PHILIPS INDIA LIMITED,KOLKATA vs. A.C.I.T., CIRCLE - 11(1), KOLKATA

1. 1. 1. 1. 1. That on the facts and circumstances of the case, the National Faceless\nAppeal Centre, Delhi [the Ld. CIT(A)] erred in rejecting the claim of refund\nof excess Dividend Distribution Tax (DDT) paid by the Appellant\namounting to Rs.94,81,687.\n\n2. That on the facts and circumstances of the case, the Ld. CIT(A) erred\nin following the Special Bench decision of Mumbai Tribunal in the case of\nDCIT vs Tata Oil India Pvt Ltd (ITA No 6997/Mum/2019) upholding that\nDDT is a tax on profits of the domestic company and not on the\nshareholder.\n\n2.

That on the facts and circumstances of the case, the Ld. CIT(A)\nerred in not appreciating the Hon'ble Supreme Court decision in\nthe case of Godrej and Boyce Manufacturing Company Ltd v. DCIT\n[2017] (394 ITR 449) (SC) upholding that the Supreme Court has\nnot diluted the reasoning of Bombay High Court in the said case\nthat DDT is a tax on the Company paying the dividend and\ndomestic company does not do so on behalf of the shareholder.\n\n3. That on the facts and circumstances of the case, the Ld. CIT(A) erred\nin holding that the Double Taxation Avoidance Agreement ('DTAA') is not\napplicable in the current scenario as DTAA does not get trigger when\ndomestic company pays DDT under section 115-O of the Income Tax\nAct, 1961 (the Act).\n\n4. That on the facts and circumstances of the case, the Ld. CIT(A) erred\nin rejecting the Appellant's request of keeping the matter in abeyance\nwithout appreciating that the Jurisdictional High Court in the case of\nExide Industries Limited (ITAT/9/2024(Cal.) has admitted the question\nof law on this issue and the matter is pending adjudication.\n\n5. That on the facts and circumstances of the case, consequential interest\nu/s 244A of the Income Tax Act, 1961 along with the refund of excess\nDDT paid be allowed to the Appellant.\n\n6. The Appellant craves leave to add to and/or amend, alter, modify or\nrescind the grounds hereinabove before or at the time of hearing of the\nappeal.\"\n\n2.1 We shall take up for AY 2008-09 as\nthe lead case for adjudication.\n\n3.\n\nBrief facts of the case are that the assessee is a company and is\na subsidiary of Koninklijke Philips N.V (Philips Netherlands), a\nleading health technology company which is claimed to be focused on\nimproving people's health and enabling better outcomes across the\nhealth continuum from healthy living and prevention, to diagnosis,\ntreatment and home care. Philips Netherlands is a tax resident of\nNetherlands holding a valid Tax Residency Certificate ('TRC") issued\nby the Netherlands authorities. During the FY 2007-08, Philips\nNetherlands held 96.46% equity shares of the assessee. Furthermore,\nduring the year under consideration for AY 2008-09, the assessee had\ndeclared and paid dividend of ₹13,55,49,560/- pertaining to FY 2006-\n07 to Philips Netherlands, on which Dividend Distribution Tax (DDT)\nof ₹2,30,36,643/- was paid at the rate of 16.995% as per the\nprovisions of section 115-O of the Act. The assessee had filed an\napplication before the Jurisdictional Assessing Officer (Ld. AO) u/s\n237 of the Act claiming refund of DDT paid/deposited in excess of the\nrate prescribed under the India-Netherlands Double Taxation\nAvoidance Agreement ('DTAA') along with interest u/s 244A of the Act.\nThe Ld. AO rejected the claim made by the assessee and passed an\norder u/s 154 of the Act. Aggrieved with the rectification order, the\nassessee filed an appeal before the Ld. CIT(A) who, vide order dated\n29.06.2024 dismissed the appeal of the assessee by following the\nSpecial Bench decision of the ITAT, Mumbai in the case of DCIT vs\nTata Oil India Pvt. Ltd. (ΙΤΑ Νο 6997/Mum/2019) upholding that\nDDT is a tax on profits of the domestic company and is not a tax on\nthe shareholders and further held that DTAA does not get triggered\nwhen a domestic company pays DDT u/s 115-O of the Act. The Ld.\nCIT(A) also held that the Jurisdictional High Court in the case of\n\nExide Industries Limited (ITAT/9/2024(Cal.) has not stayed the\norder of the Hon'ble Kolkata Tribunal in the case of Exide Industries\nLimited but has only admitted a question of law on this issue.