DY CIT 11 (3)(1), MUMBAI V. TOTAL OIL INDIA PVT LTD., MUMBAI

ITA 6997/MUM/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 2774 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-06-2021
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: Mumbai
• Assessment Year: 2016-2017
• Appeal Filed On: 14-11-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Residential status; Double taxation relief
• Section: 90; 143(3); 274; 22; 20

Judgement Text

CO NO. 57/MUM/2021 , AND ITA NO. 6997/MUM/2019 ASSESSMENT YEAR 2016 - 17 PAGE 1 OF 11 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI I BENCH, MUMBAI [CORAM: PRAMOD KUMAR (VICE PRESIDENT) , AND AMARJIT SINGH (JUDICIAL MEMBER)] ITA NO. 6997/MUM/2019 ASSESSMENT YEAR 2016 - 17 DEPUTY C OMMISSIONER OF INCOME TAX CIRCLE 11 (3)(1), MUMBAI . APPELLANT VS TOTAL OIL INDIA PVT LTD RESPONDENT 3 RD FLOOR, THE LEELA GALLERIA ANDHERI (EAST), MUMBAI 400 059 [PAN: AAACE2175M] CO NO. 57 / MUM/2021 ARISING OUT OF ITA NO. 6997/MUM/2019 A SSESSMENT YEAR 2016 - 17 TOTAL OIL INDIA PV T L TD . CRO SS - OBJECTOR 3 RD FLOOR, THE LEELA GALLERIA ANDHERI (EAST), MUMBAI 400 059 [PAN: AAACE2175M] VS DEPUTY C OMMISSIONER OF INCOME TAX CIRCLE 11 (3)(1), MUMBAI RESPONDENT APPEARANCES BY SANJAY SINGH FOR THE A SSESSING OFFIC ER N IRAJ SH ETH FOR THE ASSESSEE DATE OF CONCLUDING THE HEARING: JUNE 15, 20 21 DATE OF MAKING THE SPECIAL BENCH REFERENC E: JUNE 23, 2021 SPECIAL BENCH REFERENCE PER PRAMOD KUMAR, VP: 1. TH IS APPEAL, AS ALSO THE CROSS - OBJECTION, CALL INTO QUESTION THE CORRECTNESS OF THE ORDER DATED 29 T H AUGUST 2019 PASSED BY THE LEARNED C IT(A) IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX AC T, 1961, FOR THE ASSESSMENT YEAR 2016 - 17. 2 . ONE OF THE ISSUES RAISED IN THIS SET OF APPEAL AND THE CROSS - OBJ ECTION, BY WA Y OF GROUND NO. 4 I N THE C ROSS - OBJECTIONS FILE D BY THE ASSESSEE , IS AS FOLLOWS : CO NO. 57/MUM/2021 , AND ITA NO. 6997/MUM/2019 ASSESSMENT YEAR 2016 - 17 PAGE 2 OF 11 THE LEARNE D ASSESSING OFF I CER BE DIRECTED TO COMPUTE THE TAX PAYABLE BY THE ASSESSEE UNDER SECTION 115 - O OF T HE INCOME TAX ACT, 1961 ( THE ACT ) AT THE RATE PRESC RIBED IN THE D TAA BETWEEN INDIA AND FRANCE IN RESPECT OF DIVIDEND PAID BY THE ASSESSEE T O THE NON - RESIDE NT SHAREHOLDERS I .E. , TOTAL MARKETING SERVICES AND TOTAL HOL DI NGS ASIE, A TAX RESIDENT OF FRAN CE . 3. LEARNED DEPARTMENTAL REPRESE NTATIVE HAS VARIOUS PR ELIMINARY OB JECTIONS TO TH E ABOVE ISSUE BEING RAISED BEFORE US. H IS FIRST OBJECTI ON IS THAT THE CROSS - OB JECTION IS TIME - BARRED INASMUCH AS WHILE THE APPEAL WAS FILED BY THE ASSESSING OFF ICER ON 14 TH NOVE MBER 2019, THE CROSS - OBJECTION IS FILED MUCH AFTER TH AT DATE ON 17 TH MAY 2021 . IT IS CONTENDED THAT THE TIME LIMIT PRESCRIBED IN SE CTION 253(4) OF THE INCOME TAX ACT, 1961, HAS C LEARLY LAPSED , AND, FOR THIS S H ORT REASON ALONE, THE CROSS - OBJECTION IS L IABLE TO DISMISSED AS TIME - BARRED. HIS SECOND POINT I S TH I S CLAIM ABOUT TREATY PROTECTI ON , SO FAR AS T HE RATE OF DIVIDEND DISTRIBUTIO N TAX IS CONCERNED , WAS NEVER RAI SED BE FORE ANY O F THE AUTHORITIES BELOW, AND NO FRESH ISSUE CAN BE RAISE D BY WAY OF A CROS S OBJECTION FILED UNDER SECTION 253(4) . LEARNED DEPARTMENT AL REPRESENTATIV E RELIES UPON THE JUDICIAL PRECEDENTS IN THE CASES OF C IT VS BEGUM NOOR BANU [(1993) 204 ITR 166 (AP )], UGAR SUGAR W ORKS LTD VS C IT [ 1982) 141 ITR 326 (BOM)], PURANMAL RADHAKISHAN & CO VS CIT [(1957) 31 ITR 294 (BOM)] AND CIT V S CELLULOSE P ROD UCTS OF INDIA LTD [(198 4) 151 ITR 499 (GU J - FB )] . IN RE SPONSE TO T HE ISSUES SO RAISED BY THE LEARNED DEPARTMENTAL REPRESENTATI VE , IT IS CLARIFIED BY THE L EARNED COUNSEL FOR THE ASSESSEE THAT THE COPY OF THE DEPARTMENTAL APPEAL WAS SERVED ON THE ASSESSEE ON 15 TH APR IL 2021 BY THE SPEED POST, AND THE LAST DAT E OF F I LING C R OSS OBJECTION THUS WAS 14 TH MAY 202 1 WHICH HAPPENED TO BE A PUBL IC HOLIDAY , AND THE C ROSS OBJECTION WAS THUS F ILED ON THE VERY NEXT WORKING DAY , I.E. 17 TH MAY 2021. THERE WAS THUS NO DELA Y IN FILING OF THE CROSS OBJECTION. IT IS F U RTHER SUBMITTED THAT , IN AN Y EVENT , IN VI EW OF THE JUDGMENT OF HON BLE SUPREME CO URT S JUDGMENT DATED 27 TH APR IL 2021 IN SUO MO TU WRIT P ETITION (CIVIL) NO. 3 OF 2 020, RESTORING THE ORDER DATED 23 RD MARCH 2020 AN D IN CONTINUATION OF THE ORDER DATED 8 TH MARCH 2021, THE PERIOD O F LIMITATION ANY WA Y STANDS EXTE NDED. WE ARE, THERE FORE, URGED TO CONSIDE R