Short deduction demand in case of dtaa transactions

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swati (Querist)

19 January 2016 We have deducted TDS at rate prescribed as per DTAA. While filing the TDS return, we have mentioned the Acknowledgment No. of Form 15CA. Still our client is receiving the demand notice for short deduction.
We have raised ticket for the same but as per their opinion if PAN error is generated in DTAA transaction then the Higher rate will be applicable i.e, 20% or DTAA rate or sec 195 rate.
As per section 90(2) of the Act, provisions of the ACt are applicable to extent they are more beneficial to the assessee.
But since the ticket resolved is not satisfactory. What should we do now?

Nikhil Kaushik

Nikhil Kaushik (Expert)

21 January 2016 in case of PAN error, the provision of higher rate applies irrespective of whether you are claiming DTAA benefits or not.

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swati

swati (Querist)

17 February 2016 There is no relevance of DTAA if we have to deduct tax at higher rate. Refer recent case law DDIT v.s. SERUM INSTITUTE OF INDIA LIMITED, PUNE BENCH OF THE ITAT held that sec 206AA of ITS cannot override provisions of DTAA to the extent that the later is more beneficial to a taxpayer.

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