TaxTMI 
TaxTMI 
2016 (5) TMI 1103
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....r referred to as the 'Act'). 2. The only issue to be decided in this appeal is as to whether the dividend received from brazilian company could be claimed as not taxable in India in the facts and circumstances of the case. 3. The brief facts of this issue is that the assessee is a private limited company deriving income from business. During the financial year 2007-08 relevant to Asst Year 2008-09, the assessee company was in receipt of dividend from M/s Millinium Investimentos Ltd of Rua Jose de Andrade, 336, Pargue Alexandre , City of Cotia State of Sao Paula, Brazil amounting to Brazilian Real 367.07 equivalent to Rs. 75,79,791/- which was credited to Axis Bank, 7, Shakespeare Sarani Branch, Kolkata- 700071 on 20.8.2007. The assess....
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.... 3. The term "dividends" as used in this Article means income from shares, "jouissance" shares or "jouissance" rights, mining shares, founders' shares or other rights, not being debt-claims, participating in profits, as well as income from other corporate rights which is subjected to the same taxation treatment as income from shares by the laws of the State of which the company making the distribution is a resident. 4. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the dividends, being a resident of a Contracting State, carries on business in the other Contracting State of which the company paying the dividends is a resident, through a permanent establishment situated therein, and the holding ....
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....rce in accordance with Brazilian law. However, such tax cannot exceed 15% of gross amount of profits of that permanent establishment determined after the payment of corporate tax related to such profits. 5. It would be relevant to reproduce certain facts of the case as under:- Besco Engineering & Services (P) Ltd (assessee herein), an Indian Company, had invested in 40% Equity Capital of a Brazilian Company named Millenium Investmentos Ltda, which is a Joint Venture Investment Company with remaining 60% Equity held by Citra do Brazil (a Brazilian Company), with the main object of making equity investment in industrial venture for making railway wagon under the Banner of Santa Fe Vagoes Ltda, a Brazilian Company. Millinium Investmentos....
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....lding tax. The law requires an annual payment of dividends with reference to the minimum portion established in the article of incorporation considering the minimum limit of 25% of the net profit of the year. According to him, in the instant case, the company has fulfilled this criteria also as below:- Millinium Investmentors Ltda has net profit before tax of 2421,277.28 C Dividend distributed by the company during the year 974376.01 D Hence % of dividend distributed from profit = 974376.01 / 2421277.28 * 100 40.24% He argued that minimum limit set is 25% of the net profit for the year and hence Millinium Investmentos Ltda is satisfying the criteria fully hence dividend should not be taxed in India as per Tax treaty. 6. We fi....
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....ibly fasten a tax liability where the liability is not imposed by the Act; b. If a tax liability is imposed by the Act, an agreement may be resorted to for negotiating or reducing it; c. In case of difference between the provisions of the Act and of the agreement, the provisions of the agreement prevail over the provisions of the Act and can be enforced by the appellate authorities and the court. 7. It would also be relevant to reproduce Article 23 of DTAA between India and Brazil at this juncture - "ARTICLE 23: Methods for the elimination of double taxation - 1. Subject to the provisions of paragraphs 3 and 4, where a resident of a Contracting State derives income which, in accordance with the provisions of th....