THE CROSS - OBJECTION AS HAVING BEEN FILED IN TIME, AND DEAL WIT H THE SAME, IN ACCORD ANCE WITH THE LAW, ACCORDINGLY. A S REGARDS THE QUESTION AS TO WHETHER A NEW ISS UE CAN BE RAI SED IN THE CROSS - OBJECTIONS, LEARNED COUNSEL SUBMITS THAT IN VIEW OF THE EXPRESS PROVISIONS OF 253(4) , READ WITH RULE 22 OF THE INCOME T A X APP ELLATE TRIBUNAL RULES, 1962 , A CROSS - OBJECTION IS TO BE TREATED AT PAR W ITH AN APPEAL, AND WHAT APP LIES TO THE APPEALS EQUALLY APPLIES TO THE C ROSS - OBJECTION A S WELL. LEARNED COUNSEL ALSO REFERS TO, AND RELIES UPON, JUDICIAL PRECEDENTS IN THE CASES OF CIT VS PURBANCHAL PARIBARTAN GO S THI [(1998) 234 ITR 663 (GA U)] AND TATA SPONGE IRON LIMITED VS CIT [( 20 08) 307 ITR 441 (ORR)]. A REFERENCE IS THEN MADE TO A NUMBER OF COORDINATE BENCH DECISIONS W HER EIN IN MATERIALLY SIMILAR SITUATIONS , NEW ISSUES ARE ADMITTED BY WAY OF CROSS - OBJECTIONS . 4. IN OUR CONSIDERED VIEW, THERE IS A LEGAL PARITY IN THE APPEAL AND THE C ROSS - OBJECTI ON INASMUCH AS THE ISSUES WHICH CAN BE RAISE D IN AN APPEAL CA N ALSO BE RAISED IN A C ROSS - OBJECTION. SECTION 253(4) SPECIFICALLY PROVIDES WHEN A PARTY TO THE APPEAL IS PUT TO N OT ICE ABOUT THE APPEA L HAVING BEEN FILED BY THE OTHER PARTY, NOTWITHSTANDING THE FACT THAT SUCH A PARTY MAY NOT HAVE FILED AN APPEAL AGAINST RE LATED ORDER OR ANY PART THEREOF, WI THIN THIRTY DAYS OF BEING SO PUT TO N OTIC E, FI LE A MEMORANDUM OF CROSS - OBJECTIONS, VERIFIED IN THE PRESCRIBED MANNER, AGAINST ANY PART OF THE ORDER OF THE COMMISSIONER (APPEALS), AND SUCH MEMORANDUM SHA LL BE DISPOSED OF BY THE APPELL ATE TRIBUNAL AS IF IT WERE AN APPEAL PRESENTED WITHIN THE TIME SPECIF IED IN SUB - SECTION (3 ) . WHEN THIS CROSS - OBJECTION I S REQUI RED TO BE TREATED AS A N CO NO. 57/MUM/2021 , AND ITA NO. 6997/MUM/2019 ASSESSMENT YEAR 2016 - 17 PAGE 3 OF 11 AP PEAL PRESENTED , THERE CANNOT BE ANY JUSTIFICATION IN RESTRICTIN G THE SCOPE OF ISSUES WHICH CAN BE RAISED IN A CROSS - OBJECTION. WHATEVER ISSUES , THEREFORE, C AN B E RAISED BY WAY OF AN APPEAL A RE THE ISSUES THAT CAN BE RAISE D BY WAY OF A CROSS - OBJECTION. AS LEA RNED COUNSEL FOR THE ASSESSEE APTLY POINTS OUT, AS HELD BY HON BL E GAUHATI H I GH COURT IN THE CASE OF P URBANCHAL PAR IBARTAN GOS THI (SUPRA), IT CAN SAFELY BE HELD ON A POINT OF LA W THAT THERE IS ABSOLUTELY NO DIFFERENCE BETWEEN AN APPEAL AND A CROSS - OBJECTION. THE ONLY DIFFERENCE IF AT ALL ONE CAN BE POINTED OUT IS THAT AN APPEAL CAN BE PREFERRED WITHIN 60 DAYS FROM THE DATE OF RECEIPT OF THE ORDER WHEREAS A CROSS - OBJEC TION CAN BE FILED WITHIN A PERIOD OF 30 DAYS OF THE D ATE OF SERVICE OF APPEAL BY THE OPPOSITE PARTY . WE ARE NOT AWARE OF ANY JUDICIAL PREC EDENT CONTRA R Y TO THIS JUDICIAL PRECEDENT . AS REGARDS THE DECI SION S CITED BY THE L EARNED DEPARTMENTAL REPRESENTATIVE , ALL THESE DECISIONS ARE IN THE CONTEXT OF POWERS OF THE TRIBUNAL WHILE DEALING WITH AN APPEAL, AND, IN ANY E VENT, THESE DECISIONS ARE REN DERED PR IOR TO HON BLE SUPREME COURT S JUDGMENT IN THE CASE OF NATIONAL THERMAL POWER CO RP ORATION LTD VS CIT [(199 8 ) 22 9 ITR 383 (SC) ] WHICH DID CATEGORICALLY OBSERVE THAT W E FAIL TO SEE WHY THE TRIBUNAL SHOULD BE PREVENTED FROM CONSIDERING QUESTIONS OF LAW ARISING IN ASSES SMENT PROCEEDINGS ALTHOUGH NOT RAISED EARLIER E VEN THOUGH U NDOUBTEDLY, THE TRI BUNAL WILL HAVE THE DISCRETION TO ALLOW OR NOT ALLOW A NEW GROUND TO BE RAISED . QUITE CLEARLY, THERE FORE, THE POWERS OF THE TRIBUNAL ARE NO T RESTRICTED TO DECI DE ON LY THE ISSU ES WHICH HAVE BEEN CONSIDERED BY THE AUTHORITIES BELOW. THE NARROWER VIEW OF THE POWERS OF THE TR IB UNAL, AS ADOPTED IN THE JUDICIAL P RECE DENTS CITED BY THE LEAR NED DEPARTMENTAL REPRESENTATI VE AND PARTICULARLY THE FULL BENCH DECISION OF HON BLE GUJARAT H I G H COURT IN THE CASE OF CELLULOSE PROD UCTS OF INDIA LTD (SUPRA), HA S BEEN SPECIFICALLY DISAPPROVED BY HON BLE SUPREME COURT IN NTP C S CASE (SUP RA). AS RE GARDS T HE CLAIM OF THE LEARNED DEPARTMENTAL REPRESENTATI V E THAT THE FILING OF THIS MEMORANDUM OF CROSS - O BJECTION IS TIME - B ARRED, HAVING P ERUSED THE MATERIAL ON RECORD, WE ARE SATISFIED THAT THE MEMORANDUM OF CROSS - OBJECTIONS IS F ILED WITHIN THE TIME LIMIT. WHEN THESE FACTS AND MATERIAL ON RECORD W ERE POINTED OUT TO THE LEARNED DEPARTMENTAL REPR E SENTATIV E, HE DID NOT PRESS THIS OBJECTION ANY FURTHER AND VERY GRACIOUSLY LE FT THE MATTER TO US. NO NE OF THE PRELIMINARY OBJECTIONS RAI SED BY THE LEARNED D EPARTMENT AL REPRESENTATI VE MERIT S OUR JUDICIAL APPROVAL. WE REJECT THESE OBJECTIONS A ND PROCEED TO DEAL WITH THE ISSUE IN QUESTION AS RAI SED IN THE CROS S - OBJECTION. 