PR. COMMISSIONER OF INCOME TAX (CENTRAL), GURUGRAM V. NECTAR LIFE SCIENCES LTD.

ITA/266/2024

AI Insights

The case involves the Revenue appealing against an order of the Income Tax Appellate Tribunal (ITAT), which had dismissed the Revenue's appeal concerning the taxability of dividends received by Nectar Life Sciences Ltd. from its subsidiary in Sri Lanka. The Revenue contended that the ITAT erred in applying Section 10(34) of the Income Tax Act, 1961, which pertains to exemptions for domestic companies, to the assessee, a non-domestic company. However, the ITAT's decision was supported by a Supreme Court ruling that the dividends in question were not taxable under the applicable Double Taxation Avoidance Agreement. The Revenue's argument was further weakened by the fact that in subsequent assessment years, the Revenue had accepted the non-taxability of such dividends.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 745007 (HC-DELHI)
• Appeal Type: Others
• Pronouncement Date: 14-01-2025
• Assessment Year: misc
• Other Referred Cases: Deputy Commissioner of Income Tax v. Torqouise Investment & Finance Ltd.: [2008] 300 ITR 1
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: RADHIKA SURI; ABHINAV NARANG
• Assessee Lawyers: SANJAY KUMAR; MONICA BENJAMIN; EASHA KADIAN
• Keywords: Double Taxation Avoidance Agreement; Income tax appellate tribunal; Taxability of Dividend; Sri Lankan Subsidiary
• Section: 260A; 10(34); 115-O; 115-O; 90(3)

Judgement Text

"$~10 * IN THE HIGH COURT OF DELHI AT NEW DELHI + ITA 266/2024 PR. COMMISSIONER OF INCOME TAX (CENTRAL), GURUGRAM .....Appellant Through: Mr. Sanjay Kumar, Ms. Monica Benjamin & Ms. Easha Kadian, Advs. Versus NECTAR LIFE SCIENCES LTD. .....Respondent Through: Ms. Radhika Suri, Sr. Adv. with Mr. Abhinav Narang, Adv. CORAM: HON'BLE THE ACTING CHIEF JUSTICE HON'BLE MR. JUSTICE TUSHAR RAO GEDELA O R D E R % 14.01.2025 1. The Revenue has filed the present appeal under Section 260A of the Income Tax Act, 1961 (hereafter the Act) impugning an order dated 01.08.2022 (hereafter the impugned order) rendered by the Income Tax Appellate Tribunal (hereafter ITAT) in ITA No.761/Chd/2011 in respect of the assessment year (AY) 2006-07. The Revenue has projected the following question of law for consideration of this Court: “A. Whether in the facts and circumstances of the case and in law, the Hon'ble ITAT was right in dismissing the appeal of the revenue on the issue of taxability of dividend received by the assessee from its Sri Lankan Subsidiary in view of the provisions of sub-section 3 of Section 90 of the Income Tax Act, 1961 as well as in view of notification No. 91/2008 of CBDT? 2. The controversy involved in the present appeal relates to the taxability of the income received by the respondent (assessee) by way of dividend from its subsidiary company incorporated in Sri Lanka. 3. Mr. Sanjay Kumar, the learned counsel appearing for the Revenue referred to paragraph 41 of the impugned order which records that the This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 24/01/2025 at 15:45:35 assessee had claimed exemption of the amount of dividend received from its Sri Lankan subsidiary company under Section 10(34) of the Act. He submits that Section 10(34) of the Act is inapplicable as it applies to the companies covered under Section 115-O of the Act, which in turn refers to domestic companies. He, however, does not dispute that the issue regarding taxability of dividend is in favour of the assessee by virtue of the decision of the Supreme Court in Deputy Commissioner of Income Tax v. Torqouise Investment & Finance Ltd.: [2008] 300 ITR 1. He states that the said decision was rendered in the context of Indo Malaysian Double Taxation Avoidance Agreement, which is pari materia to the Indo-Sri Lankan Double Taxation Avoidance Agreement. 4. The learned senior counsel appearing for the assessee further submits that in subsequent assessment years (being AYs 2007-08 and 2008-09) the Revenue has accepted that the dividend from its Sri Lankan subsidiary company is not taxable and no addition in this respect has been proposed by the Assessing Officer in those years. 5. Since it is not disputed that the dividend received by the assessee from its Sri Lankan subsidiary company, is not taxable, no substantial question of law arises for consideration of this Court in the present appeal. 6. The appeal is accordingly dismissed. VIBHU BAKHRU, ACJ TUSHAR RAO GEDELA, J JANUARY 14, 2025 ‘gsr’ Click here to check corrigendum, if any This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 24/01/2025 at 15:45:35 "