Appeal details
Counselvise Citation
[2024] 101 COUNSELVISE.COM (IT) 8099 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
6 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
26-03-2024
Appeal Filed By
Assessee
Order Result
PartlyAllowed
Bench Allotted
SMC
Assessment Year
2020-2021
Appeal Filed On
20-03-2024
Judgement Text
P a g e | 1 ITA No.1299/Mum/2024 Van Oord India Pvt.Ltd. Vs. ACIT, Circle 5(3)(2) IN THE INCOME TAX APPELLATE TRIBUNAL “F” BENCH, MUMBAI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER & SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ITA No.1299/Mum/2024 (A.Y. 2016-17) Van Oord India Pvt. Ltd. 201, 2 nd Floor, Central Plaza, 166 CST Road, Kalina, Mumbai – 400098 Vs. ACIT, Circle 5(3)(2) NFAC, AayakarBhavan, M.K. Road, Mumbai – 400020 स्थायी लेखा सं./जीआइआर सं./PAN/GIR No:AAACH5430J Appellant .. Respondent Appellant by : DiveshChawala Respondent by : Ms. Rajeshwari Menon Date of Hearing 21.03.2024 Date of Pronouncement 27.03.2024 आदेश / O R D E R Per Amarjit Singh (AM): This e-appeal filed by the revenue is directed against the order passed by the ld. CIT(A) NFAC for A.Y. 2016-17. The assessee has raised the following grounds before us: “Ground No. 1: No reasonable opportunity of being heard granted: 1. On the facts and in the circumstances of the case and in law, the Appellant was not provided with sufficient and reasonable opportunity of being heard while disposing off the appeal in gross violation of the principles of natural justice and hence, the order so passed is bad in law and ought to be quashed in toto. Ground No. 2: Refund of excess Dividend Distribution Tax ('DDT') paid - INR 7,82,66,184/- 2. On the facts and in the circumstances of the case and in law, the NFAC grossly erred in not adjudicating the claim of refund of excess Dividend Distribution Tax ('DDT') paid by the Appellant under section 115-O of the P a g e | 2 ITA No.1299/Mum/2024 Van Oord India Pvt.Ltd. Vs. ACIT, Circle 5(3)(2) Act on the ground that it does not form part of subject matter of the assessment and hence, outside the purview of appellate proceedings. 3. On the facts and in the circumstances of the case and in law, the NFAC grossly erred in not appreciating that DDT paid on dividend declared and paid by the Appellant to Van Oord Dredging and Marine Contractors BV ('VODMC'), a tax resident of Netherlands, ought to be restricted to 5 percent as per Article 10 of the India-Netherlands DTAA read along with India- Slovenia DTAA and India-Hungary DTAA by virtue of the most favourednations clause. Accordingly, the NFAC grossly erred in not granting refund of excess DDT of INR 7,82,66,184/- paid by the Appellant. 4. Without prejudice to the above, the NFAC grossly erred in not appreciating that the DDT rate in any case should have been restricted to 10 percent as per the India-Netherlands DTAA and accordingly, excess DDT of INR 5,27,86,703/- paid by the Appellant ought to have been refunded Ground No. 3: Short grant of credit of Tax Deducted at Source ('TDS') of INR 24,45,390/-: 5. On the facts and in the circumstances of the case and in law, the NFAC grossly erred in not adjudicating on the issue of short grant of TDS credit of INR 24,45,390/- 6. On the facts and in the circumstances of the case and in law, the NFAC grossly erred in not appreciating that TDS credit of only INR 2,39,90,097 was granted by the Assessing Officer as against INR 2,64,35,487/- claimed by the Appellant, thereby resulting in short grant of INR 24,45,390. The appellant craves leave to add, alter, vary, omit, substitute or amend the above grounds of appeal, at any time before or at, the time of appeal, so as to enable the Hon'ble Tribunal to decide the appeal in accordance with the law.” 2. Fact in brief is that return of income declaring total income of Rs.192,91,689/- under normal provision of the Income Tax Act and Rs. 190,69,876/- u/s 115JB of the Act was filed on 10.10.2016. The case was subject to scrutiny assessment and assessment u/s 143(3) of the Act was finalised on 25.12.2018 assessing the total income as per the returned income of the assessee. Further fact of the case are discussed are while adjudicating ground of appeal as under: Ground No. 1: No reasons opportunity of the being heard granted: P a g e | 3 ITA No.1299/Mum/2024 Van Oord India Pvt.Ltd. Vs. ACIT, Circle 5(3)(2) 3. The ld. Counsel has not pressed this ground of appeal therefore the same stand dismissed. Ground No.2: Refund of excess dividend Distribution Tax (DDT) paid Rs.7,82,66,184/-: 4. Before the assessing officer the assesse submitted that the rate of dividend distribution tax in relation to the dividend paid to its parent company should be circumscribed to 5% against the rate of 20.359% provided for u/s 115-O of the Act, since the same was covered by the DTAA between Netherland & India. The assessing officer has not mentioned anything about accepting or not accepting the request made by the assessee before the Assessing Officer. 5. Aggreived the assessee filed the appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assessee. 