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IN THE HIGH COURT OF DELHI AT NEW DELHI

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ITA 233/2022

COMMISSIONER OF INCOME TAX INTERNATIONAL

TAXATION-1, NEW DELHI

..... Appellant

Through:

Mr.Puneet Rai, Sr.Standing

Counsel.

versus

AIR INDIA LTD.

..... Respondent

Through:

None

%

Date of Decision: 28^thJuly, 2022

CORAM:

HON'BLE MR. JUSTICE MANMOHAN

HON'BLE MS. JUSTICE MANMEET PRITAM SINGH ARORA

J U D G M E N T

MANMOHAN, J (Oral):

1.

Present Income Tax Appeal has been filed challenging the Order

dated 23^rdApril, 2021 passed by the Income Tax Appellate Tribunal

(ITAT) in ITA No. 2260/ DEL/2018, ITA No. 2261/DEL/2018 and ITA

No. 2262/DEL/2018 for the Assessment Year 2013-14.

2.

Learned counsel for the Appellant states that the ITAT has erred in

holding that the provisions of Section 206AA of the Income Tax Act,

1961 (‘the Act’) cannot override the provisions of the Double Tax

Avoidance Agreement without appreciating the fact that the provisions

of Section 206AA are non obstante provisions and therefore these

This is a digitally signed Judgement.

NEUTRAL CITATION NO: 2022/DHC/002862

provisions override the provisions of other Sections of the Act including

Section 90(2) of the Act under which the assessee can avail benefit of

the DTAA.

3.

He states that the ITAT has erred in holding that the rate of

deduction of tax in the case of a non-resident who does not have a PAN

and whose case does not lie in the exceptions laid down in Sub-Section

7 of Section 206AA of the Act shall be the rate prescribed in the DTAA

if such rate is lower than the rate specified in the relevant provisions of

the Act and not as per the provisions of Section 206AA of the Act.

4.

He also states that the ITAT has erred in not appreciating that

Section 206AA of the Act is in respect of deduction of tax at source in

specified circumstances and not in respect of charge of tax and that it is

with respect to charge of tax that rates in the DTAA, if more beneficial

to the assessee, then the rate specified in the relevant provision of the

Act, shall apply. He submits that ITAT has erred in not appreciating that

Section 206AA read with Section 2(37A)(iii) of the Act provides that,

for deduction of tax in circumstances covered in that Section, the

highest of the three rates as given in sub-Section (1) of Section 206AA

of the Act shall apply, even where the rate prescribed in DTAA, i.e. “the

rate or rates in force” is not such highest rate.

5.

A perusal of the paper book reveals that in the present case the

ITAT has held that it is not in dispute that the engine is a part of aircraft

and cannot be said to be an aircraft and the payment being made for rent

of engine can be covered under equipment as per Article 12(4) of the

DTAA between India and Netherlands. The ITAT has also held that the

ELFC, the lessor, is a foreign company having no permanent

This is a digitally signed Judgement.

NEUTRAL CITATION NO: 2022/DHC/002862

establishment and was a tax resident of Netherland. It is not in dispute

that assessee has not deducted this TDS from the payment but has

deposited from their own account and has absorbed it as cost. It is also

not in dispute that since payee, ELFC, being a foreign company having

no PAN, the assessee reported the transaction without PAN in the

quarterly TDS statements. The relevant portion of the ITAT judgment

is reproduced hereinbelow:-

This is a digitally signed Judgement.

NEUTRAL CITATION NO: 2022/DHC/002862

6.

This Court is in agreement with the view of the Tribunal that the

issues of law sought to be raised in the present appeal are squarely

covered by the judgment of this Court in Danisco India (P.) Ltd. vs.

Union of India [2018] 90 taxmann.com 295 (Delhi), wherein it has

been held as under:-

“6. After hearing the counsel for the parties, it is quite apparent

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NEUTRAL CITATION NO: 2022/DHC/002862

7. In this context, the ITAT in Serum Institute of India

(Supra) discussed this very issue in some detail and stated, as

This is a digitally signed Judgement