5. SO FAR AS THIS ISSUE IS CONC ERNED, ONLY A FEW MATERIAL FACTS NEED TO BE TAKEN NOT E OF. THE ASSES SEE COM PANY HAS SOME NON - RESIDENT TAX HOLDERS FISCALLY DOMICILED IN FRANC E. THE ASSESSEE HAS PAID DIVIDE ND DISTRIBUTION TAX UNDER SECTION 115 O . AND THE SHORT CASE OF THE ASSES SEE IS THAT SINCE THE SHAREHOLDERS OF THE ASSESSEE COMPANY ARE ENTITLED TO TH E BENEFITS OF THE INDIA FRANCE DOUBLE TAXATION AV OIDANCE AGREEMENT [(1994) 209 ITR (STAT) 130; INDO FRENC H TAX TREATY , IN SHORT], T HE DIVIDEND DI STRIBUTION TAX PAID BY THE ASSESSEE, WHICH IS NOTHING BUT A TAX ON DIVID END INCOME OF THE SHAREHOLDERS, CANNOT E XCEED THE RATE AT W HICH, UNDER THE INDO FRE NCH TAX TREATY, SUCH DIVIDENDS CA N BE TAXED IN THE HANDS OF T HE NON - RESIDENT SHAREHOLDERS IN QUESTION . IN SUPPORT OF THIS LINE OF REASONING, THE ASSESSEE RELIES ON A DECISION OF THE COORDINATE BE NCH IN THE CASE OF GIESECKE & DEVRIENT IN DIA P VT LTD VS ACIT [(2020) 120 TAXMANN.COM 338 (DEL)] WHICH HAS ALSO BEEN SU BSEQ UE N TLY FOLLOWED BY SE VERAL OTHER COORDIN ATE BE NCHES AS WELL. WHAT THIS DECISION H OLD S, ACCORDING TO A NOTE FILED B Y THE LEARNED COUNSEL, CAN BE SUMMED U P AS FOLLOW S: - MEMORANDUM TO FINANCE BILL 1997 AND 2003 CLEARLY ESTABLISH THAT LEVY OF TAX ON THE COMPAN Y WAS DRIVEN BY ADMINISTRATIVE CONSIDERATIONS RATHER THA N LEGAL NECESSITY AND EMPHASISES THE FACT THAT THE LEVY IS FOR ALL INTENTS AND PURPOSES, A CHARG E ON DIVIDENDS. CO NO. 57/MUM/2021 , AND ITA NO. 6997/MUM/2019 ASSESSMENT YEAR 2016 - 17 PAGE 4 OF 11 - DDT LEVIED ON THE DIVIDEND DISTRIBUTED BY THE PAYER COMPANY, BEING AN ADDITIONAL TAX IS C OVERED BY THE DEFINITION OF TAX AS DEFINED U/S. 2(43 ) OF THE ACT WHICH IS C OVERED BY THE CHARGING SECTION 4 OF THE ACT AND CHARGING SECTION ITSELF I S SUBJECT TO THE PROVISIONS OF THE ACT WHICH INCLUDE SECTION 90 OF THE ACT. - A CONJOINT READING OF THE M EM ORANDUM TO FINANCE BILL 1997, 2003 AND 2020 WOULD SHOW THAT LEVY OF DDT WAS ME RELY FOR ADMINISTRATIVE CONVENIENCES AND WITHDRAWAL OF DDT IS KEEPING IN MIND THAT REVENUE WAS ACROSS - THE - BOARD, IRRESPECTIVE OF MARGINAL RATE, AT WHICH RECIPIENT IS OTHERWISE TA XED. - THE LIABILITY TO DDT UNDER THE ACT WHICH FALLS O N THE COMPANY MAY NOT BE RELEVANT WHEN CONSIDERING APPLICABILITY OF RATES OF DIVIDEND TAX SET OU T IN THE TAX TREATIES. THE GENERALLY ACCEPTED PRINCIPLES RELATING TO INTERPRETATION OF TREATIES IN THE L IG HT OF OBJECT OF ELIMINATING DOUBLE TAXATION, DOES NOT BAR THE APPLICATION OF TA X TREATIES TO DDT. - THE DDT PROVISIONS WERE FIRST INSERTED BY FINANCE A CT, 1997 (I.E. AFTER THE INDIA - GERMANY DTAA CAME INTO FORCE) AND THE HONBLE JURISDICTIONAL HIGH COURT A T DELHI IN THE CASE OF NEW SKIES SATELLITES 382 ITR 114 HAD AN OCCASION TO CONSIDE R THE AMENDMENT TO THE ACT VIS A VIS TREATY PROVISIONS, WHEREIN THE HO NBLE HIGH COURT HELD THAT NO AMENDMENT TO THE ACT, WHETHER RETROSPECTIVE OR PROSPECTIVE CAN BE READ IN A MANNER SO AS TO EXTEND IN OPERATION TO THE TERMS OF AN INTERNATIONAL TREATY. - TH E HONBLE BENCH HAS CONSIDERED THE DISTINGUISHED THE DECISION OF THE BOMBAY HIGH COURT IN GODREJ AND BOYCE, WHICH THEREAFTER TRAVELLED TO THE SUPREME COURT. - IN VIEW OF THE AB OVE, THE HONBLE ITAT HELD THAT TAX RATES SPECIFIED IN DTAA IN RESPECT OF DIVIDEND MUST PREVAIL OVER DDT. 6. SHRI NIRAJ SHETH, LEARNED COUNSEL FOR T HE ASSESSEE, CONTENDS THAT T HE MATTER IS COVERED BY THE DECISION OF THE COOR DINATE BENCH. A REFERENCE W AS ALSO MADE TO ANOTHER DECISION OF THE COORDINAT E BE NCH IN THE CASE OF DCIT VS INDIAN OIL PETRONAS PVT LTD [ (2021) 127 TAXMANN.COM 389 (KOL )] , WHICH TAKES THE SAME STAND AND RATI ONALI S E S THE DECISION IN THE CA SE GIESECKE & DEVRIENT IN DIA P VT LTD (SUPRA) O N THE B ASIS OF MORE ELABO RATE REASONS FOR CO M ING TO TH E SAME CONCLUSION. AS FOR THE ISSUE OF MAKING A REFERENCE FOR THE CONSTITUTION OF A SPECIAL BEN CH IN CASE WE HAVE ANY RESERVATIONS ON THE CORRE C T NESS OF THE DECISIONS OF THE COORDINATE BE NCHES , LEARN ED COUNSEL SUBMITTED THAT THE ISSUE UNDER CO NSIDERATION N EED NOT BE REFERRED TO A SPECIAL BENCH AS THE SAME IS SQUARE LY COVERED BY THE AFORESAID DEC ISI ONS AND NO CONTRARY V IEW HAS BEEN TAKEN TO THE BEST OF OUR ( HIS ) KNOWLEDGE AND THAT FOLLOWING THE PRIN CI PLES OF CONSISTENCY , THE ISSUE DOES