6. Heard both the sides and perused the material on record. The assessee is a private company incorporated in India and engaged in the business of executing dredging contracts in India. The assessee is a subsidiary of Van Oord Dredging & Marine Contractors BV incorporated in the Netherland. During the assessment year 2016-17 the assessee has declared and paid dividend of Rs.50,95,89,635/- to its parent company and dividend distribution tax of Rs.10,37,45,666/- @ 20.359% was paid by the assessee on the aforesaid dividend u/s 115-O of the Act. 7. Regarding the submission of the assessee that the rate of Dividend Distribution Tax to be applied as provided in Article 10 of the DTAA between India & Netherland, we find that similar issue on identical fact has been adjudicated by the ITAT Mumbai special bench in the case of DCIT Vs. Total Oil (P) Ltd (2023) 149 taxmann.com 332 (Mumbai Trib) (SB) holding that DTAA does not get triggered at all P a g e | 4 ITA No.1299/Mum/2024 Van Oord India Pvt.Ltd. Vs. ACIT, Circle 5(3)(2) when a domestic company pays DDT u/s 115-O of the Act and where contracting states to a tax treaty intend to extend treaty protection to domestic company paying dividend distribution tax only then, domestic company can claim benefit of DTAA, if any. The relevant extract of the decision of the special bench is reproduced as under: “79. As we have discussed earlier, the purpose of DTAA is to avoid double taxation/allocation of taxing rights between two Sovereign nations. When we hold that DDT is a tax not on the shareholder but on the amount declared, distributed, paid as the case may be, by way of dividend and being a tax on income of the company, there is no double taxation of the same income. DTAAS seek to reduce the impact of double taxation which has harmful effects on the international exchange of goods and services and cross-border movements of capital, technology and persons. Bilateral tax treaties address instances of double taxation by allocating taxing rights to the contracting states. Most existing bilateral tax treaties are concluded on the basis of a model, such as the OECD Model Tax Convention or the United Nations Model, which are direct descendants of the first Model of bilateral tax treaty drafted in 1928 by the League of Nations As a result, while there can be substantial variations between one tas treaty and another, double tas treaties generally follow a relatively uniform structure, which can be viewed as a list of provisions performing separate and distinct functions: (1) Articles dealing with the scope and application of the tax treaty (a) Articles addressing the conflict of taxing jurisdiction. (1) Articles providing for double taxation relief, (iv) Articles concerned with the prevention of tax avoidance and fiscal evasion, and (v) Articles addressing miscellaneous matters (e.g administrative assistance). Articles 23A and 23B of the OECD model convention give methods to eliminate double taxation 80. A reading of Article 10 of the model OECD DTAA shows that Dividends paid by a company which is a resident of a Contracting State, say India to a resident of the other Contracting State (say France) may be taxed in that other State (France) However, if the beneficial owner of the Dividend is a resident in France, the tax so charged shall not exceed specified percent. The first condition is that the non-resident in France should be taxed in India. We have to look at the DTAA from the receipients taxability perspective. DDT is paid by the domestic company resident in India. It is a tax on its income and not tax paid on behalf of the shareholder. In such circumstances, the domestic company u/s 115-0 does not enter the domain of DTAA at all. 81. If domestic company has to enter the domain of DTAA, the countries should have agreed specifically in the DIAA to that effect. In the Treaty between India and Hungary, the Contracting States have extended the Treaty protection to the dividend distribution tax It has been specifically provided in the protocol to the Indo Hungarian Tax Treaty that, when the company paying the dividends is a resident of India the tax on distributed profits shall be deemed to be taxed in the hands of the shareholders and it shall not exceed 10 per cent of the gross amount of dividend While making Reference in the P a g e | 5 ITA No.1299/Mum/2024 Van Oord India Pvt.Ltd. Vs. ACIT, Circle 5(3)(2) case of Total Oil (supra), the Id. Division Bench has made the following observations on this aspect: "(f) Wherever the Contracting States to a tax treaty intended to extend the treaty protection to the dividend distribution tax, it has been so specifically provided in the tax treaty itself. For example, in India Hungry Double Taxation Avoidance Agreement [(2005) 274 ITR (Stat) 74: Indo Hungarian tax treaty, in short), it is specifically provided, In the protocol to the Indo Hungarian tax treaty it is specifically stated that "When the company paying the dividends is a resident of India the tax on distributed profits shall be deemed to be taxed in the hands of the shareholders and it shall not exceed 10 per cent of the gross amount of dividend". That is a provision in the protocol, which is essentially an integral part of the treaty, and the protocol to a treaty is as binding as