Loading judgment…
Facts
The assessee, engaged in processing and blending LPG, paid dividend to its shareholder, a tax resident of Malaysia. The assessee paid Dividend Distribution Tax (DDT) under Section 115-O and claimed that tax liability on dividend should be as per DTAA, not exceeding 5%. The AO did not accept this claim.
Held
The Tribunal held that Dividend Distribution Tax (DDT) is a tax on the income of the company, not on the shareholder, thus avoiding double taxation. It was also held that Section 115-O is outside the scope of DTAA, and DTAA provisions do not apply when DDT is paid.
Key Issues
Whether the tax liability on dividend distribution tax (DDT) paid by a domestic company to a non-resident shareholder should be governed by the DTAA rates or Section 115-O of the Income Tax Act, when the DTAA rate is more beneficial.
Sections Cited
115-O
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH, KOLKATA
Before: SHRI RAJESH KUMAR, AM & SHRIPRADIP KUMAR CHOUBEY, JM
These are appeals preferred by the assessee against the orders of the Commissioner of Income-tax (Appeals), Kolkata-22, (hereinafter referred to as the “Ld. CIT(A)”]even dated 31.01.2024 for the AYs2017-18 & 2018-19.
The issue involved in both these appeals same as under: -
“Whether, on a true and harmonious construction of the provisions of the Act, the tax liability of a domestic company, like the appellant, on the dividend distributed to its. non-resident shareholders shall be at the rate as applicable in the respective DTAA as the same is more beneficial to the appellant comparing the rates prevailing under the provisions of section 115-0 of the Act?”
Aggrieved assessee preferred the appeal before the ld. CIT (A). However, the ld. CIT (A) dismissed the appeal of the assessee by following decision of the Special bench Mumbai Tribunal in case of DCIT Vs. Total Oil India Pvt. Ltd. in (2023) 104 ITR (Trib) 1 [ITAT (Mum)(SB)].
After hearing the rival contentions and perusing the materials available on record, we find that in the order of the ld. CIT (A), we note that the ld. CIT (A) has followed the Special bench decision of
In the result, both the appeals of the assessee are dismissed.
Order pronounced in the open court on 29.07.2025.