NOT REQUIRE A REFER E NCE TO SPECIAL BENCH . HE THUS URGES US TO FOLLOW THE COOR DI NATE BENCHES AND REMIT THE M ATTER TO THE FILE OF THE ASSESSING OFFICER FOR RECONSIDERAT ION IN THE LIGHT OF THE SAME. 7. SHRI SANJAY SINGH , L EARNED DEPARTMENTAL REPRESENTATI VE , VEHEMENTLY OPPOSES THE SUBM ISSIONS OF THE ASSESSEE ON MERIT S AS WELL. IN A WRITTEN NOTE FILED BY THE LEARNED COUN SEL, WHICH SUMS UP HIS ARGUMENTS ON THIS ISSUE, THE LEARNED D E PARTMENTAL REPRESENTATI VE HAS SUBMITTED AS F OLLOWS: CO NO. 57/MUM/2021 , AND ITA NO. 6997/MUM/2019 ASSESSMENT YEAR 2016 - 17 PAGE 5 OF 11 3.1.1. THE TAX U/S. 115O IS TAX ON DISTRIBUTED TAXES OF THE DOMESTIC COMPANIES. THE SEC.115O SUB CLAUSE 4 SPECIFIES THAT NO FURTHER CREDIT C AN BE CLAIMED BY THE COMPANY OR BY ANY OTHER PERSON IN RESPECT OF THE AMOUNT OF TAX SO PAID. SUB SEC.1A A ND 1B OF THE SEC.115O SUPPORTS THE VIEW THAT SEC.115O IS TAX ON THE DISTRIBUTED PROFIT OF THE COMPANY AND IS NOT A TAX ON THE INCOME OF THE SHAREHOLD ER. SUB SEC.5 OF THE SEC.115O PROVIDES THAT NO DEDUCTION VIDE ANY OTHER PROVISI ON OF THE ACT SHOULD BE AL LOWED TO THE COMPANY OR A SHARE HOLDER IN RESPECT OF THE AMOUNT WHICH HAS BEEN CHARGED TO TAX U/S. 115O. FURTHER, SEC.115O BEGINS WITH A NOT OBSTANT E CLAUSE AND THEREFORE, THE APPLICABILITY OF OTHER SEC. INCLUDING SEC.90 CANNOT BE CLAIMED. 3.1.2. THE T AX U/S. 115O IS NOT A WITHHOLDING TAX OR TAX DEDUCTED AS SOURCE ON THE DIVIDEND DISTRIBUTED TO THE SHAREHOLDER. IT IS A SECONDARY TAX ON CORPORATE PR OFIT DISTRIBUTED. THE FINANCE MINISTER SPEECH IN PARLIAMENT IN 1997 AT THE TIME OF INSTITUTIO N OF PROVI SI ON OF SEC.115O STATED THAT SOME COMPANY DISTRIBUTE EXORBITANT DIVIDEND, IDEALLY THEY SHOULD RETURN THE BULK OF PROFIT AND PLOUGH THAT INTO FRESH IN VESTMENT. I INTEND TO REWARD SUCH COMPANIES TO INVEST IN FUTURE GROWTH OF THE COMPANY. HENCE , I PROPOS E TO LEVY TAX ON DIVIDEND PROFIT AT THE MODEST RATED OF 10% AND THE AMOUNT SO DISTRIBUTED ON THIS TAX SHALL BE ON THE INCIDENCE OF THE COMPANY AND SHAL L NOT BE ON THE PROFIT OF THE SHAREHOLDER. 3.1.3. THE APEX COURT UPHELD THE DECISION OF THE HONBLE BO MB AY HIGH COURT IN GODREJ &BOYCE MANUFACTURING CO. LTD. BY CATEGORICALLY DEALING WITH SEC.115O AND HOLDING THAT THE TAX IS NOT PAID BY THE COMPANY ON BE HALF OF THE SHAREHOLDER. IT IS CATEGORICALLY HELD THAT THE DEDUCTION OF INCOME TAX U/S. 115O IS A TAX O N PROFIT OF THE COMPANY AND NOT A TAX ON DIVIDEND. 3.1.4. THE ASSESSE HAS REFERRED TO THE DECISION OF THE APEX COURT IN THE CASE OF UNION OF INDIA V/ S. TATA TEA LTD. 85 TAXMANN.COM 346 (SC) . IT MAY BE NOTED THAT THIS WAS IN RESPECT OF A WRI T PETITION F ILED WHERE ISSUE WAS THE LEGISLATIVE COMPETENCE OF THE PARLIAMENT IN ENACTING SEC.115O. THE ASSESSE HAD CONTENDED THAT THE SEC.115O IMPOSED INCOME TA X EVEN ON PORTION OF THE COMPOSITE INCOME WHICH INCLUDED AGRICULTURAL INCOME AND THEREFORE, WE RE OUTSIDE O F LEGISLATIVE POWER OF THE PARLIAMENT. NOWHERE IN THIS DECISION HAS THE APEX COURT HELD THAT THE TAX U/S. 115O IS THE TAX ON SHAREHOLDER. ALL THAT IT DEALT WITH WAS THAT THE DIVIDEND DISTRIBUTED TO THE SHAREHOLDER DOES NOT BEAR THE SAME CHARAC TER AS THE S OURCE OF THE INCOME OF THE COMPANY DISTRIBUTING THE DIVIDEND. THE DECISION OF THE APEX COURT IN THE TATA TEA CO. LTD. DOES NOT EVEN REFER TO THE DEC ISION IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. AND RIGHTLY SO SINCE THE ISSUE INVOLVED IN T HE TWO DEC IS IONS ARE ENTIRELY DIFFERENT. 3.1.5. BEFORE INVOKING THE DTAA THE QUESTION TO BE ANSWERED IS WHO IS TO PRESENTLY CLAIMING THE BENEFIT OF THE DTAA . THE ASSESSE IN THIS CASE IS A RESIDENT COMPANY AND CANNOT CLAIM THE BENEFIT OF ANY DTAA AGAINS T TAXES AS P ER DOMESTIC TAX STATUTE. AS REGARDS THE SHAREHOLDER, DETAILS ARE NOT AVAILABLE ON RECORDS. FURTHER, THE SHARE HOLDER CANNOT CLAIM CREDIT OF ANY TAXE S FROM ITS TAX AUTHORITY SINCE NO TAX HAS BEEN PAID BY IT IN INDIA. UNDER VARIOUS DTAAS THAT CO NO. 57/MUM/2021 , AND ITA NO. 6997/MUM/2019 ASSESSMENT YEAR 2016 - 17 PAGE 6 OF 11 I NDIA HAS E NT ERED, THE CREDIT OF THE TAX CAN BE ALLOWED BY THE COUNTRIES WHOSE RESIDENT IS THE ASSESSE. UNDER THE INDIA FRANCE DTAA, FRANCE WILL ALLOW CREDIT TO I TS FRENCH RESIDENT FOR TAXES PAID BY IT IN INDIA AND VICE VERSA. THERE CANNOT BE A SITUATION WHERE EITH ER IN THE TAX TREATY OR THE INDIAN DOMESTIC TAX LAW, INDIA WILL BE REQUIRED TO GIVE THE CREDIT TO RESIDENT OF FRANCE OF THE TAXES PAID BY AN INDIAN RESI DENT. 3.1.6 THE