provided under DTAA.
He further submitted that issuing intimation under Section 200A and raising a demand without considering the provisions of DTAA as well as without giving an opportunity of hearing to the assessee is also beyond the scope of the Assessing Officer. The Assessing Officer is not permitted to make the adjustment while issuing the intimation under Section 200A when the issue involves is a highly debatable issue and require a well drawn reasoning and finding. Thus the learned Authorised Representative of the assessee has submitted that the impugned order of the Assessing Officer is not sustainable. He relied upon the decision of the co-ordinate bench of this Tribunal Dt.29.6.2015 in the case of DCIT Vs. Infosys BPO Ltd. in ITA No.1143 and 8 & 9/bang/2014 as well as cross objection Nos.83 & 84/Bang/2014.
Held by CIT (A)
CIT (A) confirmed the action of the AO.
Held by ITAT
ITAT held that an identical issue has been considered and decided by the co-ordinate bench of this Tribunal in case of Infosys BPO Ltd. ITA No.1143 and 8 & 9/bang/2014. It was held that while making the adjustment the AO has ignored the provisions of DTAA which are applicable on the payment in question. There is no dispute that the beneficial provisions under the Act as well as the DTAA are applicable for the non-resident assessee. The payment in question was made to the non-resident and the provisions of DTAA are applicable, as the same has not been disputed by the AO before us. Thus, the issue of applying the rate of tax at 20% and ignoring the provisions of DTAA is a debatable issue and does not fall in the category of any arithmetical error or incorrect claim apparent from any information in the statement as per the provisions of section 200A (1) of the IT Act, 1961.
Further held that it is clear the explanation below sub-section-1 of Section 200A of the IT Act, which clarifies that in respect of deduction of tax at source where such rate is not in accordance with provisions of this Act can be considered as an incorrect claim apparent from the statement. However, in the case in hand, it is not a simple case of deduction of tax at source by applying the rate only as per the provisions of Act, when the benefit of DTAA is available to the recipient of the amount in question. Therefore, the question of applying the rate of 20% as provided u/s 206AA of the IT Act is a issue which requires a long drawn reasoning and finding. Hence, we are of the considered opinion that applying the rate of 20% without considering the provisions of DTAA and consequent adjustment while framing the intimation u/s 200A is beyond the scope of the said provision. Thus, the AO has travelled beyond the jurisdiction of making the adjustment as per the provisions of Section 200A.
No contrary view or decision has been brought to our notice by the learned Departmental Representative. Accordingly, we decide this issue in favour of the assessee on both grounds that the provisions of TDS has 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 then there is no scope for deduction of tax at source @ 20% as provided under the provisions of section 206AA. Similarly, on the issue of jurisdiction, the question of computing the rate of 20% under section 206AA of the Act is a debatable issue when the recipient is eligible for the benefit of provisions of DTAA and therefore the Assessing Officer cannot proceed to make the adjustment while issuing the intimation under Section 200A. This is beyond the scope of the said provisions.
Accordingly appeal of the assessee allowed.
