Court directs 5% tax rate per DTAA, not 10% on dividend income. Emphasizes binding nature of prior judgments.

The court set aside the order directing tax deduction at 10% on dividend income and directed a certificate specifying a 5% tax rate as per the DTAA between India and Switzerland. The court emphasized the binding nature of previous judgments and the integral role of the protocol in the DTAA. The decision reaffirmed the petitioner's entitlement to the lower tax rate under the DTAA provisions, in line with established legal principles.

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Issues:
Challenge to certificate directing tax deduction on dividend income at 10% instead of 5% as per DTAA between India and Switzerland.

Analysis:
The petitioner challenged a certificate and order directing Galderma India to deduct tax at 10% on dividend income, seeking a direction for a lower rate of 5% as per the DTAA between India and Switzerland. The petitioner relied on the MFN clause in the protocol to the DTAA, which provided for a 5% tax rate. The counsel argued that previous court decisions, such as Steria (India) Ltd. v. CIT and Concentrix Services Netherlands B V v/s. Income Tax Officer, supported the automatic application of benefits agreed upon in the protocol without the need for separate notification or amendment.

The court noted that the issues raised were settled by previous judgments, including Concentrix Services Netherlands B.V. and Nestle SA, emphasizing that the protocol forms an integral part of the DTAA. The court cited the principle that the department must follow binding jurisdictional decisions, even if it plans to appeal. Referring to UOI v. Kamlakshi Finance Corpn Ltd., the court highlighted that decisions of higher appellate authorities must be followed unreservedly, regardless of the revenue's acceptance.

Consequently, the court set aside the impugned order and directed the respondent to issue a certificate under Section 197 of the Act, specifying a 5% tax rate on dividends for the petitioner as per the India-Switzerland DTAA, in line with the decision in Nestle SA. The writ petition was disposed of accordingly, affirming the petitioner's entitlement to the lower tax rate based on the DTAA provisions and established legal principles.

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