TDS disallowance and dividend tax treaty claims: Tribunal followed prior precedent on demurrage and secondment reimbursements, but rejected DDT relief.

Prior coordinate bench decisions in the assessee's own case were followed on demurrage charges and reimbursement of salary to seconded employees, with the Tribunal accepting that no tax deduction at source was required on those facts and that the related disallowances under section 40(a)(ia) could not stand. On the dividend distribution tax issue, the Tribunal applied the Special Bench view and later Supreme Court authority to hold that treaty protection under the India-France treaty and Most Favoured Nation clause does not override dividend distribution tax under section 115-O unless the treaty expressly so provides; the claim for refund or credit of excess DDT was rejected.

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Issues: (i) Whether demurrage charges paid by the assessee were subject to deduction of tax at source so as to attract disallowance under section 40(a)(ia) of the Income-tax Act, 1961; (ii) Whether reimbursement of salary paid to seconded employees was liable for tax deduction at source and consequent disallowance; (iii) Whether the assessee was entitled to refund or credit of excess dividend distribution tax on dividends paid to non-resident shareholders in view of the India-France tax treaty read with the Most Favoured Nation clause and the India-Slovenia treaty.

Issue (i): Whether demurrage charges paid by the assessee were subject to deduction of tax at source so as to attract disallowance under section 40(a)(ia) of the Income-tax Act, 1961.

Analysis: The issue was covered by earlier decisions in the assessee's own case for prior assessment years. The Tribunal followed the earlier coordinate bench view and the binding High Court authority relied upon therein, and accepted that the demurrage payment did not warrant tax deduction at source in the manner contended by the Revenue.

Conclusion: The disallowance of demurrage charges was rightly deleted and the issue was decided in favour of the assessee.

Issue (ii): Whether reimbursement of salary paid to seconded employees was liable for tax deduction at source and consequent disallowance.

Analysis: The Tribunal held that the matter was already covered by its earlier orders in the assessee's own case and by the coordinate bench decision relied upon by the assessee. It accepted that no income chargeable to tax arose in India on the facts of the reimbursement arrangement and that the earlier deletion of disallowance required no interference.

Conclusion: The disallowance on reimbursement of salary to seconded employees was rightly deleted and the issue was decided in favour of the assessee.

Issue (iii): Whether the assessee was entitled to refund or credit of excess dividend distribution tax on dividends paid to non-resident shareholders in view of the India-France tax treaty read with the Most Favoured Nation clause and the India-Slovenia treaty.

Analysis: The Tribunal applied the Special Bench decision in the assessee's own case and noted the later Supreme Court authority which held that the treaty claim does not get triggered against dividend distribution tax under section 115-O unless the treaty arrangement expressly extends such protection. On that basis, the assessee's claim for refund of excess DDT was not accepted.

Conclusion: The claim for refund of excess dividend distribution tax was rejected and the issue was decided in favour of the Revenue.

Final Conclusion: The Revenue's appeals failed on the TDS disallowance issues for demurrage and seconded employees, while the assessee's cross-objections on excess dividend distribution tax were rejected, leaving the matter partly in favour of each side.

Ratio Decidendi: A prior coordinate bench decision in the assessee's own case governs identical TDS disallowance issues, but treaty protection cannot be invoked to defeat dividend distribution tax under section 115-O unless the treaty expressly so provides.

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