ROOP RASAYAN INDUSTRIES P.LTD, MUMBAI V. ASST CIT 9(3), MUMBAI

ITA 3184/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8637 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-10-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: L
• Next Hearing Date: 02-08-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 21-04-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: CIRCUMSTANCES OF CASE
• Keywords: Residential status; Double taxation relief; Permanent establishment; Revised return

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI L BENCH MUMBAI BENCHES, MUMBAI BEFORE SHRI P M JAGTAP , AM & SHRI VIJAY PAL RAO, JM ITA NO. 8867/MUM/2011 (ASST YEAR 2007-08) & ITA NO. 3184/MUM/2011 (ASST YEAR 2008-09 ) ROOP RASYAN INDUSTRIES P LTD 40-44A, 4 TH FLOOR DHIRAJ HERITAGE S V ROAD, SANTACRUZ (W) MUMBAI 54 VS THE ASST COMMR OF INCOME TAX 9(3), MUMBAI (APPELLANT) (RESPONDENT) PER VIJAY PAL RAO, JM THESE APPEALS BY THE ASSESSEE ARE DIRECTED AGAINS T TWO SEPARATE ORDERS DATED 12.11.2010 AND 23.3.2011 OF THE COMMIS SIONER OF INCOME TAX(APPEALS) FOR THE AYS 2007-08 AND 08-09 RESPECTIVELY. 2 THE ASSESSEE HAS RAISED COMMON GROUNDS IN THESE A PPEALS. THE GROUNDS RAISED FOR THE ASSESSMENT YEAR 2007-08 ARE AS UNDER : (1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE INCOME TAX(A) ERRED IN CONFIRMING RATE OF TAX PAYABLE ON DIVIDE IN COME RECEIVED FROM A COMPANY SITUATED AT SINGAPORE IN WHICH THE APPELLAN T COMPANY IS HOLDING 25% SHAREHOLDING AS PER THE DOUBLE TAXATION AVOIDANC E AGREEMENT (DTAA), AT NORMAL RATE OF TAX INSTEAD OF 10% OF TAX RATE. (2) WITHOUT PREJUDICE TO ABOVE, ON THE FACTS AND CI RCUMSTANCES OF THE CASE AND IN LAW, THE COMMISSIONER OF INCOME TAX(A) ERRED IN INTERPRETING THE ARTICLE 10 OF DTAA AGREEMENT WITH SINGAPORE AND CONF IRMING RATE OF TAX AT PAN NO. AAACR7798F ASSESSEE BY SH RAJESH S SHAH REVENUE BY MS NEERAJ PRADHAN DT.OF HEARING 16 TH OCT 2012 DT OF PRONOUNCEMENT 19 TH OCT 2012 ITA NO.8867 & 3184/M/2011 ROOP RASYAN INDUSTRIES P LTD . 2 NORMAL RATE INST EAD OF @10% AS PER THE DOUBLE TAXATION AVOIDANCE AGREEMENT(DTAA) 3 THE ASSESSEE FILED ITS ORIGINAL RETURN OF INCOME ON 3011.2009 WHEREIN ADMITTED DIVIDEND INCOME RECEIVED FROM A FOREIGN COMPANY M/S BOROCHEMIE INTERNATIONAL PTE LTD., RESIDENT OF SINGAPORE. THE SAID DIVIDEND INCOME WAS OFFERED TO TAX AT THE NORMAL TAX RATE IN THE ORIGINAL RETURN. HOWEVER, T HEREAFTER, THE ASSESSEE FILED ITS REVISED RETURN ON 26TH MARCH, 2008 AND CLAIMED THAT AS PER THE INDO-SINGAPORE DTAA, THE DIVIDEND IS CHARGEABLE TO TAX @ 10% AND A CCORDINGLY, THE ASSESSEE HAS REDUCED THE TAX LIABILITY IN THE REVISED RETURN. THE ASSESSEE ACCORDINGLY RELIED UPON THE ARTICLE 10 OF THE DTAA OF INDIA-SINGAPORE AND C ONTENDED THAT SINCE THE ASSESSEE IS HAVING MORE THAN 25% OF SHARE HOLDING IN THE FOREIGN COMPANY FROM WHICH THE DIVIDEND INCOME RECEIVED; THEREFORE, AS PER PARA 2 OF ARTICLE 10, THE DIVIDEND IS TAXABLE @ 10% OF THE GROSS AMOUNT. 