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Informist, Tuesday, Nov. 25, 2025

 

NEW DELHI – The Supreme Court Tuesday rejected the income tax department's appeal that higher tax of 20% be deducted at source from Mphasis Ltd., Wipro Ltd. and Manthan Software Services Pvt. Ltd. for not furnishing permanent account numbers in terms of Section 206AA of the Income Tax Act, 1961. The top court said that the rate of taxation in the Double Tax Avoidance Agreement signed by these companies, which in some cases was 10%, would prevail over Section 206AA of the Income Tax Act. 

 

The apex court upheld the 2022 order of Karnataka High Court that as per the Double Tax Avoidance Agreement, the maximum deduction shall not exceed 10% which the companies had deducted. Any other interpretation to permit the taxing authority to raise a demand beyond 10% would be incongruous, said the high court. In the same year, the Delhi High Court had ruled that the provisions of Section 206AA of the Income Tax Act cannot override the provisions of the Double Tax Avoidance Agreement, which the top court had upheld in 2023. 

 

In Wipro's case, it had paid fees for technical services to various entities in the four quarters during the assessment year 2011-12. Wipro contended that the tax deducted at source shall be in terms of the relevant article in respective agreements for avoidance of double taxation in various countries. Adverting to one such agreement with Germany, Wipro said that the rate of tax shall not exceed 10% in the case of Germany.

 

The tax department had said that as per Section 206AA of the 1961 Act, every payee is required to furnish a permanent account number and in the absence of the same, the rate of tax applicable shall be 20% in terms of Section 206-AA(1)(iii). The department said that admittedly permanent account numbers have not been furnished by the companies.  

 

At 1315 IST, shares of Wipro were down 0.4% at INR 246.36 and of Mphasis Ltd. were up 0.4% at INR 2,775.10 on the National Stock Exchange.

 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Reported by Surya Tripathi

Edited by Deepshikha Bhardwaj

 

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