the provisions in the main treaty itself. In the absence of such a provision in other tax treaties, it cannot be inferred as such because a protocol does not explain, but rather lays down, a treaty provision. No matter how desirable be such provisions in the other tax treaties, these provisions cannot be inferred on the basis of a rather aggressively creative process of interpretation of tax treaties. The tax treaties are agreements between the treaty partner jurisdictions, and agreements are to be interpreted as they exist and not on the basis of what ideally these agreements should have been (g) A tax treaty protects taxation of income in the hands of residents of the treaty partnerjurisdictions in the other treaty partner jurisdiction. Therefore, in order to seek treaty protection of an income in India under the Indo French tas treaty, the person secking such treaty protection has to be a resident of France. The expression 'resident' is defined, under article 4(1) of the Indo French tax treaty, as "any person who, under the laws of that Contracting State, is liable to tax therein by reason of his domicile, residence, place of management or any other criterion of a similar nature" Obviously, the company incorporated in India te the assessee before us, cannot seek treaty protection in India- except for the purpose of, in deserving cases, where the cases are covered by the nationality non-discrimination under article 26(1). deductibility non-discrimination under article 26(4), and ownership non- discrimination under article 24(5) as. for example, article 26(5) specifically extends the scope of tas treaty protection to the "enterprises of one of the Contracting States, the capital of which is wholly or partly owned or controlled, directly or indirectly, by one or more residents of the other Contracting State" The same is the position with respect of the other non-discrimination provisions. No such extension of the scope of treaty protection is envisaged, or demonstrated, in the present case When the taxes are paid by the resident of India, in respect of its own liability in India, such taxation in India, in our considered view, cannot be protected or influenced by a tax treaty provision, unless a specific provision exists in the related tax treaty enabling extension of the treaty protection (h) Taxation is a sovereign power of the State- collection and imposition of taxes are sovereign functions. Double Taxation Avoidance Agreement is in the nature of self-imposed limitations of a State's inherent right to P a g e | 6 ITA No.1299/Mum/2024 Van Oord India Pvt.Ltd. Vs. ACIT, Circle 5(3)(2) tax, and these DIAAs divide tax sources, taxable objects amongst themselves. Inherent in the self-imposed restrictions imposed by the DTAA is the fact that outside of the limitations imposed by the DTAA, the State is free to levy taxes as per its own policy choices. The dividend distribution tax, not being a tax paid by or on behalf of a residentof treaty partner jurisdiction, cannot thus be curtailed by a tax treaty provision.” 82. We are of the view that the above exposition of law is correct and we agree with the same. Therefore, the DTAA does not get triggered at all when a domestic company pays DDT u/s.1150 of the Act.” Since, in the case of the assessee contracting states has not extended treaty protection to domestic company paying dividend distribution tax therefore, after following the decision of the ITAT (Special Bench), Mumbai as supra, dividend distribution tax would be payable at the rate mentioned in Sec. 115-O of the Act and not at the rate of tax applicable to non-resident shareholders as specified. Therefore, this ground of appeal of the assessee is dismissed. Ground No. 3: Short grant of credit of Tax Deducted at Source (TDS) of Rs.24,45,390/-: 8. The assessee has claimed credit in respect of TDS aggregating to Rs.264,35,487/- in the return of income filed on 10.10.2016 for the assessment year 2016-17. However, in the order passed u/s 143(3) of the Act the assessing officer has granted TDS credit only to the amount of Rs.39,90,097/- as against the TDS claimed made by the assessee of Rs.264,35,487/-. 9. After hearing both the sides and perusal of the material on record, we restore this issue to the file of the assessing officer for deciding afresh after verification of the detail filed by the assessee. Therefore, this ground of appeal is allowed for statistical purposes. P a g e | 7 ITA No.1299/Mum/2024 Van Oord India Pvt.Ltd. Vs. ACIT, Circle 5(3)(2) 10. In the result, the appeal of the assessee is partly allowed for statistical purposes. Order pronounced in the open court on 27.03.2024 Sd/- sd/- (Vikas Awasthy) (Amarjit Singh) Judicial Member Accountant Member Place: Mumbai Date 27.03.2024 Rohit: PS आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपीलाथी / The Appellant 2. प्रत्यथी / The Respondent. 3. आयकर आयुक्त / CIT 4. विभागीय प्रविवनवध, आयकर अपीलीय अवधकरण DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file. सत्यावपि प्रवि //True Copy// आदेशानुसार/ BY ORDER, उि/सहायक िंजीकार (Dy./Asstt. Registrar) आयकर अिीिीय अतिकरण/ ITAT, Bench, Mumbai.
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