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TMI Blog2019 (11) TMI 651X X X X Extracts X X X X X X X X Extracts X X X X ..... als of F.Y.2005-06 of Dorfketal BrasilItda alongwith schedule of retained earnings evidencing the fact that only net profit after taxes is transferred to retained earnings and that dividends are distributed from that, which means that dividends are declared and distributed after paying due taxes in Brazil. Accordingly, we hold that the dividend received by the assessee is to be treated as exempt in India The assessee had also submitted before the ld. CIT(A) that similar claim of exemption in respect of dividend received from Brazilian Subsidiary had been allowed by the ld. AO for A.Y.2007-08, 2008-09 and 2009-10 and in support of this copy of the orders were also furnished thereon. In view of the aforesaid observations, applying principle of consistency and respectfully following the aforesaid decision of Kolkata Tribunal, we hold that dividend received from Brazilian subsidiary is exempt from tax . Accordingly, the grounds raised by the assessee are allowed. - ITA No.4483/Mum/2018 - - - Dated:- 6-11-2019 - Shri M. Balaganesh, AM And Shri Amarjit Singh, JM For the Assessee : Shri Yogesh Thar / Ms. Niyanta Mehta For the Revenue : S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd thereby rejecting the Appellant's bonafide claim of ₹ 47,54,350/- of dividend received from its Brazilian Subsidiary which is claimed as exempt in India under the beneficial provisions of India-Brazil Double Taxation Avoidance Agreement (DTAA). General All above grounds are mutually exclusive and without prejudice to each other. The Appellant craves leave to add, alter, omit or substitute any or all of the above grounds of appeal, at any time before or at the time of the appeal, so to enable the Hon'ble Commissioner of Income-tax (Appeals) to decide the appeal on merits and according to law. 3. We have heard the rival submissions and perused the materials available on record. We find that this is the second round of appellate proceedings before this Tribunal. It would be necessary to address primary facts involved in this case as under:- a) The assessee had filed original return of income on 30.11.2006 for the captioned AY declaring a total income of ₹ 7,35,92,087/- and claiming exempt income of dividend amounting to ₹ 3,23,034/-. b) The search ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le Commissioner of Income-tax (Appeals) - 38, Mumbai. The erstwhile CIT(A) vide order dated 29.02.2012 confirmed the addition merely on the technical ground that fresh claim cannot be made in return filed u/s 153A of the Act by placing reliance on decision of Hon'ble Supreme Court in the case of Sun Engineering Works Pvt. Ltd. (1992) 198 ITR 297. f) The assessee then filed an appeal on 23.05.2012 before this tribunal against the said order passed by the erstwhile CIT(A). In the aforesaid appeal before tribunal, the assessee pressed the ground on addition confirmed by erstwhile CIT(A) of ₹ 47,54,308/- on account of exempt dividend income earned during the captioned year. g) The Tribunal vide its order dated 10.02.2017 has discussed at length the admissibility of a fresh claim made in return filed u/s 153A of the Act and also rebutted the applicability of case of Sun Engineering Works Pvt. Ltd. (1992) 198 ITR 297 by clearly bringing out the differences between the reassessment done u/s 147 of the Act and proceedings u/s 153A of the Act. Thus, the tribunal remanded the case back to file of CIT(A) for adjudication of claim of dividend receive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally admissible claim could be entertaining while framing the assessment u/s 153 A of IT Act, Hence the present claim of exempt dividend income has to be entertained by the revenue. 10. Now, we come to the merits of the claim of the dividend income received by the assessee from its Brazilian subsidiary being exempt in India fn view of the beneficial provisions of DTAA. We find that Ld. CIT(A) has not at all adjudicated the merits of the claim, In this view of the matter we are of considered opinion that the matter needs to the remitted to the file of the Ld. CIT (A) to consider this claim of the assessee upon merits, Accordingly, the merits of the claim of the assessee regarding the dividend income being exempt Is remitted to the file of Ld. CIT (A). The Ld, CIT (A), is directed to consider this issue after giving the assessee proper opportunity of being heard. In the result this appeal by the assessee stands allowed for statistical Purposes. 3.2. From the aforesaid directions, it could be safely concluded that the directions of this Tribunal, which are binding on the ld. CIT(A), are nothing but categorically directing the ld. CIT(A) to adjudic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legal position. 