Dividend distribution tax under section 115-O remains chargeable at the statutory rate; treaty relief does not automatically extend to the company.

Dividend distribution tax under section 115-O is chargeable on the domestic company at the statutory rate, and treaty protection for dividend income does not automatically extend to the company unless the treaty expressly provides for such relief. Applying the Special Bench ruling in Total Oil India (P.) Ltd., the tribunal held that Article 11 of the India-Germany DTAA could not be used to claim refund of excess dividend distribution tax paid by the assessee. The refund claim was rejected, and the assessment under section 115-O remained undisturbed.

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Issues: Whether the assessee was entitled to apply Article 11 of the India-Germany Double Taxation Avoidance Agreement to claim refund of excess dividend distribution tax paid under section 115-O of the Income-tax Act, 1961.

Analysis: The issue was governed by the Special Bench ruling in Total Oil India (P.) Ltd., which held that the additional income-tax payable by a domestic company on declaration, distribution or payment of dividend under section 115-O is to be levied at the rate prescribed by that provision and not at the rate applicable to the non-resident shareholder under the relevant treaty. The treaty benefit can be extended to the domestic company only where the contracting states have expressly intended such protection for dividend distribution tax.

Conclusion: The claim for refund based on Article 11 of the India-Germany DTAA was rejected, and the issue was decided against the assessee.

Final Conclusion: The appeals failed and the assessment of dividend distribution tax under section 115-O remained undisturbed.

Ratio Decidendi: Dividend distribution tax under section 115-O is chargeable on the domestic company at the statutory rate, and treaty protection for the shareholder's dividend income does not automatically extend to the company unless the treaty expressly so provides.

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