3.1 THE ASSESSING OFFICER DID NOT ACCEPT THE CONTEN TION OF THE ASSESSEE AND HELD THAT IN THE RELEVANT ARTICLE OF THE DTAA HAS BEEN D EALT WITH THE TAXABILITY OF THE DIVIDEND IN THE STATE IN WHICH THE DIVIDEND IS DECL ARED AND NOT THE RESIDENT STATE IN WHICH THE DIVIDEND IS RECEIVED. ACCORDINGLY, THE A SSESSING OFFICER TAXED THE DIVIDEND INCOME IN QUESTION AT 30%. 4 ON APPEAL, THE COMMISSIONER OF INCOME TAX(APPEALS ) HAS CONCURRED WITH THE VIEW OF THE ASSESSING OFFICER AND HELD THAT TH E TAX ON SUCH DIVIDEND IN INDIA TO BE CHARGED AT THE NORMAL RATE APPLICABLE IN INDIA. ITA NO.8867 & 3184/M/2011 ROOP RASYAN INDUSTRIES P LTD . 3 5 BEFORE US, THE LD AR OF THE ASSESSEE HAS REITERAT ED THE CONTENTIONS AS RAISED BEFORE THE LOWER AUTHORITIES AND SUBMITTED THAT WHE N THE ASSESSEE COMPANY IS HOLDING 25% OF THE SHARE HOLDING OF THE FOREIGN COM PANY FROM WHICH THE DIVIDEND IS RECEIVED; THEREFORE, AS PER PARA 2 OF ARTICLE 10 OF THE DTAA BETWEEN INDIA AND SINGAPORE, THE DIVIDEND WILL BE TAXABLE IN THE HAND S OF THE COMPANY, BEING THE RESIDENT OF INDIA ONLY @ 10% OF THE GROSS AMOUNT. 5.1 ON THE OTHER HAND, THE LD DR HAS RELIED UPON TH E ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT PARA 2 OF ARTICLE 10 DEALS WITH THE TAXABILITY OF THE DIVIDEND IN THE CONTRACTING STATE OF WHICH THE COMP ANY PAYING DIVIDEND IS RESIDENT AND NOT THE RATE OF TAX APPLICABLE IN THE CONTRACTI NG STATE IN WHICH THE RECIPIENT OF THE DIVIDEND IS RESIDENT. SHE HAS FURTHER CONTEND ED THAT THERE IS NO DISPUTE THAT THE DIVIDEND IS NOT TAXABLE IN SINGAPORE. THEREFORE, PR OVISIONS OF PARA 2 OF ARTICLE 10 ARE NOT APPLICABLE. HOWEVER, THE DIVIDEND IS TAXABLE U NDER PARA 1 OF THE ARTICLE 10 OF THE DTAA OF INDIA SINGAPORE. 6 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CARE FULLY PERUSED THE RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE REGARDING THE FACT THAT THE ASSESSEE HAS RECEIVED THE DIVIDEND INCOME IN QUESTION FROM THE F OREIGN COMPANY NAMELY M/S BOROCHEMIE INTERNATIONAL PTE LTD., RESIDENT OF SING APORE, IN WHICH THE ASSESSEE IS HOLDING MORE THAN 25% OF THE SHARE CAPITAL. THE TA XABILITY OF THE DIVIDEND UNDER INDIA-SINGAPORE DTAA HAS BEEN DEALT WITH BY ARTICL E 10 AS UNDER: ITA NO.8867 & 3184/M/2011 ROOP RASYAN INDUSTRIES P LTD . 