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TMI Blog2019 (1) TMI 1357X X X X Extracts X X X X X X X X Extracts X X X X ..... sought credit at 10% on dividend received by it from its Thailand subsidiary, which is the tax that would have been otherwise payable by assessee in Thailand as per section 70bis of Thailand Revenue Code. The tax paid by assessee on dividend income in India is at 30%, which is more than tax payable in Thailand and therefore, we do not find any violation of requirements of Paragraph 2 of Article 23 of DTAA between India and Thailand. - Decided in favour of assessee. - ITA Nos. 4347 to 4350/Del/2016 - - - Dated:- 24-1-2019 - SMT. BEENA A PILLAI, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER For The Assessee : Shri Ved Jain, Adv. Shri Rishabh Jain, CA And Shri Ashish Goel, CA For The Department : Sh. Surender Pal, Sr. DR ORDER PER BEENA A PILLAI, JUDICIAL MEMBER Present appeals have been filed by assessee against order dated 24.06.2016 passed by Ld.CIT (A)-7, New Delhi for assessment years 2010-11 to 2013-14. 2. Ld.AR submitted that grounds raised in these appeals are on identical issue and facts leading to the issue are similar. He thus submitted that all appeals may be taken up together for sake of convenience. Ld.Sr.DR also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 90 of the Act. The Ld.AO thus called for various informations. Disallowance of relief claimed u/s 90 of the Act 7. Computation of income and tax liability that the assessee has claimed a relief of ₹ 1,60,74,706/- u/s 90 of the Act, on account of tax paid in Thailand by its subsidiary, from whom assessee received dividend which was offered for taxation as per provisions of Indian I.T. Act. 8. Ld.AO vide order sheet entry dated 24.02.2014 called upon assessee to provide proof of payment of tax in Thailand, in support of tax credit claim. In response to which assessee filed letter dated 27.02.2014 stating therein that ROI filed by it includes Dividend Income of ₹ 68,81,05,808/- earned from M/s Polyplex (Thailand) Public Limited Company, and contended that as per the Paragraph 2 3 of Article 23 of Double Taxation Avoidance Agreement between Indian and Thailand read with section 90(2) of the Indian Income Tax, 1961 assessee is eligible for tax rebate of 10% on the said income. 8.1 Submissions of assessee were analyzed Ld.AO with provisions of Income Tax Act and DTAA with Thailand vis-a-vis claim of assessee, and Ld.AO observed as under: 1. That ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted dividend to assessee. Ld.CIT(A) observed that Thailand company is allowed Privilege in terms of para 6 of the Promotion Certificate, as per which dividend distributed form promoted activity to which exemption from Corporate Income Tax is granted u/s 31, is also exempt from inclusion in tax calculation throughout the period, the promoted person (Thailand company) remains exempt from Corporate Income Tax payments. However, this clause does not refer to any dividend distributed by Thailand company to Nonresident holding company (assessee). 11. Ld.CIT(A), thus confirmed addition made by Ld.AO. 12. Aggrieved by order of Ld.CIT(A), assessee is in appeal before us now. 13. Ld.AR submitted that assessee received dividend of ₹ 68,81,05,808/- from its subsidiary company in Thailand. He submitted that dividend so received was offered to tax by assessee as per Indian tax laws, however assessee also claimed relief as per provisions of DTAA amounting to ₹ 153.13 lacs u/s.90 91 of the Act. LdAR referring to Article 23 of DTAA between India and Thailand submitted that as per Paragraph 3, of Article 23 pertaining to elimination of Double Tax, amount of Thai Tax payable un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst tax paiyable in India on the dividend income. 19. Now question that arises is, whether benefit of tax spairing is available to assessee under DTAA between India and Thailand. Article 23 dealing with, Elimination of Double Taxation reads as under: CHAPTER IV METHODS FOR ELIMINATION OF DOUBLE TAXATION Article 23: ELIMINATION OF DOUBLE TAXATION 1. The laws in force in either of the Contacting States shall continue to govern the taxation of income in the respective Contracting States except where provisions to the contrary are made in this Convention. 2. The amount of Thai tax payable, under the laws of Thailand and in accordance with the provisions of this Convention, whether directly or by deduction, by a resident of India, in respect of profits or income arising in Thailand, which has been subjected to tax both in India and in Thailand, shall be allowed as a credit aganist the Indian tax payable in respect of such profits or income provided that such credit shall not exceed the Indian tax (as computed before allowing any such credit) which is appropriate to the profits or income arising Thailand Further, where such resident is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Treaty with Thailand provides for relief from double taxation. The methodology prescribed under is Tax sparing method. 20.1 Commentary to Model Conventions (both OECD and UN Model Conventions) acknowledges that there may be lot of difficulties in application of Article on relief from double taxation . It therefore recommends that domestic legislation should provide solutions for all difficult areas/issues. There are no rules in domestic statute in India dealing with manner of granting relief from double taxation. Relief from double taxation is thus to be calculated on the basis of provisions of Treaty, read with domestic legislations in India. 21. As per section 90(2) where treaty exists, for granting relief of tax in relation to an assessee to whom such agreements applies, provisions of the Act shall apply to the extent, they are more beneficial to assessee. Thus, though chargeable provision of Income-tax Act is applicable to assessee for its global income, yet as per section 90, if income is taxed both in India and Thailand, assessee is entitled to relief as per clause 23 of the DTAA with Thailand. 22. Reading above reproduced provision of Article 23(2), following ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a's DTAA with UK, Australia, Canada, etc. Klaus Vogel notes regarding Article 23 in his book for Double Taxation Conventions as under: In accepting the tax sparing credit method, the State of residence takes into consideration special measures by which the State of source has for reasons of economic policy or the like, reduced its tax individually order for certain categories of cases. The tax allowed as credit by the State of residence is that which would have been paid in the absence of such a special reduction. This arrangement avoids the otherwise unavoidable result of the credit method is that the tax relief offered by the State of source would be siphoned off by the higher tax in the State of residence and would, therefore, have no effect. In this regard, the State of residence respect the indirect subsidy given by the State of source. From the point of view of international tax law, the result would be the same if the state of source had given the tax spared a direct subsidy and the state of residence had refrained from taxing it. 24. On perusal of above commentaries, it is clear that concept of tax sparing credit shall be applicable to an assessee, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such assessable income is paid........ 28. It was argued that as per Section 70bis, dividend income received by assessee is taxable in Thailand and that Section 40 (4) (b) includes dividends as assessable income, which reads as under: Section 40 (4) (b) a diffident, share of profit or any other benefits derived from a company or journalistic partnership, a mutual fund or a financial institution established under a specific law in Thailand for the purpose of providing a loan to promote agriculture, commerce or industry, the portion of dividend or share of profits after deduction of withholding tax under the law governing petroleum income tax. It was further submitted that, as per Section 34 of Investment Promotion Act B. E. 2520 as has been amended by Investment Promotion Act (No. 2) B. E. 2534, which was further amended by Investment Promotion Act (No. 3) B.E. 2544, provides exemption on income tax on dividends derived from a promoted activity in Thailand. The said clause reads as under: Section 34. Dividends derived from a promoted activity granted an exemption of journalistic person income tax shall be exempt from computation of taxable income throughout ..... X X X X Extracts X X X X X X X X Extracts X X X X
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