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Facts
The assessee company paid dividend to its Mauritius-based shareholder and deducted TDS at the beneficial rate of 5% as per the India-Mauritius DTAA. However, the CPC-TDS, in a rectification order, raised a demand for short deduction, holding that the TDS should have been 20% as per the Income Tax Act.
Held
The Tribunal noted that while the assessee was eligible for the beneficial DTAA rate, it failed to produce the Tax Residency Certificate (TRC) and Form 10F for the relevant period. Therefore, the matter was set aside to the TDS-AO to provide another opportunity to the assessee to submit the required documents.
Key Issues
Whether the assessee was entitled to claim the beneficial DTAA rate for TDS on dividend payment without furnishing valid TRC and Form 10F for the relevant period.
Sections Cited
195, 200A, 154, 90(4), 90(5), Article 10 of India-Mauritius DTAA
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD
Before: SHRI SANJAY GARG & SHRI NARENDRA PRASAD SINHA
PER NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER:
This appeal is directed against the order dated 09.12.2025 passed by Commissioner of Income Tax (Appeal), Addl/JCIT(A)-5, Kolkata [hereinafter referred to as ‘Addl. CIT(A)’] for the Assessment Year (A.Y.) 2021-22 in the proceeding u/s 154 of the Income Tax Act.
The brief facts of the case are that the assessee had uploaded Statement of tax deduction at source in Form No. 27Q for Quarter-2 of Financial Year (F.Y.) 2020-21, wherein it had furnished details of TDS made u/s. 195 of the Act, in respect of payment of dividend of Shri Ram Krupa Medicare Pvt Ltd. Vs. DCIT, AY- 2021-22 2 Rs.21,15,000/- to its shareholders namely M/s Basswood Holdings Limited, a company tax resident of Mauritius. The statement was initially processed by CPC-TDS u/s. 200A of the Act on 01.09.2020 and was subsequently rectified u/s. 154 of the Act vide order dated 13.11.2020 raising demand of Rs.3,26,770/- on account of short deduction of TDS and interest thereon.
Aggrieved with the rectification order passed by CPC-TDS, the assessee had filed an appeal before the first appellate authority, which was decided by the learned Addl. CIT(A) vide the impugned order and the appeal of the assessee was dismissed. Th
Now the assessee is in second appeal before us. The following grounds have been taken in this appeal:
On Legality: 1. The Ld CIT(A) has not taken into cognizance the fact that the order passed u/s154 r.w.s 200A dated 13.11.2020 by the Assessing Officer (ACIT, CPC, TDS, Ghaziabad, UP) without issuing a notice u/s. 154(3) and/or without giving an opportunity to the Appellant of being heard. In the light of the above circumstances, the Ld. CIT(A) ought to have quashed the order u's. 154 as illegal and void-ab-initio 2. The Ld CTT(A) has not taken into cognizance the fact that the order u/s 154 r. w.s 200A dated 13.11.2020 is passed without a DIN (Document Identification Number) which is mandatory requirement as per CBDT Circular No. 19/2019 dated 14 08 2019. It is submitted that since order u/s. 154 is not covered under the exceptions provided in the said Circular, CIT(A) ought to have quashed the order as illegal and void-ab-initio On Merits: 3. The Ld CIT(A) has erred both in law and facts in confirming the order u/s 154 rws 200A in holding that tax was deductible on dividend payment to Non- Resident Shareholders at higher rate of 20% instead of the beneficial rate prescribed under the applicable Double Taxation Avoidance Agreement (DTAA).
