Higher tax rate not applied when tax is withheld under tax treaty:
The Ahmedabad Bench of the Income-tax Appellate Tribunal held that when the tax has been withheld (“deducted”) pursuant to provisions of tax treaties, the provisions of Section 206AA of the Income-tax Act, 1961 cannot be invoked. Section 90(2) of the Income-tax Act, 1961 provides that provisions of the Income-tax Act, 1961 apply to the extent they are more beneficial to the taxpayer. Since the taxpayer had withheld tax at source at the rates prescribed under the tax treaties, a higher rate of tax under Section 206AA cannot be invoked. The case is: Uniphos Environtronic (P.) Ltd. Read a March 2017 report [PDF 339 KB] of KPMG