Dividend distribution tax refund denied where domestic company could not import shareholder treaty rate under the India-Mauritius DTAA.

Dividend distribution tax under section 115-O is levied on the domestic company as an additional income-tax on distributed profits, and treaty relief under Article 10 of the India-Mauritius DTAA is available only if the treaty expressly extends that benefit to the company paying the tax. On the reasoning adopted from the Special Bench decision, no such extension was shown in this context. Because the tax was paid in discharge of the statutory obligation under section 115-O, a refund under section 237 could not be claimed by directly applying the lower treaty rate applicable to the non-resident shareholder. The refund claim was therefore treated as not maintainable.

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Issues: Whether a domestic company that paid dividend distribution tax under section 115-O of the Income-tax Act, 1961 at the domestic rate was entitled to refund of the alleged excess tax under section 237 by invoking the lower dividend tax rate under Article 10(2)(a) of the India-Mauritius DTAA.

Analysis: Section 115-O fastens the liability to pay dividend distribution tax on the domestic company itself and characterises it as additional income-tax on distributed profits. The treaty protection under Article 10 is available only where the contracting states have extended such protection to the domestic company paying dividend distribution tax. On the reasoning adopted from the Special Bench decision relied upon, no such extension was shown in the present context. Since the tax was paid pursuant to the statutory obligation under section 115-O, the claim for refund under section 237 could not be sustained on the footing that the company was entitled to a lower treaty rate applicable to the non-resident shareholder.

Conclusion: The claim for refund was not maintainable and the issue was decided against the assessee.

Ratio Decidendi: Dividend distribution tax payable by a domestic company under section 115-O is governed by the domestic charging provision, and the company cannot claim refund by directly importing the shareholder's treaty rate unless the treaty expressly extends such benefit to the company.

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