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Income Tax Appellate Tribunal, MUMBAI BENCH “E” MUMBAI
Before: SHRI OM PRAKASH KANT & MS. KAVITHA RAJAGOPAL
PER OM PRAKASH KANT, AM
This appeal by the assessee is directed against order dated 27.09.2022 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2020-21, raising following grounds:
On facts and circumstances of the case and in law, Learned CIT(A) erred in rejecting the claim of appellant to consider lower rate of dividend distribution tax
M/s Tricon Global Services Pvt. Ltd. M/s Tricon Global Services Pvt. Ltd. 2 ITA No. 2985/Mum/2022
(DDT) in respect of dividend paid by Appellant to its (DDT) in respect of dividend paid by Appellant to its (DDT) in respect of dividend paid by Appellant to its parent company, Tricon International Limited, who is a parent company, Tricon International Limited, who is a parent company, Tricon International Limited, who is a tax resident of Un tax resident of United States America('USA' to 15%, in ited States America('USA' to 15%, in view of the beneficial provisions of Article 10 of India view of the beneficial provisions of Article 10 of India view of the beneficial provisions of Article 10 of India USA Double Tax Avoidance Agreement (DTAA) and USA Double Tax Avoidance Agreement (DTAA) and USA Double Tax Avoidance Agreement (DTAA) and rejecting the claim of the Appellant that the excess of rejecting the claim of the Appellant that the excess of rejecting the claim of the Appellant that the excess of DDT paid over and above the rate as per article 10 of DDT paid over and above the rate as per article 10 of DDT paid over and above the rate as per article 10 of India- USA DTAA should be refunded to the Appellant. USA DTAA should be refunded to the Appellant. 2. On facts and circumstances of the case and in law, On facts and circumstances of the case and in law, On facts and circumstances of the case and in law, Learned CIT (A) failed to appreciate that in terms Learned CIT (A) failed to appreciate that in terms Learned CIT (A) failed to appreciate that in terms provisions of section 90(2) read with section 10(34) of provisions of section 90(2) read with section 10(34) of provisions of section 90(2) read with section 10(34) of the Act the income being taxable in hands of non- the Act the income being taxable in hands of non the Act the income being taxable in hands of non resident could not be subjected a rate in excess of the sident could not be subjected a rate in excess of the sident could not be subjected a rate in excess of the rate prescribed under DTA and hence erred in rate prescribed under DTA and hence erred in rate prescribed under DTA and hence erred in subjecting appellant to additional tax in terms of subjecting appellant to additional tax in terms of subjecting appellant to additional tax in terms of section 115 section 115-0 of the Act amounting to Rs. 23,33,224. 0 of the Act amounting to Rs. 23,33,224. 3. On the facts and circumstances of the case, the Ld. On the facts and circumstances of the case, the Ld. On the facts and circumstances of the case, the Ld. CIT(A) has erred in not allowing education cess IT(A) has erred in not allowing education cess IT(A) has erred in not allowing education cess amounting to IN 3,99,629 as a business expenditure. amounting to IN 3,99,629 as a business expenditure. amounting to IN 3,99,629 as a business expenditure. 4. Without prejudice to Ground No. 5 above and on the Without prejudice to Ground No. 5 above and on the Without prejudice to Ground No. 5 above and on the facts and circumstances of the case, the Ld. CIT(A) has facts and circumstances of the case, the Ld. CIT(A) has facts and circumstances of the case, the Ld. CIT(A) has erred in not appreciating that education cess is not in erred in not appreciating that education cess is n erred in not appreciating that education cess is n thenature of tax or surcharge covered under section thenature of tax or surcharge covered under section thenature of tax or surcharge covered under section 40(a)(ji) of the Act and hence shall be allowed as 40(a)(ji) of the Act and hence shall be allowed as 40(a)(ji) of the Act and hence shall be allowed as business expenditure for the year under consideration. business expenditure for the year under consideration. business expenditure for the year under consideration. 5. Without prejudice to Ground No. 5 & Without prejudice to Ground No. 5 & 6 above and on 6 above and on the facts and circumstances of the case, the Ld. CIT(A) the facts and circumstances of the case, the Ld. CIT(A) the facts and circumstances of the case, the Ld. CIT(A) has failed to appreciate that the provisions of has failed to appreciate that the provisions of has failed to appreciate that the provisions of Explanation 3C in the section 40(1)(ji) of the Act should Explanation 3C in the section 40(1)(ji) of the Act should Explanation 3C in the section 40(1)(ji) of the Act should be made applicable from April 1, 2022 and therefore be made applicable from April 1, 2022 and therefore be made applicable from April 1, 2022 and therefore shall be applicable for th shall be applicable for the relevant AYs beginning on or e relevant AYs beginning on or after April 1, 2022. after April 1, 2022. 2. Briefly stated, facts of the case are that the assessee is a Briefly stated, facts of the case are that the assessee is a Briefly stated, facts of the case are that the assessee is a subsidiary of ‘Tricon International Ltd. USA Tricon International Ltd. USA’. For the year under . For the year under consideration, the assessee filed return of income on 13.02.2021 consideration, the assessee filed return of income on 13.02.2021 consideration, the assessee filed return of income on 13.02.2021 declaring total income of Rs.4,16,83,660/ total income of Rs.4,16,83,660/-, which was subsequently hich was subsequently however claiming a revised on 11.03.2021 revised on 11.03.2021, retaining same income, however claiming a refund of Rs.23,33,264/ refund of Rs.23,33,264/- as against refund of Rs.50 claimed in the as against refund of Rs.50 claimed in the
