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Court affirm the ultimate conclusion of the CIT(A) in deleting the tax demand relatable to difference between 20% and the actual tax rate on which tax was deducted by the assessee in terms of the relevant DTAAs. As a consequence, Revenue fails in its appeals.

Shanti Prime Publication Pvt. Ltd.

Sec. 195 of Income Tax Act, 1961— TDS— Assessee filed writ petition, challenged the impugned order dated 17.02.2011 passed by the 1st respondent. The assessee had engaged the service of a law firm namely M/s. Oentoeng Suria & Partners in Indonesia for acquiring an insurance business in Indonesia. Therefore, the petitioner filed an application under 195 of the Act, before the second respondent Income Tax officer, for exemption from deducting tax on the payment to be made to the aforesaid foreign law firm for the service rendered by the said firm in Indonesia. The request of the petitioner was rejected. “The above services rendered by the Nonresident company, with regard to the proposed acquisition of an Indonesian Insurance company, by M/s.Shriram Capital Limited. is in the nature of “consultancy services”. M/s.Shriram capital limited is not having any business activity in Indonesia, and hence the proposed payments are not for the purpose of generation of any income from abroad by M/s. Shriram Capital Limited.. Such services are taxable in india,irrespective of the place of rendition of the services, and accordingly the payments to the Non-resident company, in this case, are subjected to withholding tax @ 10%. Plus applicable surcharge and Education Cess, under normal circumstances.But in this case the Non-resident (deductee) is not having a Permanent Account Number (PAN), as mandated U/s.206AA of the I.T.Act, 1961, and such payments effected to the Non-resident not having a P.A.Number, will attract Tax Deduction at source at a higher rate of 20%.

The petitioner preferred a Revision Petition under Section 264 of the Income Tax before the 1st respondent.  the assessee also referred to Double Taxation Agreement between the Government of India and Government of Indonesia, notified by Notification No.S.O.1144(E) [No.17/2016 (F.No.503/4/2005-FTD-II0], dated 16.03.2016.
The court  affirm the ultimate conclusion of the CIT(A) in deleting the tax demand relatable to difference between 20% and the actual tax rate on which tax was deducted by the assessee in terms of the relevant DTAAs. As a consequence, Revenue fails in its appeals. Therefore, the issue as to whether the petitioner was entitled to the benefit of any Clause in the said Double Taxation Avoidance Agreement as notified in Notification No.GSR 77(E), dated 04.02.1988, is left open. It is for the petitioner to file appropriate application before the 2nd respondent within a period of thirty days from the date of receipt of a copy of this order. ---SHRIRAM CAPITAL LIMITED vs. DCIT.[2020] 23 ITCD Online 12 (MAD)