TaxTMI 
TaxTMI 
TaxTMI 
2026 (2) TMI 154
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....6,82,230/- and revised return on 27-03-2018 declaring total income of Rs. 149,22,97,140/-. The assessee company entered into an Advance Pricing Agreement (hereinafter referred as APA) with Central Board of Direct Taxes on 19- 08-2019 under section 92CC of the Act for the Asst. Years 2016-17 to 2020-21. Therefore, a modified Return of Income under section 92CD was filed by the assessee company on 14-11-2019 declaring total income of Rs. 157,70,06,240/- and paid the additional tax on the said income. 3. In the meanwhile, the return was taken for scrutiny assessment. During the course of assessment proceedings, the assessee requested for refund of excess Dividend Distribution Tax (DDT) paid by it contending that the rate of DDT paid on the dividends remitted to the shareholders (residents of United Kingdom), should not exceed the rate of 10% as prescribed in the Double Taxation Avoidance Agreement (DTAA) entered between India and United Kingdom. A reference was also made to the Transfer Pricing Officer for determining Arms' Length Price of the International Transaction undertaken by the assessee company and the TPO accepted the price at which International Transaction were recorded....
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....terest under section 234C of the Act On the facts and circumstances of the case and in law, the Hon'ble CIT(A)/Ld. AO erred in levying additional interest under section 234C of the Act amounting to INR 19,55,705 on the incremental income offered for tax in the modified return of income filed pursuant to the APA. It is prayed that the Ld. AO be directed to delete the impugned interest under section 234C of the Act. 4. Short grant of credit of Tax Deducted at Source (TDS') On the facts and circumstances of the case and in law, the Hon'ble CIT(A)/Ld. AO erred in not granting credit of TDS of INR 5,78,321 (i.e., INR 5,28,75.396 as per modified return of income less INR 5.22.97,075 as per assessment order) to the Appellant. It is prayed that the Ld. AO he directed to grant the credit of TDS of INR 5,78,321/-. 5. Validity of the order passed by the Hon'ble CIT(A) On the facts and circumstances of the case and in law, the Hon'ble CTT(A) erred in observing that the Ld. Assessing Officer (Ld. AO) be directed to verify the claim of the Appellant in relation to refund of excess DDT paid without appreciating tha....
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....connection whatsoever with the primary income-tax liability in respect of the profits of the company declared in the dividend. Further, section 90(2) of the Act provides an overriding effect to the provisions of DTAA over the Act, to the extent that they are more beneficial to the taxpayers. 7.1. It is undisputed fact that section 115-0 of the Act prescribes DDT rate at 20.36%. Whereas, the DTAA between India and United Kingdom provides for a lower rate of tax on dividend at 10% of the gross amount of dividend. The assessee company, with respect to the non-resident shareholders which are the tax residents of UK, inadvertently computed the DDT liability by applying the rate prescribed under section 115-0 of the Act instead of the lower rate of tax as provided in the India-UK, DTAA. Accordingly, the Assessee company paid excess DDT under the provisions of the Act, as against the DDT liability, if the benefit of Article 11 of the India-UK DTAA was adopted i.e., at 10% and claimed refund of excess DDT paid. 7.2. In this regard, the ld Counsel relied on the following judicial pronouncements: a. Colorcon Asia Pvt. Ltd. v. JCIT - Tax Appeal No. 5 of 2024 (Bom. HC) dated 28 ....
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....not amend the treaty on the guise of its domestic law, having undergone change. Amendments to domestic law, cannot be read into treaty provisions, without amending Treaty itself. Since it is necessary for the contracting party to fulfill their obligations under a Treaty in good faith and this includes its accountability under it and act in a manner, not to defeat its purpose and object, we find that the benefit accruing under the DTAA, and Article 11 thereof, cannot be denied as Revenue is of the opinion that the Treaty do not cover 'Dividend' or it is not applicable to a domestic company. 56. In Tata Tea Company (supra), while pronouncing upon the constitutional validity of Section 115-0 of the Act of 1961, which is a provision for declaration, distribution or payment of dividend by domestic company and imposition of additional tax on dividend, it is held by the Apex Court that the source of the income may be agriculture, but when dividend is declared to be distributed and paid to shareholder of a company, its source is not relevant, as it remains dividend income. Nor does the fact that it is share of the company's profit, is held to be interfere with characte....
