DTAA Prevails Over S.206AA Of Income Tax Act For TDS On Payments To Non-Residents Without PAN: Gujarat High Court

The Gujarat High Court has ruled that the Double Taxation Avoidance Agreement (DTAA) prevails over Section 206AA of the Income Tax Act when it comes to TDS on payments made to non-residents who do not have a Permanent Account Number (PAN). Section 206AA generally mandates a higher TDS rate for non-PAN cases. However, the court's decision emphasizes that DTAA provisions, which aim to prevent double taxation and offer beneficial rates, take precedence. This is a significant relief for foreign entities and individuals without a PAN in India, ensuring they can still avail the lower TDS rates or exemptions as per the DTAA, thereby facilitating cross-border transactions and investments under treaty benefits.