Dividend Distribution Tax remains taxable at the statutory rate unless the treaty expressly extends protection to the domestic company.

Dividend Distribution Tax under section 115O is chargeable at the statutory rate on distributed profits, and treaty rates applicable to non-resident shareholders do not automatically reduce that liability. The Special Bench reasoning in Total Oil India Pvt. Ltd. was followed: treaty protection can extend to the domestic company only where the relevant DTAA expressly covers dividend distribution tax. On that basis, the claimed reduction of DDT and the related refund were rejected, and the levy at the statutory rate was upheld.

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Issues: Whether Dividend Distribution Tax paid under section 115O of the Income-tax Act, 1961 in respect of dividends declared to non-resident shareholders can be reduced by applying the rates prescribed under the relevant Double Taxation Avoidance Agreements, and whether the excess tax so paid is refundable.

Analysis: The assessee sought refund of the differential amount on the footing that the treaty rates applicable to the foreign shareholders should govern the tax on dividends. The order relied upon the Special Bench decision in Total Oil India Pvt. Ltd., which held that where dividend is declared, distributed or paid by a domestic company, the additional income-tax under section 115O is payable at the rate specified in that provision and not at the rate applicable to the non-resident shareholder under the relevant treaty. Treaty protection can be claimed by the domestic company only where the contracting States have expressly extended such protection to dividend distribution tax. Following that binding reasoning, the claimed reduction in DDT and consequential refund were not sustainable.

Conclusion: The claim for application of DTAA rates to Dividend Distribution Tax was rejected and the refund claim failed.

Final Conclusion: The assessee's appeal was dismissed, and the levy of Dividend Distribution Tax at the statutory rate was upheld.

Ratio Decidendi: Additional income-tax on distributed profits under section 115O of the Income-tax Act, 1961 is chargeable at the statutory rate in that provision unless the treaty itself expressly extends protection to the domestic company paying such tax.

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