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....corollary is that as per section 4, the said income should be chargeable to tax in the hands of the person earning such income. However, from a combined reading of Section 115-0 and 10(34), along with the legislative history narrated earlier, it is evident that DDT is a tax on the dividend income of the shareholder, though the incidence of tax has shifted from the shareholder to the company paying the dividend. Any other interpretation of the provisions will render the section 115-0 of the Act unconstitutional as it will fall foul of Entry 82, since what is sought to be taxed by the Respondent is not 'income' of the company. 58. The Board of Advanced Ruling has further failed to appreciate that in view of the statutory provisions and legislative background of Section 115-0 of the Act, DDT paid by a company distributing dividend is not an income tax on profits or income of the company, but, is a tax on the dividend, which is income of the shareholder of the company. Hence, DDT is tax on the dividend income of the shareholder, which is merely, for administrative convenience, charged in the hands of, and recovered from the company distributing dividend. There is no de....
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.... to the extent they are more beneficial to the assessee who is subjected to tax in India and as per Article 1 of the DTAA, it shall apply to the persons who are residents of one or both of the Contracting States. Further, Article 2 of the Treaty apply in respect of income tax and also to any identical or substantially similar taxes which are imposed after DTAA is brought into force. Since DDT is an 'Income Tax' as per the provisions of the Act, it definitely fall within ambit of Article 2 of DTAA as income tax includes surcharge and dividend and Article 2 (2) clearly apply to any identical or substantially similar tax in addition to or in place of tax. DDT is squarely covered under Article 11 of the DTAA. On its plain reading the payment being covered under definition of dividend under Article 11(3) which is paid by the Company, resident of India to a resident of UK and therefore, in our view, Article 11(1) is automatically triggered, consequently triggering the restriction in rate of tax under Article 11(2). 60. Thus, the BFAR erred in not appreciating that the tax under Section 115-0 is an additional tax under its sub section (4) which in turn is a part ....
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.... in the case of Tata Tea (supra) too has confirmed the nature of income being dividend income, which is subject to DDT and under Section 115-0 the dividend income is sought to be taxed at a rate of 20.36%. Section 90(2) of the Act of 1961 allow the appellant to apply the lower rate under the DTAA and Article 11(2) restrict tax rate of such dividend income to 10% and there is no embargo in Article 11 of the DTAA on the Appellant to apply the lower tax rate stipulated in Article 11(2). 61. In the wake of the above, the Authority has erred in not appreciating that DDT erroneously collected in excess of 10% as provided by India-UK DTAA is erroneous and contrary to law and retention of excess tax would be contrary to Article 265 of the Constitution of India. As a result of the above, the Appeal is allowed by setting aside the Ruling dated 27/06/2024 passed by the Board For Advanced Rulings, New Delhi, by declaring that, on the facts and circumstances of the case and in law. Colorcon Asia Pvt. Ltd ("Colorcon India" or "the Applicant" or "Company") is entitled to restrict the tax rate on dividends distributed by it to Colorcon Ltd, United Kingdom (UK), at 10% un....
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....assed by lower authorities and Ld CIT[A] already set aside this issue to the file of Ld AO. 9. Brief facts are that pursuant to Advance Pricing Agreement dated 19 August 2019 entered with the CBDT, the assessee company filed a modified Return of Income under section 92CD of the Act on 14-11- 2019 declaring a total income of INR 157,70,06,240/- and forthwith paid the entire additional tax on the income. In the modified return filed, the Assessee company inadvertently paid interest u/s. 234B of the Act amounting to INR 55,60,425/- and interest u/s 234C of the Act amounting to INR 19,55,705/- by computing the said interest on the entire income of INR 157,70,06,240/- including the incremental/ enhanced income computed pursuant to the APA, amounting to INR 8,47,09,100/-. However, the lower authorities without appreciating that such interest was not leviable in the Assessee's case did not grant any relief. It is pertinent to note that there were no additions made by the TPO in his order. Ld Counsel further submits that the advance tax installments were due and payable during the period from April 2015 to March 2016 and the time limit for filing the original ROI subsisted only upto 30t....
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....y in payment of income tax held as under:- "9. Perusal of the above provisions shows that liability to pay interest arises on failure of the assessee to pay advance tax under section 208 or advance tax payable under section 210 is paid less than 90 per cent. Perusal of the provisions of sections 208 and 209 shows that for the purpose of payment of advance tax the assessee has to estimate his current income and then he has to calculate income-tax on that income at the rate in force in the financial year. Thus, the amount of advance tax is to be decided by the assessee after estimating his current income and then applying law in force for deciding the amount of tax. It is an admitted position in the present case that the date on which the appellant paid the advance tax it had estimated its income and liability for payment of advance tax in accordance with law that was in force. Therefore, it is obvious that there was no failure on the part of the appellant to pay advance tax in accordance with the provisions of sections 208 and 209. So far as the judgment of the Supreme Court in the case of Ghaswala (20011 252 ITR 1 is concerned, the Supreme Court was concerned with the powe....