The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has held that additional income tax pay by domestic companies to resident shareholders should be at the rate mentioned under Section 115-O of the Income Tax Act, 1961.
The assessee Ambuja Cement Ltd filed the appeal for considering the additional ground raised in the miscellaneous application
The additional ground was raised by the assessee that benefit of Article 10 of the India Mauritius Double Tax Avoidance Agreement, that the dividend declared by the appellant to Holderind Investment Ltd.,Mauritius is liable to dividend distribution tax at the rate of 5 percent.
When the matter was considered before the bench, Chaitanya D Joshi, the counsel for the assessee submitted that identical issue and similar facts had been decided in the case of DCIT v/s Total Oil India Pvt. Ltd. It was held that additional grounds income tax payable by the domestic company shall be at the rate mentioned in Section 115-O of the Income Tax Act.
The tribunal by analysing the case of DCIT v/s Total India Pvt. Ltd observed that “dividend declared, distributed or paid by a domestic company to non resident shareholder(s) attract additional income tax (tax on distributed profits) referred to in section 115-O of the Income Tax Act , such additional income tax payable by the domestic company shall be at the rate of mentioned in section 115-O of the Income Tax 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.”
Therefore the two member bench of Amit Shukla, (Judicial Member) and Amarjit Singh, (Accountant Member)held that dividend distribution tax is not on the shareholder but a tax on the domestic company.
Therefore, the bench dismissed the appeal filed by the assesee.
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