Dividend distribution tax is tax on the domestic company, and DTAA dividend rates do not apply unless expressly provided.

Dividend distribution tax under section 115-O is treated as additional income-tax on the domestic company, not as tax on the non-resident shareholder. Treaty relief under an India-UK DTAA cannot be applied to reduce that tax unless the treaty expressly extends such protection to dividend distribution tax. On that basis, the claimed restriction of tax to the DTAA rate was rejected, and no refund was admissible under section 237 because the refund claim depended solely on the asserted excess over the treaty rate.

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Issues: Whether dividend distribution tax paid by a domestic company on dividends distributed to non-resident shareholders resident in the United Kingdom could be restricted to the rate prescribed under Article 11 of the India-UK Double Taxation Avoidance Agreement and excess tax refunded under section 237 of the Income-tax Act, 1961.

Analysis: The Tribunal noted that the controversy was squarely covered by the Special Bench decision in Total Oil India Pvt. Ltd., which held that dividend distribution tax under section 115-O is an additional income-tax levied on the domestic company and not a tax on the non-resident shareholder. It was further held that treaty protection under a DTAA does not automatically extend to dividend distribution tax unless the treaty expressly so provides. In the absence of any specific provision in the India-UK DTAA extending such protection, the company could not claim the beneficial rate applicable to the shareholder's dividend income. Since the refund claim was founded only on the alleged excess over the DTAA rate, no refund was admissible.

Conclusion: The claim for restriction of dividend distribution tax to the India-UK DTAA rate was rejected, and the refund claim under section 237 failed.

Ratio Decidendi: Dividend distribution tax under section 115-O is tax on the domestic company, and DTAA relief for dividend income cannot be imported to such tax unless the treaty expressly extends that protection.

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