TaxTMI 
TaxTMI 
2023 (9) TMI 850
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.... Adv., JUDGMENT PRASHANT KUMAR MISHRA, J. Delay condoned in SLP (C) Diary No. 4647 of 2018 and SLP (C) Diary No. 15333 of 2023. 2. Leave granted in SLP (C) No. _____ @ Diary No. 4647 of 2018, SLP(C) No. 11204 of 2023 and SLP (C) No. _____ @ Diary No. 15333 of 2023. 3. This judgment governs the disposal of Civil Appeal No. 836 of 2018, C.A. No. 3369 of 2019, Civil Appeal No. 2256 of 2018 and the appeals arising out of SLP (C) Diary No. 4647 of 2018, SLP(C) No. 11204 of 2023 and SLP (C) @ Diary No. 15333 of 2023. BACKGROUND FACTS: 4. The assessee is a multi-State Co-operative Society registered in India, under the administrative control of the Department of Fertilizers, Ministry of Agriculture and Co-operation, Government of India. In the course of its business of manufacturing fertilizers, it entered into a joint venture with Oman Oil Company to form the Oman Fertilizer Company SAOC (for short 'OMIFCO' or 'the JV'), a registered company in Oman under the Omani laws. The assessee has 25% share in the JV. The JV manufactures fertilizers, which are purchased by the Central Government. The assessee has a branch office in Oman which is independently registered as com....
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....n, whereas, in the case in hand, the PE is only doing preparatory and auxiliary work and is not having any tangible expenses. Therefore, the dividend income of the assessee is not related to its PE. It is also argued that the exemption letter dated 11.12.2000 issued by the Sultanate of Oman, Ministry of Finance under the signatures of Secretary General for Taxation, has no statutory force as per Omani Tax Laws, therefore, the same cannot be relied upon to claim exemption. 10. Per contra, Mr. Arvind P. Dattar, learned senior counsel appearing for the assessee would contend that the provisions of DTAA fully exempt the assessee from payment of tax on dividend in Oman which, in turn, would exempt the assessee from taxation in India. It is further argued that the letter issued by the Sultanate of Oman, Ministry of Finance emanates from the highest authority of the Omani regime, therefore, the clarification set out in the said letter is valid for interpretation of the relevant clauses of DTAA, to exempt the assessee from payment of dividend tax in Oman and, in turn, in India. ISSUE TO BE CONSIDERED BY THIS COURT: 11. All the matters involve a similar question of law as to whethe....
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....carries on business in the other Contracting State of which the company paying the dividends is a resident, through a permanent establishment situated therein or performs in that other Contracting State independent personal services from a fixed base situated therein, and the holding in respect of which the dividends are paid is effectively connected with such permanent establishment or fixed base. In such case, the provisions of Article 7 or Article 16, as the case may be, shall apply. 5. Where a company which is a resident of a Contracting State derives profits or income from the other Contracting State, that other Contracting State may not impose any tax on the dividends paid by the company except insofar as such dividends are paid to a resident of that other Contracting State or insofar as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment or a fixed base situated in that other Contracting State, nor subject the company's undistributed profits to a tax on the company's undistributed profits, even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in such ot....
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.... listed in Muscat Securities Market or from their disposal." 13. Article 25 (2) of the DTAA provides that where a resident of India derives income, which in accordance with this agreement, may be taxed in the Sultanate of Oman, India shall allow as a deduction from the tax on the income of that resident an amount equal to the income tax paid in the Sultanate of Oman, whether directly or by deduction. Article 25 (4) clarifies that the tax payable in a Contracting State mentioned in clause 2 and clause 3 of the said Article shall be deemed to include the tax which would have been payable but for the tax incentive granted under the laws of the Contracting State and which are designed to promote development. 14. The revenue relied upon Article 11 which provides that dividends paid by a company which is a resident of a Contracting State to a resident of the other Contracting State may be taxed in that other Contracting State. Thus, according to the revenue, dividend received by the assessee is taxable in India and is not exempt because the same is not designed as tax incentive in Oman to promote development in that country. In the same manner, it is argued that the letter issued b....
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....g investments. We presume from our recent discussions with you that the Indian investors in the above Project would be setting up Permanent Establishment in Oman and that their equity investments in the Project would be effectively connected with such Permanent Establishments. On the above presumption, we confirm that tax would be payable on dividend income earned by the Permanent Establishments of the Indian Investors, as it would form part of their gross income under Article 8, if not for the tax exemption provided under Article 8 (bis). As the introduction of Article 8 (bis) is to promote economic development in Oman, the Indian Investors should be able to obtain relief in India ITA Nos. 6785 & 6786/DEL/2015 (AYRS. 2010-11 & 2011-12) KRISHAK BHARATI CO-OPERATIVE LIMITED VS. ACIT under Article 25 (4) of the Agreement for Avoidance of Double Taxation in India. All other matters covered in our letter No. FT/13/92 dated 6th August, 2000 remained unchanged." 16. It is, thus, clear from the above letter of the Omani Finance Ministry that the dividend distributed by all companies, including the tax-exempt companies would be exempt from payment of income ta....