DECCAN HOLDINGS B V V. INCOME TAX OFFICER & ANR.

W.P.(C)/11921/2021

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The case involves Deccan Holdings B V, a Netherlands-based company, challenging the withholding tax rate applied to dividend income received from Deccan Fine Chemicals (India) Private Limited. The petitioner argued that under the Most Favoured Nation (MFN) clause of the India-Netherlands Double Taxation Avoidance Agreement (DTAA), they are entitled to a reduced withholding tax rate of 5%, similar to rates agreed in other OECD countries' DTAAs with India. The Income Tax Officer had issued a certificate applying a 10% withholding tax rate, which the petitioner contested. The High Court referenced previous judgments that supported the petitioner's claim and directed the issuance of a new certificate reflecting the 5% rate.

• Counselvise Citation: [2021] 140 COUNSELVISE.COM (IT) 763992 (HC-DELHI)
• Appeal Type: Others
• Pronouncement Date: 25-10-2021
• Assessment Year: misc
• Other Referred Cases: Concentrix Services Netherlands B.V. v. ITO (TDS), Nestle SA v. Assessing Officer, Circle (International Taxation)
• Laws Referred To: Income Tax Act, 1961, India Netherlands DTAA
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: RUCHIR BHATIA
• Assessee Lawyers: DEEPAK CHOPRA
• Keywords: Dividend; Double Taxation Avoidance Agreement; Most Favoured Nation; Withholding Tax
• Section: 197

Judgement Text

"W.P.(C) 11921/2021 Page 1 of 3 $~35 * IN THE HIGH COURT OF DELHI AT NEW DELHI + W.P.(C) 11921/2021 DECCAN HOLDINGS B V ..... Petitioner Through Mr.Deepak Chopra, Advocate. versus INCOME TAX OFFICER & ANR. ..... Respondents Through Mr.Ruchir Bhatia, Advocate. % Date of Decision: 25th October, 2021 CORAM: HON'BLE MR. JUSTICE MANMOHAN HON'BLE MR. JUSTICE NAVIN CHAWLA 1. Present writ petition has been filed challenging the certificate dated 29 MANMOHAN, J. (Oral) th September, 2021 as well as the order dated 12th August, 2021 (the correct date being 29th 2. Learned counsel for the petitioner states that the petitioner is a company incorporated under the laws of Netherlands and is engaged in the business of acquiring strategic ownership interests, owning and disposing September, 2021) issued by the first Respondent. Petitioner seeks directions to the Respondents to issue a fresh certificate under section 197 of the Income Tax Act, 1961 [the Act] permitting the Petitioner to receive dividend of Rs. 65.68 crores for Financial Year 2021-22 subject to deduction of tax at the rate of 5% in terms of the India Netherlands DTAA read with the Protocol and MFN clause. Digitally Signed By:KRISHNA BHOJ Signing Date:27.10.2021 21:03:28 Signature Not Verified W.P.(C) 11921/2021 Page 2 of 3 ownership interests in other companies and enterprises, both in Netherlands and abroad with a primary focus on the food and agriculture, agro- chemicals, specialty chemicals, agri-technology (Ag-Tech) and pharmaceuticals sector. He states that the Petitioner holds 58.39% of the shares of Deccan Fine Chemicals (India) Private Limited [DFCPL]. He further states that during the current Financial Year (“FY”) i.e. 2021-22, DFCPL proposes to distribute a dividend of INR 65.68 cr. to the Petitioner. 3. Learned counsel for the Petitioner states that the Petitioner filed an application dated 13th August, 2021 under Section 197 of the Act before the Assessing Officer (AO) requesting him to issue a certificate authorizing the Petitioner to receive dividend income from DFCPL subject to lower withholding tax rate of 5% as applicable under the Double Taxation Avoidance Agreement (“DTAA”) between India and Netherlands read with the Protocol. He submits that the Protocol to India Netherlands DTAA provides for “Most Favoured Nation” (“MFN”) clause in terms of which when India enters into a DTAA with another member country of the Organisation for Economic Cooperation and Development (“OECD”) wherein India limits its tax deduction at source (“TDS”) to a lower rate than the one agreed between India and Netherlands, then from the date such agreement comes into force, the rates or scope contemplated in such other treaty shall apply to India-Netherlands DTAA. He states that though the India-Netherlands DTAA prescribes a withholding rate of 10%, yet as India has entered into DTAAs with other OECD member countries being Slovenia / Lithuania / Colombia wherein tax rate on dividend income was agreed at a lower rate of 5%, owing to the MFN clause, the lower withholding rate shall also be applicable to any dividend income covered under the India- Netherlands DTAA. He further states that the Petitioner’s application to Digitally Signed By:KRISHNA BHOJ Signing Date:27.10.2021 21:03:28 Signature Not Verified W.P.(C) 11921/2021 Page 3 of 3 withhold tax at a lower rate was rejected vide the impugned orders and a certificate issued under Section 197 of the Act at the rate of 10% was issued to the Petitioner. 4. Learned counsel for the Petitioner states that the issue involved in the present writ petition is no longer res integra as it is covered by the judgment of this Court in Concentrix Services Netherlands B.V. v. ITO (TDS), W.P.(C) 9051/2020 [2021] 127 taxmann.com 43 (Delhi) and Nestle SA v. Assessing Officer, Circle (International Taxation), W.P.(C) 3243/2021. He states that the impugned order and certificate have been passed in contravention of the settled position of law. He further states that the Respondent cannot disregard the binding judgments of this Court on the ground that the revenue proposes to file an appeal against such decisions. 5. Issue notice. Mr.Ruchir Bhatia, Advocate accepts notice on behalf of the Respondents. He admits that the issue raised in the present writ petition is squarely covered in W.P.(C) No.9051/2020 titled Concentrix Services Netherlands (supra). Accordingly, the impugned order and certificate are set aside. 6. Consequently, a certificate under Section 197 of the Act will be issued in favour of the Petitioner, indicating therein, that the rate of tax, on dividend, as applicable qua the Petitioner is 5% under India-Netherlands DTAA. 7. The writ petition is disposed of in the aforesaid terms. MANMOHAN, J NAVIN CHAWLA, J OCTOBER 25, 2021 KA Digitally Signed By:KRISHNA BHOJ Signing Date:27.10.2021 21:03:28 Signature Not Verified "