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original return of income. The claim of refund of dividend original return of income. The claim of refund of dividend original return of income. The claim of refund of dividend distribution tax made in revised return made in revised return was rejected by the Ld. was rejected by the Ld. Central Processing Centre, Bangalore (CPC) Central Processing Centre, Bangalore (CPC), while processing the while processing the return of income u/s 143(1) of the Act return of income u/s 143(1) of the Act vide order dated 18.12.2021. dated 18.12.2021. On further appeal, this claim of this claim of refund of alleged refund of alleged excess dividend distribution tax (DDT) (DDT) paid was rejected by the Ld. CIT(A). The paid was rejected by the Ld. CIT(A). The assessee claimed that it paid dividend of Rs.4,20,00,000/- during assessee claimed that it paid dividend of Rs.4,20,00,000/ assessee claimed that it paid dividend of Rs.4,20,00,000/ the year to parent company. The assessee further claimed that company. The assessee further claimed that company. The assessee further claimed that in the original return of income filed, the original return of income filed, it paid dividend it paid dividend distribution tax (DDT) of Rs.80,33,224/ Rs.80,33,224/- on the entire dividend of Rs.4,20,00,000/ on the entire dividend of Rs.4,20,00,000/- inclusive of surcharge and education cess at an effective inclusive of surcharge and education cess at an effective inclusive of surcharge and education cess at an effective distribution tax rate of 26.56%. distribution tax rate of 26.56%. But, in the revised return of the revised return of income, the assessee the assessee claimed that in view of India USA Double claimed that in view of India USA Double Taxation Avoidance Agreement (DTAA) Taxation Avoidance Agreement (DTAA), the dividend distribution he dividend distribution tax rate of 15% was only applicable. The claim of the assessee has been rate of 15% was only applicable. The claim of the assessee has been rate of 15% was only applicable. The claim of the assessee has been rejected by the Ld. CIT(A) observing as under: rejected by the Ld. CIT(A) observing as under:
“5.2 There is no merit in the c 5.2 There is no merit in the claim of the appellant. The laim of the appellant. The provisions of section 115 provisions of section 115-O clearly state that the tax on the O clearly state that the tax on the amount declared, distributed or paid by a domestic amount declared, distributed or paid by a domestic amount declared, distributed or paid by a domestic company by way of dividends shall be charged to company by way of dividends shall be charged to company by way of dividends shall be charged to additional income tax @ 15%. The sub additional income tax @ 15%. The sub-section 115 section 115-0(1A) even provides even provides for levy of tax on the domestic company if for levy of tax on the domestic company if any dividend is received from the foreign subsidiary. The any dividend is received from the foreign subsidiary. The any dividend is received from the foreign subsidiary. The provisions of section 115 provisions of section 115-O(5) state that no deduction under O(5) state that no deduction under any other provision of the Act shall be allowed to the any other provision of the Act shall be allowed to the any other provision of the Act shall be allowed to the company or shareholder in respect of t company or shareholder in respect of the amount which has he amount which has been charged to tax under sub been charged to tax under sub-section (1) or the tax thereon. section (1) or the tax thereon. In view of these clear provisions, the claim that the DDT is a In view of these clear provisions, the claim that the DDT is a In view of these clear provisions, the claim that the DDT is a tax collected by the company on behalf of the shareholders tax collected by the company on behalf of the shareholders tax collected by the company on behalf of the shareholders has no legal basis. Therefore the said tax being pay has no legal basis. Therefore the said tax being pay has no legal basis. Therefore the said tax being payable as
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additional income tax, the beneficial provisions of DTAA are additional income tax, the beneficial provisions of DTAA are additional income tax, the beneficial provisions of DTAA are not applicable. Therefore this ground is dismissed. not applicable. Therefore this ground is dismissed. not applicable. Therefore this ground is dismissed.” 2.1 Aggrieved, the assessee is in appeal before the Tribunal by way Aggrieved, the assessee is in appeal before the Tribunal by way Aggrieved, the assessee is in appeal before the Tribunal by way of raising grounds as reproduced above. of raising grounds as reproduced above.
