PAN Not Mandatory For Lower TDS Under DTAA: Gujarat High Court
The Gujarat High Court has held the Permanent Account Number (PAN) is not mandatory for lower Tax Deducted At Source (TDS) under Double Tax Avoidance Agreement (DTAA).
The bench of Justice Bhargav D. Karia and Justice Pranav Trivedi has observed that Section 206AA of the Income Tax Act does not override the provisions of Section 90(2) of the Income Tax Act, 1961, emphasizing that DTAAs prevail when they offer more favorable terms to the taxpayer.
Section 206AA of the Income Tax Act requires every taxpayer who receives taxable income to furnish their PAN to the payer of such income. This applies to both resident and non-resident recipients. The payments for residents would include salary, rent, professional receipts, contractual receipts, and so on. For non-residents, these would include all receipts that are taxable in India.
Section 90(2) in The Income Tax Act, 1961 states that where the Central Government has entered into an agreement with the Government of any country outside India or specified territory outside India, as the case may be, under sub-section (1) for granting relief of tax, or as the case may be, avoidance of double taxation, then, in relation to the assessee to whom such agreement applies, the provisions of this Act shall apply to the extent they are more beneficial to that assessee.
The case revolved around Section 206AA of the Income Tax Act, which mandates a 20% tax deduction at source (TDS) if a foreign recipient fails to furnish a PAN. However, Adani Wilmar had applied the lower rates prescribed in DTAAs between India and various countries, arguing that these were more beneficial and therefore permissible under Section 90(2) of the Income Tax Act, 1961.
The department contended that Section 206AA, with its non-obstante clause, mandated a 20% TDS irrespective of DTAAs if PAN was not furnished. However, the Tribunal and High Court maintained that DTAA provisions, protected under Section 90(2), hold supremacy in such cases.
The court dismissed ten appeals filed by the Commissioner of Income Tax (International Taxation and Transfer Pricing) challenging the Income Tax Appellate Tribunal (ITAT)'s ruling in favor of Adani Wilmar.
Case Details
Case Title: Commissioner Of Income Tax (International Taxation And Transfer Pricing) Versus M/S Adani Wilmar Ltd.
Case No.: 10/06/2025
Date: R/Tax Appeal No. 514 Of 2024
Counsel For Petitioner: Maithili D Mehta
Counsel For Respondent: Swati Soparkar
Mariya is the Senior Editor at JurisHour. She has 5+ years of experience on covering tax litigation stories from the Supreme Court, High Courts and various tribunals including CESTAT, ITAT, NCLAT, NCLT, etc. Mariya graduated from MLSU Law College, Udaipur (Raj.) with B.A.LL.B. and also holds an LL.M. She started as a freelance tax reporter in the leading online legal news companies like LiveLaw & Taxscan.
