M/S DXC GATRIAM HOLDING BV V. DEPUTY COMMISSIONER OF INCOME TAX

WP/6595/2022

AI Insights

The case involves M/S DXC GATRIAM HOLDING BV, a company based in the Netherlands, challenging a certificate issued by the Deputy Commissioner of Income Tax, directing EITS India to deduct 10% tax on dividend income payable to the petitioner. The petitioner argued that the tax should be 5% as per the India-Netherlands Double Taxation Avoidance Agreement (DTAA). The High Court of Karnataka, referencing a Supreme Court decision in a similar case (Nestle SA), upheld the tax deduction at 10%. The petitioner also raised issues regarding errors in the Supreme Court's judgment, particularly concerning the interpretation and implementation of the MFN clause in the treaty.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 759417 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 20-01-2024
• Assessment Year: misc
• Other Referred Cases: Assessing Officer v. Nestle SA, Union of India v. Agricas LLP
• Laws Referred To: Articles 226 and 227 of the Constitution of India
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: SANMATHI I
• Assessee Lawyers: KAMAL SAWHNEY
• Keywords: Certiorari; Certiorari; Dividend Tax; DTAA; International Taxation; Mandamus; MFN Clause
• Section: 90

Judgement Text

" - 1 - NC: 2024:KHC:2684 WP No. 6595 of 2022 C/W WP No. 6632 of 2022 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 20TH DAY OF JANUARY, 2024 BEFORE THE HON'BLE MR JUSTICE S.R.KRISHNA KUMAR WRIT PETITION NO. 6595 OF 2022 (T-IT) C/W WRIT PETITION NO. 6632 OF 2022 (T-IT) IN W.P.No.6595/2022 BETWEEN: M/S DXC GATRIAM HOLDING BV LAAN VAN ZUID HOORN 70 RIJSWIJK RIJSWIJK NL 2289DE REP BY ITS AUTHORIZED SIGNATORY MR MAHESH S S/O SHARANAPPA GOUDA AGED ABOUT 37 YEARS, R/AT NO.41184 PRESTIGE FALCONCITY KANAKAPURA MAIN ROAD DODDAKALLASANDRA BANGALORE-560062 …PETITIONER (BY MR. KAMAL SAWHNEY, ADVOCATE FOR MR. MOHAMMED SHAKEEB M MULLA., ADVOCATE) AND: 1. DEPUTY COMMISSIONER OF INCOME TAX INTERNATIONAL TAXATION CIRCLE (1) Digitally signed by NARASIMHA MURTHY VANAMALA Location: HIGH COURT OF KARNATAKA - 2 - NC: 2024:KHC:2684 WP No. 6595 of 2022 C/W WP No. 6632 of 2022 ROOM NO.430 4TH FLOOR BMTC BUILDING 80 FT ROAD 6T BLOCK KORMANGALA BENGALURU -560095 2. ADDITIONAL COMMISSIONER OF INCOME TAX INTERNATIONAL TAXATION CIRCLE 1 (1) ROOM NO.430 4TH FLOOR BMTC BUILDING 80 FT ROAD 6TH BLOCK KORMANAGALA BENGALURU-560095 3. CENTRAL BOARD OF DIRECT TAXES NORTH BLOCK NEW DELHI-110002 …RESPONDENTS (BY SRI. SANMATHI E I.,ADVOCATE) THIS WP IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTON OF INDIA PRAYING TO QUASH OF CERTIFICATE DATED 24.02.2022 (ANNEXURE-A) ISSUED BY THE R-1 WITH THE APPROVAL OF THE R-2 DIRECTING EITS INDIA TO DEDUCT TAX 10 PERCENTAGE ON DIVIDEND INCOME TO BE PAID TO THE PETITIONER FOR THE RELEVANT FY AND ETC. IN W.P.No.6632/2022 BETWEEN: M/S DXC GATRIAM HOLDING BV LAAN VAN ZUID HOORN 70 RIJSWIJK RIJSWIJK NL 2289DE REP BY ITS AUTHORIZED SIGNATORY MR MAHESH S S/O SHARANAPPA GOUDA AGED ABOUT 37 YEARS, R/AT NO.41184 PRESTIGE FALCONCITY - 3 - NC: 2024:KHC:2684 WP No. 6595 of 2022 C/W WP No. 6632 of 2022 KANAKAPURA MAIN ROAD DODDAKALLASANDRA BANGALORE-560062 …PETITIONER (BY MR. KAMAL SAWHNEY, ADVOCATE FOR MR. MOHAMMED SHAKEEB M MULLA., ADVOCATE) AND: 1. DEPUTY COMMISSIONER OF INCOME TAX INTERNATIONAL TAXATION CIRCLE (1) ROOM NO.430 4TH FLOOR BMTC BUILDING 80 FT ROAD 6T BLOCK KORMANGALA BENGALURU -560095 2. ADDITIONAL COMMISSIONER OF INCOME TAX INTERNATIONAL TAXATION CIRCLE 1 (1) ROOM NO.430 4TH FLOOR BMTC BUILDING 80 FT ROAD 6TH BLOCK KORMANAGALA BENGALURU-560095 3. CENTRAL BOARD OF DIRECT TAXES NORTH BLOCK NEW DELHI-110002 …RESPONDENTS (BY SRI. RAVIRAJ Y.V., ADVOCATE) THIS WP IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTON OF INDIA PRAYING TO QUASH OF CERTIFICATE DATED 24.02.2022 (ANNEXURE-A) ISSUED BY THE R-1 WITH THE APPROVAL OF THE R-2 DIRECTING EITS INDIA TO DEDUCT TAX @ 10% ON DIVIDEND INCOME TO BE PAID TO THE PETITIONER FOR THE RELEVANT FY AND ETC. THESE PETITIONS, COMING ON FOR ORDERS, THIS DAY, THE COURT MADE THE FOLLOWING: - 4 - NC: 2024:KHC:2684 WP No. 6595 of 2022 C/W WP No. 6632 of 2022 ORDER In these petitions, the petitioner seeks for the following reliefs: IN W.P.No.6595/2022 a) Issue a writ of Certiorari or any other appropriate writ for quashing of Certificate dated 24.02.2022 (Annexure -A) issued by the Respondent No.1 with the approval of the Respondent No.2 directing EITS India to deduct tax @ 10% on dividend income to be paid