The Mumbai bench of the Income Tax Appellate Tribunal held that taxation rate is not to exceed 10% under Article 12 of the DTAA between India and France.
The assessee is a company engaged in the business of Air Transport of Passengers and is a holder of Non-Scheduled Air Transport (Passenger) Services (NSOP) permit granted by the Director General of Civil Aviation / Ministry of Civil Aviation.
During the Financial Year 2015-16, the assessee had made payment of USD 61,200 (amounting to Rs.40,30,020) to Flight Safety International Inc, USA for availing training of pilots.
Since the services were in the nature of technical services, therefore, as per the provision of Section 115A of the Income Tax Act, 1961 (as stood at the relevant time), the applicable rate of tax was 10%.
However, in the absence of PAN of deductee, the assessee deducted tax at source under section.195 r.w.s. 206AA of the Act @25.94% being grossed up rate of 20% under Section 195A.
Accordingly, the assessee made payments and deposited Rs.10,45,390/- to the credit of the Government on 08/09/2015.
However, after making the payment of taxes, the assessee filed an appeal before the CIT(A) under Section 248 contending that the deductee, being a tax resident of the USA and Double Taxation Avoidance Agreement between India and USA are applicable to the transaction in question.
As per Article 12 of DTAA, the rate of tax on “fees for included services” shall not exceed 15%. It was further submitted that as per section 90 of the Act, the provisions of the Act can be applied only to the extent they are more beneficial to the assessee.
In terms of section 115A of the Act, any income in the nature of “fees for technical services” is taxable in India @ 10% and the grossed up rate under Section 195A would work out to 11.48%. Accordingly, the assessee deductor claimed that the tax is required to be deducted @ 11.48% under section 115A of the Income Tax Act, in the appeal filed under section 248 of the Act before the CIT(A).
However, the CIT(A) dismissed assessee’s appeal as not maintainable, Aggrieved, the assessee appealed before the tribunal.
The tribunal after hearing both the parties held that the assessee can challenge excess deduction under Section 248 if it is found that otherwise income is chargeable to tax in India and then certainly an appeal would be maintainable under Section 248 seeking relief/refund for excess tax deducted.
Thus, the word no tax was required to be deducted in Section 248 should be interpreted in such a manner so as to include claim of the deductor that no tax was required to be deducted in excess of deductible at rates in force.
Since the aforesaid services are in the nature of technical services, as per section 115A of the Income-tax Act (as stood at the relevant time), the applicable rate of tax was 10%. However, in the absence of PAN of Deductee, the Appellant deducted tax at source under section. 195 r.w.s. 20GAA of the Act @ 25.94% (being grossed up rate of 20% under Section 195A of the Act).
Accordingly, the Appellant made below payment and deposited Rs. 8,97,975 to the credit of the Government on 7th December, 2015.
The two bench member consisting of S.Rifaur Rahman (Accountant member) and Amit Shukla (Judicial member) came to the conclusion that The claim of the assessee is that as per Article 12 of the DTAA between India and France, the rate of tax shall not exceed 10% and accordingly it filed appeal before the CIT (A) claiming that rate of tax to be deducted shall be 10%. However, the aforesaid finding will also apply mutatis mutandis for this appeal also.
Thus the appeal was allowed
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