HONBLE ITAT, DELHI BENCH IN THE CASE OF GIESECKE & DEVRIENT INDIA PVT. LTD . HAVE NOT ED THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD., WHICH HELD THAT SECTION 115 - O DEALS WITH TAX ON THE COMPANY AND NOT ON THE SHAREHOLDERS. THE HONBLE ITAT HAS DISTINGUISHED BY TREATIN G THE TAX LE VIED U/S 115 - O AS TAX ON INCOME RELYING ON THE DEFINITION INCOME WHICH INCLUDES DIVIDEND. THEREAFTER, THE HONBLE ITAT HAVE ELABORATED ON THEIR UN DERSTANDING THAT THE AMENDMENT OF THE STATUTE BRINGING SECTION 115 - O IS OF ADMINISTRATIVE C ONVENIENCE AND THEREBY IMPLYING THE TAX IS ON DIVIDEND. THEREAFTER, THE HONBLE ITAT HAVE HELD THAT THE LIABILITY U/S 115 - O FALLS ON THE COMPANY IS NOT RELEV ANT IN RESPECT OF RATES OF DIVIDEND TAX SET OUT IN THE TAX TREATY. THE HONBLE ITAT HAS HEL D THAT THE E NACTMENT OF SECTION 115 - O WAS SUBSEQUENT TO THE NOTIFICATION OF THE TAX TREATY AND ON THIS REASONING IT WAS HELD THAT THE TAX RATE SPECIFIED IN DTAA IN RESPECT OF DIVIDEND MUST PREVAIL ON SECTION 115 - O. IT IS HUMBLY SUBMITTED THAT THIS DECISI ON HAS NOT C ONSIDERED THE ASPECTS AS TO THAT DIVIDEND DISTRIBUTION TAX IS A SPECIES OF TAX ON THE PROFITS OF THE COMPANY, WHO IS CLAIMING THE BENEFITS OF TAX TREA TY, WHETHER HE IS ENTITLED TO THE BENEFIT, WHO WOULD BE THE BENEFICIARY OF REFUND, WHETHER THE RATE IN T HE ARTICLE DEALING WITH DIVIDEND WILL APPLY WHEN THE RECIPIENT IS NOT BEING TAXED, THE OECD COMMENTARY, ELIMINATION OF JURIDICAL DOUBLE TAXATION VS E CONOMIC DOUBLE TAXATION, DECISIONS OF OTHER COUNTRIES ON THIS ISSUE, HAVE NOT BEEN ADDRESSED A DEQUATELY. 3.1.7 .. IT IS HUMBLY SUGGESTED THAT THIS ISSUE MAY BE REFERRED TO A SPECIAL BENCH. 8. WE HAVE GIVEN OUR CARE FUL CONSIDERATION TO THE R IVAL CO NTENTION, WE HAVE PERUSED THE MATER IAL ON RECORD AND WE HA VE DULY CONSIDER ED THE FACTS OF THE ISSUE INVO LV ED IN THE LIGHT OF THE APPLICABLE LE GAL POSITION. 9. WHILE IT CANNOT BE , AND IS NOT, OPEN TO US TO DISREGARD THE REASON AND THE GROUND OF A COORDIN ATE BE N CH DE CISION , LEST SUCH JUDICIAL INCONSISTENCY SHOULD SHAKE PUBLIC CONFIDENCE IN THE ADMINIS T RATIO N O F JUSTIC E AND LEST ONE OF THE FUNDAMENTAL L EG ITI MATE EXPECTATION S OF THE STAKEHOLDERS , I.E. THOSE EXERCISING JUDICIAL FUNCTIONS WILL FOLLOW THE REASO N OR GROUND OF THE JUDICIAL DECISION IN THE EARLIER CASES ON IDENTICAL MATTERS , WILL STAND DECLINED . I T I S, HOWEVER, EQUALLY TRUE , TO BO RROW THE WORDS OF HON BLE SUP REME COURTS AS ARTIC ULATED IN TH E CASE OF U NION OF INDIA VS PARAS LAMINATES PV T LTD [(19 90) 186 ITR 7 2 2 (SC) ] , THAT IT IS VITAL TO THE ADMINISTRATION OF JUSTICE THAT THOSE EXERCISING JUDICIAL PO WER MUST HAVE THE NECESSARY FREE DOM TO DOUBT THE CORRECTNESS OF A N EARLIER DECISION IF AND WHEN SUBSEQUENT PROCEEDINGS BEING TO LIGHT WHAT IS PERCEIV ED BY THEM AS AN ERRONEOUS CO NO. 57/MUM/2021 , AND ITA NO. 6997/MUM/2019 ASSESSMENT YEAR 2016 - 17 PAGE 7 OF 11 DECISION IN THE EARLIER CASE AND THAT I N SUCH CIRCUM STANCES, IT IS BUT NATU RAL AND REASONABLE AND INDEED EFFICA CIOUS THAT THE CASE IS REFERRED TO A LARGER BENCH . INCI DENTALLY, THESE OBSERVATIONS WE RE MADE IN THE CONTEXT OF A T WO - MEMBER BENC H DOUBTING THE CORRE CTNESS OF A THREE - MEM BER BENCH DECISION AND REFERRING THE MATTER FOR TH E CONSTITUTION OF A FIVE - ME MBER BENCH . HON BLE PRESIDENT OF C E NTRAL EXCISE , CU S TOMS AND GOLD C ONTR OL TRIBUNA L (CEGAT ), AS IT THEN WAS, ACCEPTED THESE RECOMMENDATIONS , AN D T HE HONBLE SUPREME COURT ULTIMATELY UPHELD THE ACTION OF THE HON BLE PRESIDEN T , CEGAT . THERE WAS NO OCCASION FOR CONFLICT OF DECISIONS OF THE COORDINATE BE N CH ES, AND YET , IN THE ESTE EMED VIEWS OF HON BLE SUPREME COURT, THE RECOMMEND ATION FOR CONSTITUTION OF THE SPECIAL BE NCH , AS INDEED THE CONSTITUTION OF THE SPECIAL BENCH ITSELF, WA S HELD TO BE IN O RDER. IN THIS VIEW OF THE MATTER, LEARN ED COUNSEL S SUBMISSION THAT HON BLE PRESIDENT C ANNOT CONSTITUTE A SPECIAL BENCH IN THE ABSENCE OF CONFLICT OF OPINION S BY THE DIVISION BENCHES IS INC ORRECT AND UNTENABLE IN LAW. OF COURSE, IT IS FOR THE HON BLE PRESIDENT TO TAKE A CONSIDERED CALL ON WHETHER OR NOT IT IS A FIT CASE FO R CONS TITU TION OF A SPECIAL BENCH, BUT, IN THE EVENT OF HIS HOLDING THE VIEW THAT IT IS INDEED A FIT CASE FOR CONS TITUTE OF A SPECIAL BE N CH, HE IS NOT, IN OUR HUM BLE UNDE R STANDING, DENUDED OF THE POWERS TO DO SO ON ACCOUNT OF LAC K OF CONFLICT IN THE VIEWS OF THE DIVISION BENCHES. 