2025 (7) TMI 1027

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....s. 14,94,29,436/- at the rate of 20.56% on the aforesaid dividend, in accordance with provisions of section 115-O of the Act. 4. The assessee filed an application dated 30.03.2020 u/s 237 of the Act, with the Jurisdictional Assessing Officer (JAO) claiming refund of DDT paid by it in excess of the rate of 10% as prescribed under India-UK DTAA with respect to dividend paid to the payee company. The assessee relied on (i) Hon. ITAT, Delhi, in the case of Giesecke & Devrient (India) Pvt. Ltd. Vs The Addl. CIT [ITA 7075/DEL/2017] (Delhi ITAT). (ii) Hon. ITAT, Kolkata, in the case of Indian Oil Petronas Pvt. Ltd [TS- 324-ITAT-2021 (Kol)]. 5. The AO rejected the claim of DDT refund made by the Appellant u/s 237 of the Act, vide his Order dated 05.08.2022, and the same was upheld by the CIT(A). 6. Aggrieved, the assessee is before us. 7. It is the say of the ld. counsel for the assessee that the rate of DDT on dividends paid by assessee to Intertek Holdings Limited, UK, ought to be restricted to 10% of gross amount of dividend in accordance with Article 11 of India-UK DTAA, instead of 20.56% charged in terms of section 115-O of the Act. 8. The ld. counsel for the assessee further....

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....rofits and not income in the hands of the shareholder. (Para No. 75) g) Section 115-O(3) and 115-O(4) clarifies that the taxes paid are final payment of tax and no credit shall be claimed by the Company or any other person (Para No. 77) h) DDT is a tax not on the shareholder but on the income of the company and thus, there is no double taxation and thus, DTAA does not apply (Para No. 79 & 80) i) If domestic company has to enter the domain of DTAA, the countries should specifically extend the treaty protection to DDT (Para No. 81) 10. The ld AR, in essence argued that the basis of the above provisions and judicial precedents is that DDT is a tax on dividend income of recipient shareholder and therefore benefit of Article 11 of India-UK tax treaty should be allowed to the Appellant. The ld AR added that the correct rate of Dividend distribution tax i.e., rate under DTAA vs Section 115-O is under consideration of Hon'ble Delhi High court in writ jurisdiction from 8.12.2021. 11. Per contra, the ld DR heavily relied on the orders of the CIT(A). 12. We have heard the rival submissions and have carefully perused the materials on record. We find that the ld. CIT(A), relying on....

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....on/allocation of taxing rights between two Sovereign nations. When we hold that DDT is a tax not on the shareholder but on the amount declared, distributed, paid as the case may be, by way of dividend and being a tax on income of the company, there is no double taxation of the same income. DTAAs seek to reduce the impact of double taxation which has harmful effects on the international exchange of goods and services and cross-border movements of capital, technology and persons. Bilateral tax treaties address instances of double taxation by allocating taxing rights to the contracting states. Most existing bilateral tax treaties are concluded on the basis of a model, such as the OECD Model Tax Convention or the United Nations Model, which are direct descendants of the first Model of bilateral tax treaty drafted in 1928 by the League of Nations. As a result, while there can be substantial variations between one tax treaty and another, double tax treaties generally follow a relatively uniform structure, which can be viewed as a list of provisions performing separate and distinct functions: (i) Articles dealing with the scope and application of the tax treaty, (ii) Articles addressi....

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....d in the hands of the shareholders and it shall not exceed 10 per cent of the gross amount of dividend". That is a provision in the protocol, which is essentially an integral part of the treaty, and the protocol to a treaty is as binding as the provisions in the main treaty itself. In the absence of such a provision in other tax treaties, it cannot be inferred as such because a protocol does not explain, but rather lays down, a treaty provision. No matter how desirable be such provisions in the other tax treaties, these provisions cannot be inferred on the basis of a rather aggressively creative process of interpretation of tax treaties. The tax treaties are agreements between the treaty partner jurisdictions, and agreements are to be interpreted as they exist and not on the basis of what ideally these agreements should have been. (g) A tax treaty protects taxation of income in the hands of residents of the treaty partner jurisdictions in the other treaty partner jurisdiction. Therefore, in order to seek treaty protection of an income in India under the Indo French tax treaty, the person seeking such treaty protection has to be a resident of France. The expression 'resident....