4 ARTICLE 10 : DIVIDENDS - 1. DIVIDENDS PAID BY A COMPANY WHIC H IS A RESIDENT OF A CONTRACTING STATE TO A RESIDENT OF THE OTHER CONTRAC TING STATE MAY BE TAX 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 RESIDEN T AND ACCORDINGLY TO THE LAWS OF THAT STATE, BUT IF THE RECIPIENT IS THE BENEFICIAL OWNER OF THE DIVIDENDS, THE TAX SO CHARGED SHALL NOT EXCEED: (A) 10 PER CENT OF THE GROSS AMOUNT OF THE DIVIDEND I F THE BENEFICIAL OWNER IS A COMPANY WHICH OWNS AT LEAST 25 PER CENT OF THE SHARES OF THE COMPANY PAYING THE DIVIDENDS; (B) 15 PER CENT OF THE GROSS AMOUNT OF THE DIVIDENDS IN ALL OTHER CASES. THIS PARAGRAPH SHALL NOT AFFECT THE TAXATION OF THE C OMPANY IN RESPECT OF PROFITS OUT OF WHICH THE DIVIDENDS ARE PAID. 3. NOTWITHSTANDING THE PROVISIONS OF PARAGRAPH 2 OF THIS ARTICLE, AS LONG AS SINGAPORE DOES NOT IMPOSE A TAX ON DIVIDENDS IN ADDI TION TO THE TAX CHARGEABLE ON THE PROFITS OR INCOME OF A COMPANY, D IVIDENDS PAID BY A COMPANY WHICH IS A RESIDENT OF SINGAPORE TO A RESIDE NT OF INDIA SHALL BE EXEMPT FROM ANY TAX IN SINGAPORE WHICH MAY BE CHARGE ABLE ON DIVIDENDS IN ADDITION TO THE TAX CHARGEABLE ON THE PROFITS OR I NCOME OF THE COMPANY. 4. THE TERM DIVIDENDS AS USED IN THIS ARTICLE MEANS INCOME FROM SHARES OR OTHER RIGHTS NOT BEING DEBT-CLAIMS, PARTICIPATING IN PROFITS, AS WELL AS INCOME FROM OTHER CORPORATE RIGHTS WHICH IS SUBJECTED TO THE SAME TAXATION TREATMENT AS INCOME FROM SHARES BY THE LAWS OF THE STATE OF WHI CH THE COMPANY MAKING THE DISTRIBUTION IS A RESIDENT. 5. THE PROVISIONS OF PARAGRAPHS 1 AND 2 SHALL NOT AP PLY IF THE BENEFICIAL OWNER OF THE DIVIDENDS, BEING A RESIDENT OF A CONTRACTING STATE, CARRIES ON BUSINESS IN THE OTHER CONTRACTING STATE OF WHICH THE COMPANY P AYING THE DIVIDENDS IS A RESIDENT THROUGH A PERMANENT ESTABLISHMENT SITUATE D THEREIN OR PERFORMS IN THAT OTHER STATE INDEPENDENT PERSONAL SERVICES FROM A FIXED BASE SITUATED THEREIN, AND THE HOLDING IN RESPECT OF WHICH THE DIV IDENDS ARE PAID IS EFFECTIVELY CONNECTED WITH SUCH PERMANENT ESTABLISH MENT OR A FIXED BASE. IN SUCH CASE, THE PROVISIONS OF ARTICLE 7 OR ARTICLE 14 A S THE CASE MAY BE, SHALL APPLY. 6 WHERE A COMPANY WHICH IS A RESIDENT OF A CONTRACTI NG STATE DERIVES PROFITS OR INCOME FROM OTHER CONTRACTING STATE, THAT OT HER STATE MAY NOT IMPOSE ANY TAX ON THE DIVIDENDS PAID BY THE COMPANY EXCEPT IN SO FAR AS SUCH DIVIDENDS ARE PAID TO A RESIDENT OF THAT OTHER ST ATE OR SO FAR AS THE HOLDING IN RESPECT OF WHICH THE DIVIDENDS ARE PAID I S EFFECTIVELY CONNECTED WITH A PERMANENT ESTABLISHMENT OR A FIXED BASE SITU ATED IN THAT OTHER STATE, NOR SUBJECT THE COMPANY UNDISTRIBUTED PROFITS TO A T AX ON THE COMPANYS UNDISTRIBUTED PROFITS, EVEN IF THE DIVIDENDS PAID OR THE UNDISTRIBUTED PROFITS CONSIST WHOLLY OR PARTLY OF PROFITS OR INCOME ARISING IN SUCH OTHER STATE. ITA NO.8867 & 3184/M/2011 ROOP RASYAN INDUSTRIES P LTD . 