PIAGGIO VEHICLES PRIVATE LIMITED,PUNE vs. THE ASSISTANT COMMISSIONER OF INCOME TAX- CIRCLE 4, PUNE

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ITTPA 3195/PUN/2025Status: DisposedITAT Pune25 May 2026AY 2018-195 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the assessee is entitled to the benefit of Article 11 of the India-Italy DTAA in determining the Dividend Distribution Tax (DDT). The Tribunal noted that the CIT(A) had denied the benefit on the ground that the assessee was the payer and not the recipient of the dividend. However, the Tribunal referred to the recent decision of the Hon'ble Bombay High Court in the case of M/s. Colorcon Asia Pvt. Ltd. (supra). The High Court had held that DDT, in substance, is a tax on the dividend income of the shareholder, even though it is paid by the company distributing the dividend for administrative convenience. Therefore, DDT is squarely covered under Article 11 of the DTAA, and the rate prescribed in the DTAA should apply. The Tribunal found the facts in the present case to be identical to those in M/s. Colorcon Asia Pvt. Ltd. and considered it mandatory to follow the jurisdictional High Court's decision. While acknowledging a previous ITAT decision in the assessee's own case that favoured the Revenue, the Tribunal clarified that this decision was based on the Special Bench ruling of the ITAT, which predated the Bombay High Court's decision. Consequently, the Tribunal directed the AO to allow the benefit of Article 11 of the India-Italy DTAA to the assessee.

What were the facts?

The assessee, Piaggio Vehicles Private Limited, filed an appeal before the Income Tax Appellate Tribunal (ITAT) Pune against the order of the Commissioner of Income-tax (Appeals) [CIT(A)] for Assessment Year 2018-19. The appeal stemmed from an assessment order passed under Section 143(3) read with Section 144C of the Income Tax Act, 1961. The core issue was the denial of the benefit of Article 11 of the India-Italy Double Taxation Avoidance Agreement (DTAA) in determining the Dividend Distribution Tax (DDT) payable by the assessee on dividends distributed to its foreign shareholder, Piaggio & C.S.p.A., Italy. The CIT(A) had held that the assessee, being the payer of dividend and not the recipient, was not eligible to invoke the DTAA.

What were the issues?

1. Whether, on the facts and circumstances of the case and in law, the assessee is entitled to the benefit of Article 11 of the India-Italy Double Taxation Avoidance Agreement (DTAA) in determining the Dividend Distribution Tax (DDT) payable, considering that the dividend declared and paid by the assessee to Piaggio & C.S.p.A., Italy, should be taxed at the rate prescribed in the India-Italy DTAA, and consequently, whether a refund of excess DDT paid by the assessee should be granted? (Question of law and mixed fact and law, turning on Article 11 of the India-Italy DTAA and Section 115-O of the Income Tax Act, 1961). Assessee's contention: The assessee argued that as per Article 11 of the India-Italy DTAA, it is entitled to the benefit of the DTAA, and DDT should be charged as per Article 11. The assessee relied on the Bombay High Court's decision in M/s. Colorcon Asia Pvt. Ltd. (Tax Appeal No. 5 of 2024, dated 28-11-2025). Revenue's contention: The Revenue relied on the orders of the Assessing Officer (AO) and the CIT(A). The Revenue also submitted that an identical issue in the assessee's own case was decided in favour of the Revenue by the ITAT in ITA No. 868/PUN/2022, dated 23-12-2024.

Which sections of the Income-tax Act were involved?

Section 250,Section 143(3),Section 144C,Section 115-O

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, PUNE BENCHES “C” :: PUNE

Before: Ms. ASTHA CHANDRA & DR.DIPAK P. RIPOTE

For Appellant: Shri Siddhesh Chaugule
For Respondent: Shri Prakash L Pathade, CIT-DR
Hearing: 30/03/2026Pronounced: 25/05/2026

आदेश/ ORDER PER DR. DIPAK P. RIPOTE, AM:

This appeal filed by the Assessee against the order of ld. Commissioner of Income Tax(Appeal),Pune13 [Ld.CIT(A)], passed under section 250 of the Income Tax Act, 1961 for the A.Y.2018-19 dated 14.10.2025, emanating out of assessment order passed u/s 143(3) r.w.s 144C dated 01.11.2021. The Assessee has raised the following grounds of appeal : Based on the facts and circumstances of the case, Piaggio Vehicles Private Limited (hereinafter referred to as "the Appellant") respectfully craves leave to prefer an appeal against the order dated 14 October 2025 (received by the Appellant on 14 October 2025) passed by the Commissioner of Income-tax (Appeals), Circle 13, Pune [hereinafter referred to as "Hon'ble CIT(A)']

ITA No.3195/PUN/2025 under section 250 of the Income-tax Act, 1961 (hereinafter referred to as 'the Act') on the ground mentioned below 1. Refund of excess taxes paid on dividend distributed On the facts and circumstances of the case and in law, the Hon'ble CIT(A) has erred in not granting the benefit of Article 11 of the India-Italy Double Taxation Avoidance Agreement (DTAA) in determining the Dividend Distribution Tax ('DDT) payable, without appreciating the fact that the dividend declared and paid by the Appellant to Piaggio & C.S.p.A.. Italy, being tas on dividend income should be liable to tax at the rate prescribed in the India-Italy DTAA. Consequently, the refund of excess tax (DDT) paid by the Appellant be granted. The Appellant craves leave to add, alter, amend, modify or withdraw any or all the above grounds of appeal herein above and to submit such statements, documents and papers as may be considered necessary either at or before the hearing of this appeal as per the law.