\nTherefore, the extant law on the subject is the decision of Tata Oil\nIndia Pvt. Ltd. of the Special Bench of the Mumbai Bench of the\nTribunal which was followed by the Kolkata Tribunal in the case of\nExide Industries.\n\n4.\n\nAggrieved with the order of the Ld. CIT(A), the assessee has filed\nthe appeal before the Tribunal.\n\n5. Rival contentions were heard and the submissions made have\nbeen examined. The Ld. AR stated that the Hon'ble Bombay High\nCourt has held in favour of the assessee but the Revenue has\nrequested for constitution of larger Bench. There are decisions of the\nTribunal in favour of the assessee.\n\n6. The Ld. DR on the other hand stated that the appeal has been\nfiled after a gap of 12 to 13 years and beyond 4 years no rectification\napplication could be filed. The assessee was claiming the refund of\nDDT on the basis of DTAA. The tax on DDT is charged on the profits\nof the company on the dividend distributed by the company and is\nnot a tax on the shareholder. The DDT is a mandatory charge on the\ndividend distributed by the company and it is not a tax in the hands\nof the shareholder and so the DDT in Chapter-XII-B cannot be\nequated with TDS in Chapter-XVII-B. The assessee had filed a\npetition for refund which was treated as an application u/s 154 of the\nAct and was decided on 12.10.2022 and the Ld. CIT(A) disposed of\nthe appeal on 29.06.2024. The assessee had filed the application\ndated 23.06.2022 for all the assessment years. The Ld. AR stated that\n\nthere was no time limit for claiming the refund. However, the\nattention of the Ld. AR was drawn to the provisions of sub-section (1)\nof section 239 of the Act which states that every claim for refund\nunder Chapter-XIX shall be made by furnishing return in accordance\nwith the provisions of section 139 of the Act and it was queried by the\nBench whether any return of income had been filed for claiming the\nrefund, to which the Ld. AR stated that no such return was filed.\nHowever, the Ld. AR stated that as per section 237 of the Act, the\nassessee is entitled to a refund of the excess if it satisfies the Ld. AO\nthat the amount of tax paid by him or on his behalf or treated as paid\nby him or on his behalf for any assessment year exceeds the amount\nwith which he is properly chargeable under the Act for that year.\n\n7.\n\nWe have considered the facts of the case, the submissions made\nand the documents filed. As was argued by the Ld. DR, the DDT is\nnot a tax on the income of the assessee so as to trigger the\napplicability of DTAA but is a charge levied at the specified rate on\nthe profits of the company distributed as dividend and was brought\ninto the statute for a specific purpose for taxing the distributed profits\nof the companies while the rate of DDT and the rate of tax applicable\nin the hands of the taxpayers on its income may also be different.\nMoreover, since the assessee had not filed any return of income for\nclaiming the refund in accordance with the provisions of section 139\nof the Act, as required under sub-section (1) of section 239 of the Act,\nthe claim of the assessee for the refund is not maintainable and the\ngrounds of appeal are hereby dismissed and the order of the Ld.\nCIT(A) is confirmed for all the assessment years.\n\n8. In the result, the appeals filed by the assessee for all the\n assessment years i.e. AY 2008-09 to 2015-16 are dismissed.\n\nOrder pronounced in the open Court on 20th March, 2026.\n\nSd/-\n[Sonjoy Sarma]\nJudicial Member\n\nDated: 20.03.2026\n(Bidhan (Sr. P.S.))\n\nSd/-\n[Rakesh Mishra]\nAccountant Member", "summary": { "facts": "Philips India Limited declared and paid Dividend Distribution Tax (DDT) on dividends paid to its Netherlands-based parent company. The assessee sought a refund of excess DDT paid, claiming it was paid in excess of the rate prescribed under the India-Netherlands DTAA.", "held": "The Tribunal held that DDT is a charge on the distributed profits of the company, not a tax on the shareholder's income, and therefore, the DTAA is not triggered in this scenario. Furthermore, the assessee had not filed a return of income for claiming the refund, making the claim unsustainable.", "result": "Dismissed", "sections": ["115-O", "244A", "237", "154", "239", "139"], "issues": "Whether DDT paid by a domestic company is a tax on profits triggering DTAA benefits, and whether a refund claim is maintainable without filing a return of income." } }