TaxTMI 
TaxTMI 
2026 (4) TMI 343
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..... (ii) To restrict the Dividend Distribution Tax (DDT) prescribed under the India-Netherlands tax treaty read with protocol to tax treaty and the excess DDT paid should be refunded along with the interest. 3. At the time of hearing, the Ld.AR has not pressed the additional ground of appeal no (i) and accordingly this ground of appeal is treated as withdrawn and is dismissed. 4. The second additional ground of appeal (ii) raised by the assessee for applicability of Dividend Distribution Tax (DDT) tax rate @10% under the India-Netherlands tax treaty read with protocol treaty and the excess DDT paid should be refunded along with the interest and the Ld.AR substantiated the submissions with the factual paper book and judicial decisions. Per Contra, The Ld.DR submitted that this issue is covered in favour of the Revenue by the decision of the Special Bench of the Tribunal in DCIT Vs Total Oil India Private Ltd, reported in [2023] 149 taxmann.com 332 (Mumbai - Trib.) (SB). The Ld.AR highlighted and relied on recent decision of the Hon'ble High Court of Bombay in Colorcon Asia (P.). Ltd. v/s JCIT, reported in [2025] 181 taxmann.com 301 (Bom.).We heard both the parties and p....
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...., but it cannot 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 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 Co. Ltd (supra), while pronouncing upon the constitutional validity of Section 115-O 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 interfer....
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....39; income ', the natural 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), alongwith 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 distribu....
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....2) of the Income Tax, the provision of DTAA would prevail over the domestic law 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 deinitely 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- O i....
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....ion 115-O corroborates this. More importantly, the Apex Court in the case of Tata Tea Co. Ltd (supra) too has confirmed the nature of income being dividend income, which is subject to DDT and under Section 115-O 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....
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....e duplication of functions being carried out by the assessee on its own and no economic value of services and dealt at Para 5 on the objections/submissions of the assessee of the T.P.O order. Accordingly the TPO has made ALP adjustment of international transactions of payment of management fees of Rs. 3,17,85,688/- and passed the order u/s 92CA(3) of the Act dated 28.10.2016. 7. The Assessing officer after the receipt of the TPO order, has passed a draft assessment order on 18.11.2016 u/s 144C(1) of the Act with (i) the Transfer pricing adjustment of Rs. 3,17,85,688/- and (ii) disallowance of excess depreciation on Nip Cap unit of Rs. 17,54,911/ and assessed the total income of Rs. 98,29,02,810/-. The assessee aggrieved with the draft assessment order has filed the objections in Formno-35A with the Dispute Resolution Panel (DRP). In the DRP proceedings the assessee in support of payment of management fees in addition to the objections raised in Form no-35A and submissions, the assessee has filed the evidences in the DRP proceedings which were filed earlier before the Transfer Pricing Officer (TPO) and were not considered. The DRP find that the assessee has filed the same evidenc....