5 7. (A) DIVIDENDS SHALL BE DEEMED TO ARISE IN INDIA I F COMPANY WHICH IS A RESIDENT OF INDIA; (B) DIVIDENDS SHALL BE DEEMED TO ARISE IN SINGAPORE: (I) IF THEY ARE PAID BY A COMPANY WHICH IS A RESIDE NT OF SINGAPORE; OR (II) IF THEY ARE PAID BY A COMPANY WHICH IS A RESIDE NT OF MALAYSIA OUT OF PROFITS ARISING IN SINGAPORE AND QUALIFYING A S DIVIDENDS ARISING IN SINGAPORE UNDER ARTICLE VII OF THE AGREEM ENT FOR THE AVOIDANCE OF DOUBLE TAXATION BETWEEN SINGAPORE AND MALAYSIA SIGNED ON 26TH DECEMBER, 1968. 7 AS PER PARA 1 OF ARTICLE 10 OF INDIA- SINGAPORE D TAA, THE DIVIDEND PAID BY A COMPANY WHICH IS THE RESIDENT OF A CONTRACTING STAT E TO A RESIDENT OF OTHER CONTRACTING STATE TO BE TAXED IN THE OTHER STATE IN WHICH THE RECIPIENT IS RESIDENT. PARA 2 OF ARTICLE 10 CONTEMPLATES A SITUATION WHERE SUCH DIVIDEND MAY ALSO BE TAXED IN THE CONTRACTING STATE OF WHICH THE COMPANY PAYING THE DIVIDEND IS RESIDENT. HOWEVER, THE TAX SO CHARGED IS LIMITED TO 10% OF THE GROSS AMOUNT OF THE DIVIDEND IF THE RECIPIENT OWNS AT LEAST 25% OF THE SHARES OF THE COMPANY PAYING THE DIVIDEND AND IN OTHER CASES, THE TAXABILITY OF THE DIVIDEND IN THE CONTRACTING STATE OF WHICH THE COMPANY PAYING THE DIVIDEND IS RESIDEN T IS 15% OF THE GROSS AMOUNT OF THE DIVIDEND. THUS, PARA 2 OF ARTICLE 10 DEALS WIT H THE PERCENTAGE OF TAXABILITY OF THE DIVIDEND IN THE CONTRACTING STATE OF WHICH THE COMP ANY PAYING DIVIDEND IS A RESIDENT, IF THE DIVIDEND IS ALSO TAXED IN THE SAID CONTRACTING STATE. 7.1 SINCE IN THE CASE IN HAND THE DIVIDEND IS NOT T AXABLE IN SINGAPORE OF WHICH THE COMPANY PAYING THE DIVIDEND IS RESIDENT; THEREF ORE, PARA 2 OF ARTICLE 10 IS NOT AT ITA NO.8867 & 3184/M/2011 ROOP RASYAN INDUSTRIES P LTD . 6 ALL RELEVANT. EVEN OTHERWISE, FOR THE PURPOSE OF T AXABILITY OF DIVIDEND IN INDIA AND PARTICULARLY THE RATE OF TAX, ONLY PARA 1 OF ARTICL E 10 IS RELEVANT. 7.2 THE ISSUE BEFORE US IS ONLY WITH RESPECT TO THE RATE OF TAX APPLICABLE ON THE DIVIDEND INCOME RECEIVED BY THE ASSESSEE FROM A SI NGAPORE COMPANY. IN ANY CASE, AS PER PARA 1 OF ARTICLE 10, THE DIVIDEND REC EIVED BY THE INDIAN COMPANY FROM A SINGAPORE COMPANY IS SUBJECTED TO TAX AT THE NORM AL RATE OF 30%. ACCORDINGLY, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE IMPUG NED ORDERS OF THE COMMISSIONER OF INCOME TAX(APPEALS) ON THIS ISSUE AND THEREFORE, TH ERE IS NO NEED TO INTERFERE WITH THE FINDING OF THE COMMISSIONER OF INCOME TAX(APPEA LS). 8 IN THE RESULT, THE APPEALS FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 19 TH , DAY OF OCT 2012. SD/- SD/- ( P M JAGTAP ) ACCOUNTANT MEMBER ( VIJAY PAL RAO ) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 19 TH , OCT 2012 RAJ* ITA NO.8867 & 3184/M/2011 ROOP RASYAN INDUSTRIES P LTD . 7 COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI