2021 (12) TMI 715 - HC - Income Tax

Income accrued in India - DTAA between India and Switzerland - deduct tax @ 10% on dividend income to be paid to the Petitioner for the relevant Financial Year - HELD THAT - As in the present writ petition are no longer res integra as they are fully covered by the judgments of this Court in Concentrix Services Netherlands B.V. 2021 (4) TMI 1051 - DELHI HIGH COURT as well as in Nestle SA 2021 (4) TMI 1267 - DELHI HIGH COURT In Concentrix Services Netherlands B.V. 2021 (4) TMI 1051 - DELHI HIGH COURT it has been held that no separate notification is required insofar as the applicability of the protocol is concerned and the same forms an integral part of the Convention. It is well settled law that the Department cannot refuse to follow binding jurisdictional decision merely on the basis that the Department proposes to file an appeal. The Supreme Court in UOI v. Kamlakshi Finance Corpn Ltd. 1991 (9) TMI 72 - SUPREME COURT has held that order of higher appellate authorities should be followed unreservedly and mere fact that decision is not acceptable to the Revenue cannot be a ground for not following the decision of higher authority. Keeping in view the aforesaid, the impugned order and certificate are set aside and the respondent is directed to issue a certificate under Section 197 of the Act indicating therein, that the rate of tax, on dividend, as applicable qua the Petitioner is 5% in India v/s Switzerland DTAA as held in Nestle SA (Supra) which was also under the India-Switzerland DTAA

Summary

Issues:
Challenge to certificate directing tax deduction on dividend income at 10% instead of 5% as per DTAA between India and Switzerland.

Analysis:
The petitioner challenged a certificate and order directing Galderma India to deduct tax at 10% on dividend income, seeking a direction for a lower rate of 5% as per the DTAA between India and Switzerland. The petitioner relied on the MFN clause in the protocol to the DTAA, which provided for a 5% tax rate. The counsel argued that previous court decisions, such as Steria (India) Ltd. v. CIT and Concentrix Services Netherlands B V v/s. Income Tax Officer, supported the automatic application of benefits agreed upon in the protocol without the need for separate notification or amendment.

The court noted that the issues raised were settled by previous judgments, including Concentrix Services Netherlands B.V. and Nestle SA, emphasizing that the protocol forms an integral part of the DTAA. The court cited the principle that the department must follow binding jurisdictional decisions, even if it plans to appeal. Referring to UOI v. Kamlakshi Finance Corpn Ltd., the court highlighted that decisions of higher appellate authorities must be followed unreservedly, regardless of the revenue's acceptance.

Consequently, the court set aside the impugned order and directed the respondent to issue a certificate under Section 197 of the Act, specifying a 5% tax rate on dividends for the petitioner as per the India-Switzerland DTAA, in line with the decision in Nestle SA. The writ petition was disposed of accordingly, affirming the petitioner's entitlement to the lower tax rate based on the DTAA provisions and established legal principles.