3.4. We find that assessee had received dividend from Brazilian entity and is governed by Double Taxation Avoidance Agreement (DTAA) entered into between India and Brazil. In the instant case, the assessee had availed the treaty benefit and in this regard, the following articles are relevant from India Brazil DTAA which are reproduced hereinbelow:- Article 10 Dividends 1. Dividends paid by a company which is a resident of a Contracting State to a resident of the other Contracting State may be taxed in that other State. 2. However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident and according to the laws of that State, but if the recipient is a company which is the beneficial owner of the dividends the tax so charged shall not exceed 15 per cent of gross amount of the dividends. This paragraph shall not effect the taxation of the company in respect of the profits out of which the dividends are paid. 3. The term dividends as used in this Article means income from shares, jouissance shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the tax, as computed before the deduction is given, which is attributable to the income which may be taxed in that other State. 2. For the deduction mentioned in paragraph 1, the tax paid in that other State shall always be deemed to have been paid at the rate of 25 per cent of the gross amount of interest referred to in paragraph 2 of Article 11 and of royalties referred to in paragraph 2(b) of Article 12, provided however, that the tax so deemed to have been paid shall not exceed the tax leviable on that income in the first-mentioned State. 3. Where a company which is a resident of a Contracting State derives dividends which, in accordance with the provisions of paragraph 2 of Article 10 may be taxed in the other Contracting State, the first-mentioned State shall exempt such dividends from tax. 4. Where a resident of India derives profits which, in accordance with the provisions of paragraph 5 of Article 10 may be taxed in Brazil, India shall exempt such profits from tax. 3.5. We find from the combined reading of Article 23(3) and Article 10(2) supra that if the dividend is paid by Brazilian company to I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Citra do Brazil (a Brazilian Company), with the main object of making equity investment in industrial venture for making railway wagon under the Banner of Santa Fe Vagoes Ltd., a Brazilian Company. Millinium Investmentos Ltd had invested 60% Equity of Santa Fe Vagoes, Manufacturing Railway Wagon in Brazil, wherein, balance equity is held by another Brazilian Company. Santa Fe Vagoes Ltd. declared dividend and paid the dividend to Millinium Investmentos Ltd and similarly Millinium Investmentos Ltd. has paid dividend to its equity holders and one of the equity holders is Besco Engineering Services (P) Ltd (assessee herein). The assessee submitted certificate issued by Santa Fe Vagoes Ltd. in the name of Millinium and the Annual Performance Report (APR) submitted by assessee to RBI by declaring dividend received along with the bank documents and also the Brazilian Audited Balance Sheet of Millinium along with the English translated version which confirm payment of dividend to the assessee after all the statutory compliance of that country. The Learned AR stated that M/s Millinium Investmentos Ltd. had already paid tax at the rate of 34% as per Brazilian Tax Rate and the post tax pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tries. Under tax credit method, an income is taxable in both the countries in accordance with their respective tax laws read with the DTAA. However, the country of residence of the tax payer allows him credit for the tax charged thereon in the country of source against the tax charged on such income in the country of residence. In India's DTAA, double taxation relief is provided by a combination of two modes. The effect of DTAA is as follows:- a. If no tax liability is imposed under the Act, the question of resorting to the agreement would not arise, no provision of the agreement can possibly fasten a tax liability where the liability is not imposed by the Act; b. If a tax liability is imposed by the Act, an agreement may be resorted to for negotiating or reducing it; c. In case of difference between the provisions of the Act and of the agreement, the provisions of the agreement prevail over the provisions of the Act and can be enforced by the appellate authorities and the court. 7. It would also be relevant to reproduce Article 23 of DTAA between India and Brazil at this juncture ..... X X X X Extracts X X X X X X X X Extracts X X X X
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