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TMI Blog2024 (7) TMI 1139X X X X Extracts X X X X X X X X Extracts X X X X ..... note of the special bench decision in the case of Total Oil [ 2023 (4) TMI 988 - ITAT MUMBAI (SB)] In that case, the assessee M/s Total Oil India Private Ltd., an Indian Co., declared/paid dividend for AY 2016-17. One of the shareholders to whom dividend was to be paid was a Non Resident (Tax resident of France). Similar plea was raised in that case that the rate at which tax under 115-O of the Act had to be paid could not be more than the rate at which dividend could be taxed in the hands of the Non Resident shareholder in India under the DTAA between India and France as the rate of tax prescribed in the DTAA is generally less than the rate prescribed in section 115-O. On nuanced analysis, the Special bench formed a view that dividend declared by a domestic company to a non resident should be taxed at the rate given u/s 115-O and not the beneficial rates given under DTAA for Non Residents unless the contracting state to which the treaty intends to extend the treaty protection to the domestic company. It thus observed that 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 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a wholly owned subsidiary of Peri Mauritius, Mauritius. Statedly, the holding company i.e. Peri Mauritius is a Tax Resident of Mauritius and is eligible to claim benefits under the Double Taxation Avoidance Agreement (DTAA) entered into between India and Mauritius. 2.1 During the Financial Year 2004-05 relevant to A.Y. 2005-06, the assessee-company has paid dividend of ₹ 50,02,48,000/- to its holding co. Peri Mauritius on which Dividend Distribution Tax (DDT) liability of ₹ 7,01,60,000/- was paid by the assessee-company in terms of provisions of Section 115O of the Act. Similar payments by way of DDT were paid by the assessee company on distribution of dividend for different assessment years under captioned appeals. 2.2 The assessee moved an application dated 18.02.2019 under Section 237 of the Act before the AO seeking refund due to excess payment of DDT for all such years. To contend excess tax paid by way of DDT, the assessee pointed out before the AO that while the DDT has to be paid as per the rates [12.5% plus surcharge etc. which was enhanced to 15% + surcharge etc from AY 2007-08] prescribed under Section 115-O of the Act, the Article-10 of Indo-Mauritius Treaty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. In case of excessive withholdings/payment of taxes on behalf of non-resident, the benefit of such excessive payment shall arise only to the beneficiary non-resident not to the domestic deductor. (d) Without commenting on the applicability of India-Mauritius treaty in the case of M/s. Peri Mauritius as it is not a matter in this appeal, it is observed that even if M/s. Peri Mauritius is the beneficiary of the treaty, the refund of excess payment cannot be claimed by the appellant-company as payment of any such refund will not be benefitting the non-resident shareholders but the company. 7.4 In view of the above observations, I find that the decision of Ld. Assessing Officer in this case is correct as per law and is accordingly, sustained. The appeal filed by the appellant is dismissed. 5. Further aggrieved, the assessee preferred appeal before the Tribunal. 6. The ld. counsel for the assessee, at the outset, adverted to Section 237 of the Act and submitted that such provision entitles the assessee to claim refund of excess tax paid by it owing to inadvertence or mistake committed. In the present case, the assessee-company while making distribution / remittance of dividend to its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provided under Section 115-O owing to special provision. There is no legal obligation to pay tax upon the shareholder who is recipient of the dividend income in view of Section 115-O of the Act notwithstanding default, if committed, in payment of DDT by the Domestic Company distributing dividend. The payment of DDT thus is not on behalf of the shareholder but owing to obligation squarely placed upon the domestic company distributing profits by way of dividend. The payment of tax is to be regarded as additional income tax on account of distribution of profits in distinction to vicarious liability of payment of tax on behalf of shareholder. Hence, the benefit of Article-10 is not available to the domestic company. In the absence of any obligation towards payment of taxation upon the beneficial owner of the dividend, the benefit of treaty in terms of provisions of Article-10 is not triggered at all. The Ld CIT-DR also pleaded that the issue is no longer res integra. The issue has been duly examined by the special bench in the case of DCIT vs. Total Oil India (P) Ltd (2023) 149 taxmann.com 332 (Mum-SB) wherein the issue was decided in favour of the revenue. The CIT-DR thus contended th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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