Before us, the Ld. Cou Before us, the Ld. Counsel of the assessee submitted that nsel of the assessee submitted that assessee was not interest in prosecuting in ground No. 3 to 5 of the assessee was not interest in prosecuting in ground No. 3 to 5 of the assessee was not interest in prosecuting in ground No. 3 to 5 of the appeal, in view of the decision of the Hon’ble Supreme Court n view of the decision of the Hon’ble Supreme Court n view of the decision of the Hon’ble Supreme Court dated in the case of Joint Commissioner of Income Joint Commissioner of Income-tax Vs 14/12/2022 in the case of Chambal Fertilizer Fertilizer and Chemical P ltd in SLP© Chemical P ltd in SLP© No. 7091/2019and and and therefore, therefore, therefore, these these these grounds grounds grounds are are are dismissed dismissed dismissed as as as infructuous.
Regarding ground No. 1 and 2 of the appeal challenging the Regarding ground No. 1 and 2 of the appeal challenging the Regarding ground No. 1 and 2 of the appeal challenging the finding of the Ld. CIT(A) that dividend distribution tax (DDT) has to finding of the Ld. CIT(A) that dividend distribution tax finding of the Ld. CIT(A) that dividend distribution tax be levied as per the domes as per the domestic law without any benefit of the tic law without any benefit of the provisions of the DTAA provisions of the DTAA, the Ld. Counsel of the assessee fairly he Ld. Counsel of the assessee fairly conceded that issue is dispute conceded that issue is dispute is covered against the assessee by covered against the assessee by the decision of the Special Bench of the Tribunal in the case of Total the decision of the Special Bench of the Tribunal in the case of the decision of the Special Bench of the Tribunal in the case of Oil India Pvt. Ltd. in ITA No. 6997.Mum/2019 for AY 2016 in ITA No. 6997.Mum/2019 for AY 2016 in ITA No. 6997.Mum/2019 for AY 2016-17 . The relevant finding of the Special Bench of the Tribunal is reproduced relevant finding of the Special Bench of the Tribunal is reproduced relevant finding of the Special Bench of the Tribunal is reproduced as under:
CONCLUSION: 83. For the reasons give above, we hold that where 83. For the reasons give above, we hold that where 83. For the reasons give above, we hold that where dividend is declared, distributed or paid by a domestic dividend is declared, distributed or paid by a domestic dividend is declared, distributed or paid by a domestic company to a non non-resident shareholder(s), which attracts resident shareholder(s), which attracts
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Additional Income Tax (Tax on Distributed Profits) referred Additional Income Tax (Tax on Distributed Profits) referred Additional Income Tax (Tax on Distributed Profits) referred to in Sec.115-O of the Act, such additional income tax O of the Act, such additional income tax O of the Act, such additional income tax payable by the domestic company shall be at the rate payable by the domestic company shall be at the rate payable by the domestic company shall be at the rate mentioned in Section 115 O of the Act and no mentioned in Section 115 O of the Act and not at the rate t at the rate of tax applicable to the non of tax applicable to the non-resident shareholder(s) as resident shareholder(s) as specified in the relevant DTAA with reference to such specified in the relevant DTAA with reference to such specified in the relevant DTAA with reference to such dividend income. Nevertheless, we are conscious of the dividend income. Nevertheless, we are conscious of the dividend income. Nevertheless, we are conscious of the sovereign's prerogative to extend the treaty protection to sovereign's prerogative to extend the treaty protection to sovereign's prerogative to extend the treaty protection to domestic companies domestic companies paying dividend distribution tax paying dividend distribution tax through the mechanism of through the mechanism of Special Bench - Total Oil India Total Oil India Pvt. Ltd. DTAAs. Thus, wherever the Contracting States to a tax DTAAs. Thus, wherever the Contracting States to a tax DTAAs. Thus, wherever the Contracting States to a tax treaty intend to extend the treaty protection to the treaty intend to extend the treaty protection to the treaty intend to extend the treaty protection to the domestic company paying dividend distribution ta domestic company paying dividend distribution ta domestic company paying dividend distribution tax, only then, the domestic company can claim benefit of the DTAA, then, the domestic company can claim benefit of the DTAA, then, the domestic company can claim benefit of the DTAA, if any. Thus, the question before the Special Bench is if any. Thus, the question before the Special Bench is if any. Thus, the question before the Special Bench is answered, accordingly. answered, accordingly. 4.1 The issue in dispute being squarely covered by the decision of The issue in dispute being squarely covered by the decision of The issue in dispute being squarely covered by the decision of the Special Bench (supra), the ground No the Special Bench (supra), the ground Nos. 1 and 2 of the appeal of and 2 of the appeal of the assessee are dismissed. dismissed.
In the result, the appeal of the assessee is dismissed. In the result, the appeal of the assessee is dismissed. In the result, the appeal of the assessee is dismissed.
Order pronounced in the open Court on nounced in the open Court on 13/0 /06/2023. Sd/ Sd/- Sd/- Sd/ (KAVITHA RAJAGOPAL KAVITHA RAJAGOPAL) (OM PRAKASH KANT OM PRAKASH KANT) JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 13/06/2023 Rahul Sharma, Sr. P.S.
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Copy of the Order forwarded to Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. BY ORDER, BY ORDER, //True Copy// (Assistant Registrar) (Assistant Registrar) ITAT, Mumbai ITAT, Mumbai
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