The Ld CIT(A) failed to appreciate that the non-resident shareholders had duly furnished valid Tax Residency Certificate (TRC) and Form No. 10F and thereby fully complying with the conditions laid down under Section 90(4) and 90(5) of the Act and hence entitled to the benefits of the applicable DTAA 5 The Ld CIT(A) erred in ignoring the binding provisions of Article 10 of DTAA between India and Mauritius, which clearly provide for TDS on dividend income at a concessional rate where the beneficial owner holds more than 10% of the capital of the company paying the dividend. . 6. The Ld. CIT(A) failed to appreciate that your appellant had correctly deducted tax at source (TDS) at 5% on dividend payments of Rs 21,15,000/- strictly in accordance with the rates prescribed under the applicable DTAA and, therefore, there was no short deduction or default under Section 195 of the Act. 7. The Ld. CIT(A) erred in confirming the consequential demand of interest which is illegal, unjustified, and bad in law, being based on an incorrect interpretation of the provisions of the Act and the DTAA. As there is no short deduction or default under Section 195 of the Act, interest cannot be levied.
Shri Kinjal Shah the Ld. AR of the assessee submitted that the deductee was a tax resident of Mauritius and was entitled for beneficial provision under DTTA between Indian and Mauritius u/s. 90 of the Act. As per Article 10(2) of DTTA between Indian and Mauritius, the dividend income in the hands of Basswood Holdings Limited was taxable in India at the rate of 5%. Accordingly, the assessee had deducted TDS u/s. 195 of the Act on the dividend payment made to the Basswood Holdings Limited at the rate of 5%. Considering this fact the CPC-TDS was not correct in passing the rectification order on the ground that the assessee was liable to deduct TDS on dividend at the rate of 20% under the provisions of Income Tax Act. The Ld. AR submitted that the information to be provided u/s. 90(5) of the Act in Form No. 10F as well as the tax residency certificate of the deductee was also brought on record. Therefore, the Ld. Addl. CIT(A) was not correct in upholding the rectification order of CPC-TDS.
Shri Ram Krupa Medicare Pvt Ltd. Vs. DCIT, AY- 2021-22 4 6. Per Contra, Smt. Ananya Kulshresth, the Ld. SR-DR, submitted that the assessee did not furnish the Form No. 10F as well as the tax residency certificate of the deductee, either before CPC-TDS or before the Ld. Addl. CIT(A). In the absence of these details the assessee was not entitled to take benefit of the beneficiary provision of DTTA between India and Mauritius. She, therefore, supported the order of the Ld. Addl. CIT(A).
We have considered the rival submissions. There is no dispute to the fact that the dividend was paid by the assessee to its shareholder who was resident of Mauritius. There is also no dispute to the fact that the deductee was eligible to claim beneficial provision of DTTA between India and Mauritius as per which the dividend was taxable at the rate of 5% only. The assessee had deducted TDS on the dividend payment made to the non-resident shareholders at the rate of 5%, as stipulated in Article 10 of India-Mauritius DTTA. The Ld. Addl. CIT(A) had rejected the appeal of the assessee for the reason that Form No. 10F and the tax residency certificate of the deductee was not brought on record. The assessee has filed a copy of Form 10F and also “Tax Residence Certificate” of Basswood Holdings Limited in the paper-book. It is found therefrom that the tax residence certificate was valid for the period 08.10.2021 to 07.10.2022, which is not for the relevant period during which the dividend payment was made by the assessee. As already discussed earlier, the assessee had made payment of dividend and deducted TDS thereon during Quarter 2 of F.Y. 2020-21. In view of this fact the assessee was required to bring on record Form No. 10F as well as tax residency certificate of the deductee for the period from 01.07.2020 to 30.09.2020. In the interest of justice, therefore, we deem it proper to set aside the Shri Ram Krupa Medicare Pvt Ltd. Vs. DCIT, AY- 2021-22 5 matter to the file of TDS-AO with a direction to allow another opportunity to the assessee to produce Form No. 10F as well as tax residency certificate of the non-resident deductee, for the relevant period during which the dividend payment was made and thereafter re-decide the matter in accordance with the provisions of law.
In the result, the appeal of the assessee is allowed for statistical purpose.
Order pronounced in the Court on 09/04/2026 at Ahmedabad.