2.

Submission of Ld.AR Ld.AR submitted that as per Article 11 of India-Italy DTAA, assessee is entitled for the benefit of DTAA and dividend distribution tax needs to be charged as per Article 11 of India-Italy DTAA. Ld.AR submitted that Ld.CIT(A) and AO relied on the order of the Special Bench of ITAT in the case of Total Oil India Private Limited [2023] 104 ITR 1 (Mumbai Trib) (SB). However, subsequently, the Hon’ble Bombay High Court has laid down the law in the case of M/s. Colorcon Asia Pvt. Ltd. in Tax Appeal No. 5 of 2024, dt. 28-11-2025. The relevant paragraph of the written submissions of the Ld.AR is as under:

ITA No.3195/PUN/2025

3.

Submission of Ld.DR Ld.DR relied on the order of the AO and the Ld.CIT(A). However, the Ld.DR submitted that the identical issue in assessee’s own case has been decided by the ITAT in favour of Revenue. Ld.DR relied on the order of the ITAT in assessee’s own case in ITA No. 868/PUN/2022, dt. 23-12-2024.

4.

Findings and Analysis: We have heard both the parties and perused the records. The only question raised by the assessee is that Ld.CIT(A) has not allowed benefit of Article-11 of India-Italy Double Taxation Avoidance Agreement in determining the dividend distribution tax. The relevant paragraph of the Ld.CIT(A)’s order is reproduced as under:

ITA No.3195/PUN/2025 Thus, the Ld.CIT(A) held that assessee is the payer of the dividend and not recipient of the dividend and hence, not eligible for invoking DTAA. However, recently, the Hon’ble Bombay High Court in the case of M/s. Colorcon Asia Pvt. Ltd. in Tax Appeal No. 5 of 2024, dt. 28-11-2025 (supra) on identical facts has held as under: Quote:“6. During the assessment years 2016-17, 2017-18 and 2018-19, the Appellant paid dividend to Colorcon UK and also paid Dividend Distribution Tax (DDT) at rates speciied under Section 115-O of the Act of 1961. It also paid interim dividend for assessment year 2019-20. It is, in this background the Appellant sought an advance ruling under Section 245Q and approached the Board and Advance Ruling by preferring an Application on 20/05/2019 when it postulate a clear issue as to whether Colorcon India would be entitled to restrict the tax rate on the dividends distributed by it to Colorcon UK to 10% under Article 11 of the India UK Double Taxation Avoidance Agreement i.e. the Tax Treaty and if the answer is in affirmative whether the tax rate of 10% under the tax duty needs to be further grossed up.……. 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 proits 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………… While the DDT is a tax payable by the company, and not the shareholders, in pith and substance, it is a tax on dividends that is income of the shareholders. DDT is squarely covered under Article 11 of the DTAA. On its plain reading the payment being covered under deinition 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)……….. 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” UnQuote:

Thus, the Hon’ble jurisdictional High Court (supra), has laid down the law that DTAA is applicable to DDT. The facts in the case of M/s. Colorcon Asia Pvt. Ltd., (supra) and assessee are identical. Therefore, the ratio of the Hon’ble jurisdictional High Court (supra), is applicable in the case of the assessee. As per judicial precedents, it is mandatory for the ITAT to follow the decision of the Hon’ble jurisdictional High Court. We are aware

ITA No.3195/PUN/2025 that ITAT, Pune in assessee’s own case in ITA No. 868/PUN/2022, dt. 23- 12-2024 has held that Article 11 of DTAA is not applicable to DDT, however, at that point of time, ITAT had followed the decision of the Special Bench of the ITAT, as the decision of the Hon’ble jurisdictional High Court, dt. 28-11-2025 (supra), was not available. However, now the decision of the Hon’ble jurisdictional High Court (supra), is available, therefore, it is our duty to follow the decision of the Hon’ble jurisdictional High Court. Accordingly, we direct the AO to allow benefit of Article 11 of the India-Italy DTAA. 5. In the result, grounds of appeal raised by the assessee are allowed. Order pronounced in the open Court on 25th May, 2026.

Sd/- Sd/- (ASTHA CHANDRA) (Dr. DIPAK P. RIPOTE) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; दिन ांक / Dated : 25th May, 2026 TNMM आदेशकीप्रनिललपपअग्रेपर्ि / Copy of the Order forwarded to : अपील र्थी / The Appellant. 1. प्रत्यर्थी / The Respondent. 2. 3. The CIT(A), concerned. 4. The Pr. CIT, concerned. विभ गीयप्रतितनधि, आयकर अपीलीय अधिकरण, “सी ” बेंच, पुणे / DR, ITAT, “C” 5. Bench, Pune. ग र्डफ़ इल / Guard File. 6. आिेश नुस र / BY ORDER, // TRUE COPY // सह यक रजिस्ट्र र /Assistant Registrar आयकर अपीलीय अधिकरण, पुणे/ITAT, Pune

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