2024 (1) TMI 614 - HC - Income Tax

Revision u/s 264 - Claiming benefit of DTAA - refund of Dividend Distribution Tax (DDT) which was paid wrongly - revision application was rejected on the grounds that the petitioner could have filed a revised return or an appeal u/s 248 of the Income Tax Act - petitioner declared and paid dividend to its holding company which became aware that, as per Section 90 it is entitled to the benefit of the Double Taxation Avoidance Agreement (DTAA) between India and Mauritius - HELD THAT - The rejection is not on the merits of the application but on the grounds that the petitioner could have filed a revised return or presented an appeal under Section 248 of the Income Tax Act. As regards the option of filing a revised return, learned counsel for the petitioner pointed out that the time limit for filing such revised return expired. In any event, when a statute prescribes a remedy, the petitioner cannot be denied the benefit of availing of such remedy merely because an alternative remedy may be available. This can, no doubt, be done if the remedy is discretionary but not if the remedy is statutory. Therefore, the first ground of rejection in the impugned order is untenable. On examining Section 248 of the Income Tax Act, it is evident that it applies to a case where the tax deducted on payments made u/s 195 of the Income Tax Act to a non-resident, other than by way of interest, is required to be borne by the person by whom the income is payable (i.e. the person making the payment) as per contract or arrangement between the parties and the person making the deduction claims that tax was not payable. The case on hand pertains to the declaration and distribution of dividend by the petitioner, a company, to its shareholders and the tax payable thereon. This was not a case where a deduction was made u/s 195 towards tax on payments made to a non-resident and the parties had agreed that the deducting resident entity would bear the tax liability by compensating the non-resident by a proportional top up. Therefore, Section 248 is clearly inapplicable. The second ground on which the revision petition was rejected is also consequently unsustainable. Thus the impugned order is quashed and the matter is remanded for reconsideration on merits by the Principal Commissioner of Income Tax.

Summary

Issues Involved:
The petitioner challenges the rejection of its revision application under Section 264 of the Income Tax Act, 1961 regarding the payment of Dividend Distribution Tax (DDT) at a higher rate due to not availing the benefit under the Double Taxation Avoidance Agreement (DTAA) between India and Mauritius.

Details of Judgment:

Issue 1: Rejection of Revision Application
The petitioner filed a return of income for the assessment year 2018-2019 and paid DDT at a higher rate. Subsequently, realizing the benefit under Section 90 of the Income Tax Act and the DTAA with Mauritius, the petitioner applied for revision under Section 264. The rejection was based on the grounds that a revised return could have been filed or an appeal under Section 248 could have been presented. The petitioner argued that the time limit for a revised return had expired, and Section 248 was not applicable to cases of higher DDT computation. The petitioner relied on the judgment of the Bombay High Court to support the wide scope of revisional jurisdiction.

Issue 2: Applicability of Section 248
The Senior Standing Counsel agreed that Section 248 may not be applicable to errors in DDT payment rates. The rejection was not based on the merits of the application but on the availability of alternative remedies. Section 248 pertains to tax deductions under Section 195 for non-residents, not to cases of dividend declaration and distribution by a company to its shareholders. The rejection based on Section 248 was deemed unsustainable.

Conclusion:
The court quashed the impugned order and remanded the matter for reconsideration on merits by the Principal Commissioner of Income Tax. A fresh order is to be issued within three months, providing a reasonable opportunity to the petitioner. The writ petition was disposed of without costs, and the connected Miscellaneous Petition was closed.