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2024 (7) TMI 778 - AT - Income TaxRefund of excess Dividend Distribution Tax ('DDT') paid on dividend received by the Appellant - HELD THAT - As decided in Total Oil India (P.) Ltd. 2023 (4) TMI 988 - ITAT MUMBAI (SB) dividend is declared, distributed or paid by a domestic company to a non-resident shareholder(s), which attracts Additional Income-tax (Tax on Distributed Profits) referred to in section 115-O, such additional income tax payable by the domestic company shall be at the rate mentioned in section 115-O and not at the rate of tax applicable to the non-resident shareholder(s) as specified in the relevant DTAA with reference to such dividend income. Thus, wherever the Contracting States to a tax treaty intend to extend the treaty protection to the domestic company paying dividend distribution tax, only then, the domestic company can claim benefit of the DTAA, if any. Thus, the question answered accordingly. Applicability of transfer pricing regulations to the assessee to the extent of operations carried out through operating qualifying ships where the income is taxed under TTS - HELD THAT - The issue is covered in favour of assessee s own case 2019 (12) TMI 815 - ITAT MUMBAI , A.Y. 2010-11, 2019 (6) TMI 1238 - ITAT MUMBAI , A.Y. 2007-08 as held that provisions of chapter-X have been invoked to alter an expenditure, namely the mobilisation and demobilisation charges paid for a qualifying ship, an item which has no bearing on the income as computed under Chapter XII-G and accordingly the provisions of Chapter-X have no application in computing the income of the assessee chargeable to tax as per Chapter XII-G. In view of the aforesaid discussion, the transfer pricing regulations do not apply to the assessee in taxed under TTS.
Issues Involved:
1. Refund of excess Dividend Distribution Tax (DDT) paid by the appellant. 2. Transfer pricing adjustments related to the allocation of head office costs and notional interest on outstanding receivables. 3. Application of Chapter-X provisions in computing income under the Tonnage Tax Scheme (TTS). Detailed Analysis: Refund of Excess Dividend Distribution Tax (DDT): - The appellant claimed that the CIT(A) erred in not restricting the DDT rate on dividends to 5% as per the India-Netherlands DTAA and India-Slovenia DTAA. - The appellant sought a refund of Rs. 5,79,36,286/- for excess DDT paid. - The Tribunal referred to the Special Bench decision in the case of Total Oil India (P.) Ltd., which clarified that DDT under section 115-O is a tax on distributed profits and not on the dividend distributed. Therefore, the DTAA rates do not apply to DDT. - The Tribunal upheld the CIT(A)'s decision, dismissing the appellant's claim for a reduced DDT rate and refund. Transfer Pricing Adjustments: - The revenue challenged the CIT(A)'s decision to delete the transfer pricing adjustments of Rs. 1,92,98,946/- for allocation of head office costs and Rs. 19,17,683/- for notional interest on outstanding receivables. - The CIT(A) held that Chapter-X provisions do not apply to income computed under the Tonnage Tax Scheme (TTS) as per Chapter-XII-G. - The Tribunal confirmed that TTS is a presumptive tax scheme based on the tonnage capacity of ships, independent of actual receipts and expenses. - The Tribunal dismissed the revenue's appeal, affirming that transfer pricing provisions do not affect the computation of income under TTS. Application of Chapter-X Provisions in TTS: - The revenue argued that the CIT(A) erred in holding that Chapter-X does not apply to TTS, contending that transfer pricing adjustments should be considered to mitigate the effect of international transactions on income. - The Tribunal reiterated that TTS is a self-contained code where income is computed based on the tonnage capacity of ships, not actual transactions. - The Tribunal cited previous decisions, including the DRP's ruling in the assessee's own case for A.Y. 2013-14, which supported the non-applicability of Chapter-X provisions to TTS. - The Tribunal upheld the CIT(A)'s order, confirming that transfer pricing regulations do not apply to income computed under TTS. Conclusion: - The Tribunal dismissed both the assessee's and the revenue's appeals. - It upheld the CIT(A)'s findings that DDT is not subject to DTAA rates and that transfer pricing adjustments do not apply to income computed under the Tonnage Tax Scheme.
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