Dividend distribution tax and tax treaty relief: section 115-O was upheld because the levy falls on the company's profits.

Dividend distribution tax under section 115-O was treated as a levy on the distributing company's profits, not on the non-resident shareholder's dividend income, so treaty relief was unavailable unless the treaty expressly protected the company paying the tax. The additional appellate claim was nevertheless entertained despite not being raised in the return, but it failed on merits because section 115-O remained applicable to the distribution. The assessee's challenge was rejected on the main tax issue, and the remaining grounds were not pursued.

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Issues: Whether the assessee was entitled to press an additional claim for restriction of dividend distribution tax on dividends paid to non-resident shareholders under the applicable tax treaty, and whether section 115-O of the Income-tax Act, 1961 applied to such distribution.

Analysis: The additional claim was entertained as a valid appellate claim even though it had not been made in the return of income, but the substantive contention failed on merits. The controlling principle applied was that dividend distribution tax is a levy on the distributing company's profits under section 115-O and not a tax on the shareholder's dividend income. On that basis, treaty relief was held not to be attracted in the absence of a treaty provision specifically extending protection to the company paying such tax.

Conclusion: The claim for restriction of dividend distribution tax under the tax treaty was rejected and the applicability of section 115-O was upheld against the assessee.

Final Conclusion: The assessee's appeal failed on the principal tax issue, and the remaining grounds were not pursued.

Ratio Decidendi: Dividend distribution tax under section 115-O is a tax on the distributing company's profits and not on the non-resident shareholder's dividend income, so treaty protection does not apply unless the treaty expressly extends it to the company.

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