• Notification Date: 29-06-2023
• Notification No: N/A

ITAT: Additional Income Tax on Dividend Paid to Non-Resident Shareholders shall be Taxed u/s115-O

The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has held that the additional income tax on dividends paid by domestic companies to non-resident shareholders should be at rate prescribed under Section 115-O of Income Tax Act, 1961and not as per Double Taxation Avoidance Agreement (DTAA). The assessee company, Group M Media India Pvt. Ltd was into the business of media planning, buying and implementing activities. Assessee’s return of income declaring total income was subjected to scrutiny. 

The Assessing Officer (AO) noticed that the assessee during the year under consideration had claimed software expenses to the tune of Rs.2.99 crore as revenue expenditure on the payments made to foreign countries. However, TDS applicable was not deducted while making such payment. 

The assessee by filing application for raising additional ground in its cross objection that “Refund of excess Dividend Distribution Tax (DDT) paid, it was submitted by assessee that the AO and Commissioner of Income Tax Appeal (CIT(A)) ought to have appreciated that dividend paid by Group M India to its Singapore shareholder, Group M Asia Pacific Holdings Pte Limited, was liable to tax as per the beneficial tax rate of 10% under Article 10(2) of the India – Singapore Tax Treaty. 

He further submitted that the DDT paid by Group M India in excess of the 10% tax rate should be refunded to Group M India” on the ground that the same was a legal ground raised on the basis of decision rendered by Coordinate Bench of Delhi Tribunal in case of Giesecke & Devrient (India) Pvt. Ltd. wherein it was held that DDT rate should be restricted to the tax rate on dividend under the relevant tax treaty and DDT paid in excess of the tax treaty rate should be refunded to the taxpayer. 

Nikhil Tiwari,appeared on behalf of the assessee and Nihar Ranjan Samal, appeared on behalf of the revenue. 

The two-member Bench of B R Baskaran, (Accountant Member) and Kuldip Singh, (Judicial Member) referred to Total Oil India Pvt. Ltd. vs. CIT & ors. which held that “Where dividend is declared, distributed or paid by a domestic company to a non-resident shareholder(s), which attracts Additional Income Tax (Tax on Distributed Profits) referred to in Sec.115-O of the Act, such additional income tax payable by the domestic company shall be at the rate mentioned in Section 115 O of the Act and not at the rate of tax applicable to the non-resident shareholder(s) as specified in the relevant DTAA with reference to such dividend income.”