The Visakhapatnam Bench Income Tax Appellate Tribunal (ITAT) has held that the provision mandating furnishing of PAN with E-TDS has an overriding effect and upholds the applicability of section 206AA of Income Tax Act 1961, on payments made under an oral agreement.
The appellant, Bheemunipatnam Mutually Aided Cooperative Building Society Ltd petitioned against the order of orders of the CIT(A)-2, Visakhapatnam in ITA No.1252/2013-14/ITO-W6(3) VSP/2014-15, Date 17/12/2014 passed U/s. 201(1)/201(1A) 250(6) of the Income Tax Act for the AY 2013-14. The Assessing Officer found a short deduction of tax on verification of books of account on the payment made to Sri A. Venkateswarlu for Rs. 2 Crs. It was found that the payee failed to furnish his PAN to the assessee and the e-TDS statement was filed without the PAN of the assessee. The Assessing Officer invoked the provisions of section 206AA and assessed the payment of professional fees to Sri A. Venkateswarlu at the tax rate of 20% and raised a demand of Rs. 25,89,776/- including interest on short deduction of tax.
The appellant contended that the payment was subjected to TDS U/s. 194C of the Act but it was wrongly deducted U/s. 194J of the Act and submitted the TDS challan dated 20/03/2013 for Rs. 24,07,407/- being the tax deducted towards professional charges with grossed-up TDS as per the provisions of section 195A of the Act @ 10%. Further, contended that the documents for allotment of Government Land were submitted and entered into an oral agreement for liaisoning and coordination in connection with obtaining necessary approvals for the allotment of land by the Government. The appellant claimed that section 206AA cannot be invoked when Section 195A is applicable. In contra, the respondent stated that section 206AA overrides the other provisions of the Income Tax Act, 1961 as it starts with a non-obstante clause
The Coram consists of Shri Duvvuru R L Reddy, Judicial Member and Shri S Balakrishnan, Accountant Member observed that section 195A is applicable in cases where the tax is borne by the payer of the services and therefore the tax has to be deducted by grossing up amount payable by the rates prescribed under the Act. Section 206AA overrides the other provisions of the Act as it mandates furnishing PAN for TDS. It was viewed that failure to produce PAN will deduct the rate of tax as per the provisions of section 206AA of the Act.
The Tribunal confirms the order of CIT(A) and remitted the matter back to the AO to examine any short deduction in the payment made to M/s. Venus Ventures India Limited. The Tribunal partly allowed the appeal for statistical Purposes. Sri Y.A. Rao appeared on behalf of the appellant and Sri Karthik Manickam appeared on behalf of the respondent.
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