10. THE REASONS FOR OUR DOUBTING THE CO RREC TNESS OF THE DECISIONS OF THE COORDINATE BENCHES, ON THE DIVIDEND DISTRIBUTION TAX RATE BEING RESTR I CTED BY THE TREATY PROVISION DEA LING WITH TAXAT ION OF DIV IDENDS IN THE HANDS OF THE S HARE HOLDERS (I.E. ARTICLE 11 OF THE INDO FR ENCH TAX TREAT Y, AS IN T HIS CASE) , ARE AS SET OUT BE LOW: (A) HONBLE SUPREME COURT, IN THE JUDGMENT REPORTED AS GODREJ & BOYC E M FG CO LTD VS DCIT [(2017) 394 ITR 449 (SC)] , HAS OBSERVE D THAT THE FACT THAT SECTI ON 10(3) AND SECTION 115 O OF THE BROUGHT IN TOGETHER, DELETED AND REINTRODUCED IN A COMPOSITE MANNER ALSO DO ES NOT ASSIST THE ASSESSEE AND THAT IF THE ARGUMENT IS THAT TAX PAID BY THE DIVIDEND PAYING COMPANY UNDER SECTION 115 - O IS TO BE UNDERSTOOD TO BE IN BEHALF OF THE RECIPIENT ASSESSEE, THE PROVISIONS OF SECTION 57 SHOULD ENABLE THE ASSESSEE TO CLAIM DEDUCT ION OF EXPENDITURE INCURRED TO EARN THE INCOME ON WHICH SUCH T AX IS PAID WHICH IS WHOLLY INCONGRUOUS IN VIEW OF THE PROVISIONS OF SECTION 10(33). THE PAYMENT OF DIVIDEND DISTRIBUTION TAX UNDER SECTION 115 O DO ERS NOT DISCHARGE THE TAX LIABILITY OF THE SHAREHOLDERS. IT IS A LIABILITY OF THE COMPANY AND DISCHA RG E D BY THE COMPANY. WHATEVER BE THE CONCEPTUAL FOUNDATION OF SUCH A TAX, IT IS NOT A TA X PAID BY, OR ON BEHALF O F, THE SHAREHOLDER. IN OUR CONSIDERED V IEW , THERE FORE, DIVIDEND DISTRIB UTION TAX CANNOT BE TREATED AS A TAX ON BEHALF OF THE RECIP IENT OF DIVIDEN D S , I.E. THE SHAREHOLDERS. IN GIESECKE & DEVRIENT IN DIA P VT LTD S CASE, THE DIVISION BENCH DID NOT HAVE AN Y OCCASION TO DEAL WITH TH IS JU DICIAL PRECEDENT FROM HON BLE S UPREME COU RT. ( B ) THE STAND OF THE ASSESSEE THAT IN THE LIGHT OF THE SUBSEQUENT JUDGME N T OF HON BLE SUPREME COURT IN THE CASE OF UNION OF INDIA VS TATA TEA CO LTD [(2017) 398 ITR 26 0 (SC)], ONE HA S TO PROCEED ON THE BASIS THAT DIVIDENDS R ECE IVED BY THE SHAREHOLDERS ARE TAXED AS INCOME IN THE HAN DS OF THE SHAREHOLDERS , IS SIMPLY INC ORRECT. T HE QUESTION WHICH FELL FOR CONSIDERATION BEFORE HON BLE SU PRE ME COURT WAS WHETHER CO NO. 57/MUM/2021 , AND ITA NO. 6997/MUM/2019 ASSESSMENT YEAR 2016 - 17 PAGE 8 OF 11 LEVY OF TAX UNDER SECTION 11 5 O WAS CONSTITUTIONALLY V ALI D OR NOT, AND HON BLE SUPREME COURT HAS HELD THAT UNDER SECTION 2(24)(II) DIVIDEND IS INCLUDED IN INCOME AND IS T H U S COVERED BY E NTRY 82 OF LIST I TO SEVENT H SC HEDULE , TAX ES ON INCOME , OTHER THAN A GRICUL TU RAL INCOME IN THE LEGISLATIVE COMPETEN CE OF THE PARLIAMENT. IT DEALS WITH THE CONSTITUTIONALITY, NOT THE INT ERPRETATION , OF SECTION 115 O . IT DOES NOT OV ERRULE , O R EVEN REMOTEL Y DEAL WIT H, THE SPECIFIC DEC ISION OF HON BLE SUPREME COURT HOLDI NG THAT THE ARGUMENT IS THAT T AX PAID BY THE DIVIDEND PAYING COMPANY UND ER SECTION 115 - O IS TO BE UNDERSTOOD TO BE IN BEHALF OF THE RECIPIENT ASSESSEE CANNOT BE ACCEPTED IN L A W. IT IS ONLY ELEMENTARY, AS WAS HELD BY HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF IN THE CASE OF CIT V. SUDHIR JAYANTILAL MULJI [ ( 1995 ) 214 IT R 154 (BOM) ] , A JUDICIAL PRECEDENT IS ONLY 'AN AUTHORITY FOR WHAT IT ACTUALLY DECIDES AND NOT WHAT MAY C OME TO FOLLOW FROM SOME OBSERVATIONS WHICH FIND PLACE THEREIN'. THE PROPOSITIONS WHICH ARE ASSUMED BY THE COUR T TO BE CO RRECT FOR THE PURPOSE OF DECIDIN G THE SAME ARE, ACCORDING TO THIS JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT, LACK PRECEDENCE VA L UE AND ARE NOT BINDING IN NATURE . THE ASSESSEE IS N OT RELYING UPON WHAT HAS BEEN DECIDED IN TATA TEA C ASE, BUT ON WHAT LOGICALLY FO LLOWS FROM THE SAID P RECEDENT. THE INFERENCES DRAWN ON THE BASIS OF T ATA T EA DECISION (SUPRA) ARE THUS , IN O UR CONSIDERED VI E W, MISPLACED . ( C ) UNDER THE SCHEME OF THE T AX TREATIES, NO TAX C REDITS ARE ENVISAGED IN THE HANDS OF THE SHAREH OLDERS IN RESPECT OF D IVIDEND DISTRI BUT ION TAX PAID BY THE COMPANY IN WHICH SHARES ARE HELD. THE DI VIDEND DISTRIBUTION TAX THUS CANNOT BE EQUA T ED WITH A TAX PAID BY , OR ON BEHALF OF , A SHARE HOLDER IN RECEIPT OF SUCH A DIV IDEND. INFACT, THE PAYMENT OF DIVID END DISTRIBUTION TAX DOES NOT , IN ANY M ANNER, PREJUDICE THE FOREIGN SHARE HOLDER, AND ANY REDUCTION IN THE DI VIDEND DISTRIBUTI ON TAX DOES NOT, I N ANY MANNER, ACT TO THE BENEFIT OF THE F OREIGN SHARE HOLDER RESIDENT IN THE TREATY PARTNER JURISDICTION. THIS TA XA BILITY IS WHOLLY TAX - NEUTRAL VIS - - VIS FOREIG N RESIDENT SHARE HOLDER AND THE TREATY P R OTECTION , WHEN GIVEN IN RESPECT OF DIVIDEND DISTRIBUTION