2021 (10) TMI 623 - HC - Income Tax

Revision u/s 264 - AO observed that the benefit of the MFN clause could not be availed by the Petitioner as Slovenia / Lithuania / Colombia were not OECD countries at the time when the India Netherlands Treaty came into effect - HELD THAT - Issue notice. Mr.Kunal Sharma, Advocate accepts notice on behalf of the Respondent. He states that he has no objection if the Respondent is directed to dispose of the application filed by the Petitioner under Section 264 of the Act in a time bound manner. Keeping in view the limited prayer made, this Court disposes of the present writ petition directing the Respondent to decide the Petitioner s application dated 18th August, 2021 filed under Section 264 of the Act, by way of a reasoned, order in accordance with law, within eight weeks.

Summary

Issues:
1. Application seeking directions for disposal of an application under Section 264 of the Income Tax Act, 1961.
2. Interpretation of Most Favoured Nation (MFN) clause in the India-Netherlands Double Taxation Avoidance Agreement (DTAA).
3. Rejection of application for lower withholding tax rate on dividend income.
4. Delay in deciding the application under Section 264 of the Act.

Analysis:

The petitioner, a company incorporated in the Netherlands, sought directions for the disposal of an application under Section 264 of the Income Tax Act, 1961, related to receiving dividend income subject to a lower withholding tax rate. The petitioner holds shares in an Indian company and applied for a lower tax rate based on the MFN clause in the India-Netherlands DTAA. The petitioner's application for a 5% tax rate was rejected by the Assessing Officer, citing that certain countries were not OECD members when the treaty was signed. The petitioner approached the court, emphasizing the decision in Concentrix Services Netherlands B.V. v. ITO (TDS) and Nestle SA v. Assessing Officer, where similar issues were decided in favor of the petitioners.

The court directed the respondent to decide the petitioner's application under Section 264 of the Act within eight weeks, emphasizing a reasoned order in accordance with the law. The court acknowledged the limited prayer made by the petitioner and disposed of the writ petition with the specified direction for timely resolution. The respondent accepted the notice and had no objection to the direction for a time-bound disposal of the application. The court's decision aimed to ensure a fair and prompt resolution of the petitioner's request, considering the legal provisions and precedents cited during the proceedings.