Sec 206AA in case of Foreign payment

This query is : Resolved

Ganisht (Querist)
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07 January 2011 Dear Experts,

Please explain with the provision of relevent Section With notication, clarrification & SC/HC Jugdement if any.

A & Co ltd (incorporated in India) made a contract with B & Co. ltd. (incorporated in Japan)for providing some professional services in India, which are covered under Import of Services as per Service Tax Act,1994.

On making 1st payment to B ltd, A ltd wrongly deduct TDS at the rate of 10%, While B ltd. not provide PAN No.

Same in the 2nd payment to B ltd, A ltd wrongly deduct TDS at the rate of 10%, While B ltd. not provide PAN No.

But on making 3rd payment to B ltd, A ltd deduct TDS at the rate of 20% as per section 206AA.

After 3rd payment B ltd applied for PAN no.

Now, A ltd received invoice from B ltd. & want to make 4th payment to B ltd but they not deduct TDS becasue they say that we are already deduct excess TDS in 3rd payment.

Is this treatment is possible?
Is their is any reverce back machinisam in Section 206AA.
Is their any provision in section 195 & any other section.

Guide please

CA. Anuj Gupta

CA. Anuj Gupta (Expert)
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08 January 2011 The treatment sought to be given is possible as the purpose of sec. 206AA is to ensure that foreign as well indian parties receiving any income shall have PAN.
Kindly ensure that the amount deductible this time and amount deducted excess previously match.
Also Tax residency Certificate and NO PE Certificate shall also have been obtained before any remmitance.