TaxTMI 
TaxTMI 
2026 (6) TMI 408
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....obtaining approvals from multiple stakeholders, including foreign entities. The said process, being time-consuming, resulted in the delay in filing the appeal. On perusal of the reasons stated, we are of the view that no latches can be attributed to the assessee as there is sufficient cause for belated filing of these appeals. Hence, we condone the delay and proceed to dispose off the appeals on merits. 3. Common issues are raised in these appeals. Hence, they are heard together and are being disposed of by this common order. Identical grounds are raised in these appeals and they read as follows:- 1. Ground No. 1-General The Order passed by the Commissioner of Income Tax(Appeals) (Ld. CIT(A)) under section 250 of the Income-tax Act. 1961 (the Act) is unsustainable and bad in law. The denial of refund and rejection of claim of refund under section 237 of the Act by the CIT(A) is contrary to the law, facts and circumstances of the case and hence liable to be quashed. The detailed grounds of appeal, including the position in law and facts is set out in the ensuing paragraphs. 2. Ground No.2 Dividend Distribution Tax paid by the Company i....
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....er sub-section 2 of section 90 of the Act which states 'provisions of this Act shall apply to the extent they are more beneficial to that assessee." 6. Ground No.6-Specific inclusion of provisions deeming DDT as a tax on shareholders income in a particular tax treaty cannot be construed as leading to its automatic exclusion in other tax treaties. The Ld.CIT (A) has failed to appreciate the fact that the specific inclusion of DDT in a particular tax treaty cannot be construed as an automatic exclusion of the same in other treaties Consequently, irrespective of a specific inclusion the beneficial tax rates shall be available to DDT as well. 7. Ground No.7- The Appellant is eligible for DDT refund claim. Further, given that the DDT has been paid by the Indian Company and consequently, the refund claim would need to be made by the Indian company and not the non-resident shareholders. The Ld. CIT(A) has erred in facts and law by failing to appreciate that the appellant is eligible to DDT refund. Further, the Ld.CIT(A) ought to have considered the fact that the liability to discharge DDT is on the Company declaring the dividends and accordingly, th....
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....iled an application dated 23.03.2021 u/s. 237 of the Act seeking refund of excess DDT amounting to Rs. 14,55,660/-. In this regard, the number of shares held, amount of dividend paid and DDT remitted on dividend paid to the Non-resident shareholders [ie. ESAB Holdings Limited, UK (ESAB UK') and Exelvia Group India B.V. Netherlands (ESAB Netherlands')] is tabulated below: Sl. No. Name of the shareholder No. of shares held Dividend paid at the rate of INR 90 per share DDT liability under the Act in INR Dividend rate as per the respective DTAA DDT as per DTAA in INR Amount of excess DDT paid in INR 1 ESAB UK 5,743,200 516,888,000 106,247,849 10% 51,688,800 54,559,049 2 ESAB Netherlands 5,604,760 504,428,400 103,686,741 5% 25,221,420 78,465,321 Total 11,347,960 1,021,316,400 209,934,590 76,910,220 133,024,370 6. The AO, however, rejected the refund claim vide order dated 26.11.2021 passed u/s. 237 of the Act. The relevant finding of the AO reads as follows:- "The submission of the assessee is duly considered and the assessee company claimed refund for the ex....
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....d by the company is not eligible for treaty protection afforded to shareholders under Articles 11 or 10 of the respective DTAAs. The Appellant, not being a resident of the treaty partner country, cannot invoke treaty benefits for its own tax liability. The statutory framework, judicial interpretation, and treaty language all converge on this settled position of law. Accordingly, the appeal is hereby dismissed." 8. Aggrieved, the assessee filed the present appeal before the Tribunal. The Ld.AR submitted that the order of the Special Bench of ITAT, Mumbai in the case of DCIT vs. Total Oil India Pvt. Ltd., in ITA No.6997/Mum/2019 (order dated 20.04.2023) has not been approved by the Hon'ble Bombay High Court in the case of Colorcon Asia Pvt. Ltd., vs. PCIT in Tax Appeal No.5 of 2024 (judgment dated 28.11.2025), wherein it has been held that dividend distribution tax is a tax on dividend income of the shareholder. It was further held by the Hon'ble Court that section 90(2) of the Act allow the appellant to apply the lower rate under the DTAA, if other stipulated conditions are met for the benefit of DTAA. 9. The Ld.DR supported the orders of the AO and the FAA. 10. We have hea....
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....bligations thereunder, 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 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-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 he....
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....e Hon'ble Supreme Court has held that dividend connotes '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-O 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-O 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-O 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, charg....
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....ot appreciating that as per Section 90(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 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 ....