TAX , CAN ONLY BENEFIT THE DOMESTIC COMPANY CONCER NED. THE TREATY PROTECTION THUS SOUGHT GOES WELL BEYOND THE PURPOSE OF THE TAX TREATIES. ( D ) HON BLE DELHI HIGH C OURT S JUDGMENT IN THE CASE OF DIT V. NEW SKIES SATELLITE BV [ (2016) 382 ITR 114 (DEL)] DO E S L AY DOWN T HE PRI NCIPLE THAT A N AME NDMENT IN T HE D O ME STIC LAW WILL NOT INFLU ENCE THE INTERPRETATION OF THAT EXPRESSION IN THE TAX TREATY, AND THERE IS AB SOLUTELY NO DOUBT ON THAT PROPOSITION , BUT THAT PROPOSITION CANNOT SUPPORT THE INTERPRETATION, AS IS C ANVASSED BY THE COORDINATE BE NCHES, THAT EVEN W HEN TAX BURDEN IS SHIFTE D FROM A RESIDENT OF THE TAX TREATY PARTNER JURISDICTION TO RESIDENT OF ANOTHER J URISDICTION, THE TAX BURDEN ON THE ANOTHER PERSON, WHO IS NOT ELI GIBLE FOR TAX TREATY BENEFITS AN Y WAY , W ILL NEVERTHELESS BE SUBJECTED TO THE SAME LEVEL OF TAX TREATY PROTECTION . THAT IS STRETCH ING THINGS A BIT TOO FAR. SUCH A PROP OSITION DOES NOT EVEN FIN D MENTION IN ANY TAX TREATY LITERATURE , AND WE ARE , THEREFORE, NOT REALLY SURPRISED THAT THE PRESEN T DEC ISION , EXTENDING THE TAX TREATY PROT ECTION TO THE COMPANY PAYING DIVIDENDS, IN RESPECT OF DIVIDEND TAX DIS TRIB UTION TAX, APPEARS TO BE A SOL ITARY DECISI ON OF ITS KIND , TO THE BEST OF OUR KNOW LEDGE, ANYWHERE IN THE WORLD. QUITE TO THE CONTRARY , I N THE C ASE OF VOLKSWAGEN OF SOUTH AFRICA (PTY) LTD VS C OMMISSIONER OF SOUTH AFRICAN CO NO. 57/MUM/2021 , AND ITA NO. 6997/MUM/2019 ASSESSMENT YEAR 2016 - 17 PAGE 9 OF 11 REVENUE SERVICE (CASE NO. 24201/2007 ; WWW.I BFD.ORG DATABASE ) HON BLE SOUTH AFR ICAN HIGH COURT HAS OBSERVED THAT A SIMILAR DIVIDEND DISTRIBUTI ON T A X, KNOWN AS SECONDARY TAX ON COMPANIES (STC) PAID ON THE DISTR IBUTION OF DIVIDENDS, IS A TAX ON A COMPANY DEC LARING THE DIVIDENDS AND NOT ON DIVIDENDS . HON BLE SOUTH AFRICAN H I GH COURT HAS OBSERVED , INTER A LIA , AS FOLLOWS : IN THE CASE OF STC, THE ENTITY LI ABLE FOR THE DIVIDEND IS THE COMPANY DECLARING THE DIVIDEND AND THE DIVIDEND DECLARED IS NET OF TAX ON TH E OTHER H AND, A WITHHOLDING TAX SUCH AS NO N - RESIDENT SHAREHOLDER S TAX WAS A TAX ON THE SHAREHOLDER S DIVIDEND INCOME. AS FAR AS STC IS CONCERNED, SA ME IS LEVIED ON ALL SOUTH AFRICAN RESIDENT COMPANIES WHEN T HEY DECLARE DIVIDENDS. ON THE OTHER HAND, WITHHO LDING TAX SUCH AS NON - RESIDENT SHAREHOLDER S TAX IS APPLICABLE ONLY TO CERTAIN TYPE OF SHAREHOLDERS, FOR EXAMPLE A NON - RESIDENT SHAREHOLDER. FURTH ERM ORE, STC IS A TAX LEVIED WITH REFERENCE TO THE NET AMOUNT O F A COMPANY S TOTAL DIVIDENDS DURING A PARTICULA R PERIOD, AND ON THE OTHER HAND, NON - RESID ENT SHAREHOLDER S TAX WAS LEVIED ON THE AMOUNT OF THE DIVIDEND DECLARED TO THE AFFECTED SHAREHOLDER. TH E A BOVE - MENTIONED DIFFERENCES BETWEEN STC AND A WITHHOLDING TA X NEGATE THE SUBMISSION THAT STC IS SUBSTANTIALL Y SIMILAR TO A WITHHOLDING TAX SUCH AS NON - RESIDENT SHAREHOLDER S TAX. STC IS A TAXATION OF THE COMPANY DECLARING A DIVIDEND AND IS NOT A TAXATIO N O F THE RECIPIENT OF THE DIVIDEND, AND CONSEQUENTLY AS STATED EARLIER ARTICLE 7 OF THE DTA DOES NOT APPLY TO STC. THE ABOVE CONCLUSION IS FURTHER SUPP ORTED BY A PROPER READING AND ANALYSIS OF ARTICLE 7(2)(A) WHICH REFERS TO A RECIPIENT OF DIVIDENDS AND N OT TO A COMPANY DECLARING THE DIVIDEND. THE BENEFITS CONFERRED BY THE SAID ARTICLE ARE TO BE ENJOYED BY THE RE CIPIENTS OF THE DIVIDENDS AND NOT THE COMP ANY DECLARING THE DIVIDENDS ( E ) WHILE THE VIEWS SO EXPRESSED BY A FOR EIGN JUDICIAL B ODY DO NOT BIND US , O R, F OR THAT PURPOSE, ANY JUDICIAL BODY IN INDIA, TH ESE VIEW S AT LEAST SUGGEST THAT THIS SC H OOL OF THOUGHT REFLECTED IN THE SAID DECISION DESERVES TO EXAMINED IN A FAIR, JUDICI OUS AND OPEN - MINDED MANNE R. ( F ) WHEREVER THE C ONTRACTING S T ATES TO A TAX TR EATY INT END ED T O EXTEND THE TREATY PROTECTION TO THE DIVIDEND DISTRIBU TION TAX, IT HAS BEEN SO SPEC IFICALLY PRO VIDED IN THE TAX TREATY ITSELF . FOR EXAMP LE, IN INDIA HUN GRY DOUBLE TAXATION AVOIDANCE AGREEMENT [ ( 200 5 ) 274 ITR (STAT) 74; INDO H U NGARIAN TAX T REATY , IN S HORT] , IT IS SPECIFICALLY PROVIDED, IN THE PROTOCOL TO THE INDO HUNGARIAN TAX TREATY IT IS SPE CIFICA LLY 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 H ANDS OF TH E SHAREHOLDERS AND IT SHALL NOT EXCEED 10 PER CENT OF THE G ROSS AMOUNT OF DIVIDEND . CO NO. 57/MUM/2021 , AND ITA NO. 6997/MUM/2019 ASSESSMENT YEAR 2016 - 17 PAGE 10 OF 11 THAT IS A PROVI SION 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 