to the Petitioner for the relevant FY. (b) Issue a writ of Certiorari or any writ in the nature of Certiorari or any other appropriate writ quashing the CBDT Circular No.3/2022 dated 03.02.2022 (Annexure -B) issued by Respondent No.3 for being in contravention to provisions of the Act and being in violation of high court decisions including decision of this Hon'ble High Court; (c) Issue a writ of mandamus or any writ in the nature of mandamus or any other appropriate writ allowing EITS India to pay dividend to the Petitioner for the relevant FY after deducting tax @ 5% in terms of the Protocol to the DTAA between India and the Netherlands at the time of payment of such dividend. - 5 - NC: 2024:KHC:2684 WP No. 6595 of 2022 C/W WP No. 6632 of 2022 IN W.P.No.6632/2022 (a) Issue a writ of Certiorari or any other appropriate writ for quashing of Certificate, dated 24.02.2022 (Annexure-A) issued by the First Respondent with approval of the Second Respondent directing EITS India to deduct tax @ 10% on dividend income to be paid to the Petitioner for the relevant FY. (b) Issue a writ of Certiorari or any writ in the nature of Certiorari or any other appropriate writ quashing the CBDT Circular No.3/2022 dated 03.02.2022 (Annexure - B) issued by third Respondent for being in contravention to provisions of the Act and being in violation of high court decisions including decision of this Hon'ble High Court; (c) Issue a writ of mandamus or any writ in the nature of mandamus or any other appropriate writ allowing EITS India to pay dividend to the Petitioner for the relevant FY after deducting tax @ 5% in terms of the Protocol to the DTAA between India and the Netherlands at the time of payment of such dividend; - 6 - NC: 2024:KHC:2684 WP No. 6595 of 2022 C/W WP No. 6632 of 2022 2. The learned counsel for the petitioner has filed memos in both these petitions, which read as under: “1. It is conceded by the Petitioner that the present writ petition stands decided against the Petitioner by the Hon'ble Supreme Court's judgement in Assessing Officer v. Nestle SA, CA No. 1420 of 2023 dated 19.10.2023. 2. It is the Petitioner's stand that the judgement of the Hon'ble Supreme Court in Nestle (supra) has certain glaring errors highlighted below: a. Nestle judgement (supra) has patently erred in deciding the issue of issuance of notifications as India-Netherlands Treaty including its MFN clause after being notified in 1988 under Section 90 of the Act itself has already become part of the domestic law. Once this notification was issued, the treaty in question stood legislated and India was left with a treaty to implement and interpret based on its language. Thus, there is a patent error in the Impugned judgement insofar as it confuses the requirement of notifying the treaty and protocol under Section 90 with notification for 'triggering benefit of MFN clause'. - 7 - NC: 2024:KHC:2684 WP No. 6595 of 2022 C/W WP No. 6632 of 2022 b. Nestle Judgement (supra) has interpreted the relevant treaties before it by relying on Indian Government's subsequent practice of issuing unilateral notifications. This is per incuriam to the three judges bench judgement of this Hon'ble Court's in Union of India of India v. Agricas LLP, [2020] 14 SCR 372 wherein the Hon'ble Court has clearly held that India cannot rely upon its internal law as a defence for the breach of treaty obligation. c. Nestle judgement (supra) has relied on subsequent practice of India ignoring the well settled law that unilateral practice without consent of the other treaty partner cannot be relied upon at all to interpret the treaty and in that matter there was expressed denial of Indian Government's stand taken in its notification by the treaty partners such as Netherlands. 3. Due to the above glaring errors in the judgement besides other, Petitioner wishes to challenge the dismissal of the present petition before the Hon'ble Supreme Court vide a special leave petition under Article 136 with the prayer to allow larger bench reference in the matter. - 8 - NC: 2024:KHC:2684 WP No. 6595 of 2022 C/W WP No. 6632 of 2022 4. It is therefore prayed that the present writ petition be heard and disposed off by recording the aforesaid submissions of the Petitioner.” As can be seen from the said memo, the issue in controversy is covered by the judgment of the Hon’ble Apex Court in Assessing Officer Vs. Nestle SA in C.A.No.1420/2023 dated 19.10.2023. The petition stands disposed of in terms of the memo. Sd/- JUDGE RB "