MAI N TREATY I TSELF. IN THE ABSENCE OF SUCH A PROVISION IN OTHER TAX TREA TIES , IT CANNOT BE INFERRED AS SUCH BECA U SE A PROTOC OL D OES NOT EXPLAIN, B U T RATHER LA YS DOWN, A TREATY PROVISION. NO MATTER HOW DES IRABLE BE SUCH PRO VISIONS IN THE OTHER TAX TREATIES, TH ESE PROVIS IONS CANNOT BE INFERRED ON THE BASIS OF A RATHER AGGRESSIVE LY C REAT IVE PROCESS OF INT ERPRETATION OF TAX TREATIES. THE TAX TREATIES ARE AGREEME NTS BETWEEN THE TREATY PARTNER JURISDICTIONS , AND AGREEMENTS ARE TO BE INTERPRE TED AS THEY EXIST AND NOT ON THE BA SIS OF WHAT IDEALLY THESE AGREEMENTS SHOULD HAVE BEEN. ( G ) A TAX TREATY PROTECTS TAXATION OF INCOME IN THE HANDS OF RESIDENTS OF THE TREATY PARTNER JURISDICTIONS IN THE OTHER TREATY PARTNER JURISDICTION. THEREFORE, IN ORDER TO SEEK TREATY PROT ECTION OF AN INCO ME IN INDIA UNDER THE INDO FRENCH TAX TREATY, THE PE RSON S EEKING SUCH TREATY PROTECTION HAS TO B E 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 TH AT CONTRACTING STATE, IS LIABLE TO TAX THEREIN BY REASON OF HIS DOMICILE, RESIDENCE, PLACE OF MANAGEMEN T OR ANY OTHER CRITERION OF A SIMILAR N ATURE . O BVIOUSLY, THE COMPANY INCORPORATED IN INDIA, I .E. THE ASSESSEE BEFORE US, CANNOT SEEK TREATY PR O TECTION I N INDIA - EXCEPT FOR THE PURPOSE OF, IN DESERVING CASES, WHE RE THE CASES ARE COVERED BY THE NATIONALITY NON - DISCRIMINATION UNDER ARTICLE 2 6 ( 1 ), DEDUCTIBILITY NON - DISCRIMINATION UNDER ARTICLE 2 6 ( 4 ) , AND OWNERSHI P NON - DI SCRIMINATION UNDER ARTICLE 24 (5) AS , FO R EXAMPLE, AR TICLE 26(5) SPE CIFICALLY EXTENDS THE SCOPE OF TAX TRE ATY P ROTECTION TO THE E NTERPRISES OF ONE OF THE CONTRACTING STATES, THE CA PITAL OF WHICH IS WHOLLY OR PARTLY OWNED OR CONTROLLED, DIRECTLY OR INDIRECTLY, BY ONE OR MORE RESIDE NTS OF THE OT HER CONTRACTING STAT E . THE SAME IS THE POSITION WITH RESPECT OF THE OTH ER NON - D ISCRIM INATION PROVISIONS. NO SUCH EXTEN SION OF THE SCOPE OF TR EATY P ROTECTION IS ENVISAGED, OR DEMONSTRATED, IN THE PRESENT CASE . WHEN THE TAXES ARE PAID BY THE RESID ENT OF IND IA, IN RESPECT OF ITS OWN LIABIL ITY IN INDIA , SUCH TAXATION IN INDI A , IN OUR CO NSIDERED VIEW, CANNOT BE PROTECTED OR INFL UENCED BY A TAX TREAT Y PROVISION , UNLESS A SPECIFIC PROVISION EXISTS IN THE RELATED TAX TREATY ENABLIN G EXTENSION OF THE TREA TY PROTE CTION. ( H ) TAXATION IS A SOVEREIGN POWER OF THE STATE - COLLECTION A ND IMPOSITION OF TAXES ARE SOVEREIGN FUNCTIONS. DOUBLE TAXATION AVOIDANCE AGREEMENT IS IN THE NATURE OF SELF - IMPOSED LIMITATIONS OF A STATES I NHERENT RIGHT TO TAX , AND THESE DTA AS DIVID E TAX SOURCES, TAXABLE OBJECTS AMONGST THEMSELVES . INHERENT IN THE SELF - IMPOSED RESTRICTIONS IMPOSED BY THE DTAA IS THE FACT THAT OUTSIDE OF THE LIMITATIO NS IMPOSED BY THE DTAA, THE STATE IS FREE TO LEVY TAXES AS PER ITS OWN POLICY CHOICES . THE DIV IDEND DI STRIBUTION TAX , N OT BE ING A TAX PAID BY OR ON BEHALF O F A R ES IDENT OF TR EATY PARTNER JURISDICTION, CANNOT THUS BE CURTAILED BY A TAX TREATY PRO V ISION. (I) F OR ALL THESE REASONS INDEPENDENTLY , A S ALSO TAKEN TOGETHER, WE ARE OF THE CONSIDERED VIEW THAT IT IS A FIT CASE FOR THE CO NSTITUTION OF A SPECIAL BENCH , CONSISTING OF THREE OR MORE MEMBERS, SO THAT ALL THE A SPECTS RELATING TO THIS ISSUE CAN BE CO NO. 57/MUM/2021 , AND ITA NO. 6997/MUM/2019 ASSESSMENT YEAR 2016 - 17 PAGE 11 OF 11 CONSIDERED IN A HOLISTIC AND COMPREHEN SIVE MANNE R . IN AN Y CASE, IT IS A MACRO ISSUE THAT TOUCHES UPON THE TAX LIABILITY OF VIRTUALLY EVERY COMPANY WHICH HAS RESIDENTS OF A TAX TREATY PARTNER JURISDICTION AS SHAREHOLDERS , AND HAS SUBSTANTIAL RE VENUE IMPL ICATIONS . THE QUESTION WH ICH MAY BE REFERRED FOR THE CONSIDERATION OF SPECIAL BENCH CONSISTING OF THREE OR MORE MEMBERS , SUBJECT TO THE APPROVAL OF , AND MODIFICATIONS B Y, HON BLE PRESIDE NT, IS AS FOLLO WS: WHETHER THE PROTECTION GRANTED BY THE TAX TREA TIE S , UNDER SECTION 90 OF THE INCOME TAX ACT, 1961, IN RESPECT OF TAXATION OF DIVIDEND IN THE SOURCE JURISD ICTION , CAN BE EXTENDED , EVE N IN THE A BSENCE OF A SPECIFIC TREATY PROVISION TO THAT EFFEC T, TO THE DIVI DEND DISTRIBUTION TAX UNDER SECTION 115 O IN TH E H ANDS OF A DOMESTIC COMPANY? 11. THE RE GISTRY IS DIRECTED T O PLACE THE MATTER B EFORE THE HO N BLE PRE SIDENT FOR HIS KIND CO NSIDERATION AND FOR THE APPROPRIA TE ORDE RS . SD/XX SD/XX A MARJIT SINGH PRAMOD KUMAR ( JUDIC I AL MEMBER ) (VIC E PRESIDE NT) MUMBAI, DATED TH E 23 RD DAY OF JUNE, 2021