While allowing relief to M/s Barclays Capital Mauritius Limited, the Income Tax Appellate Tribunal (ITAT), Mumbai bench has held that the Company is eligible for the benefit of Indo-Mauritius Double Taxation Avoidance Agreement (DTAA).
The assessee is carrying on investment activities in Indian capital market.
The counsel for the assessee, Shri Nishant Thakkar submitted that it had earned dividend income amounting to Rs.3,37,04,020/- in respect of shares represented by Indian Depository Receipts(IDR) issued by Standard Chartered Bank Plc. (SC Plc) incorporated in United Kingdom. The said IDRs are listed on Stock Exchange in India. The dividend has been received by overseas custodian bank in UK and ultimately remitted to all IDR holders (including assessee). An IDR has been recognized as a security to facilitate trading thereof on the Indian Stock Exchange. The dividend that an IDR holder receives, is in fact a dividend on the shares of SC Plc ( a foreign company). Thus, according to the assessee, the dividend cannot be regarded as income from the IDR.
It is an undisputed fact that the dividend on IDR has been received in India. The DRP and the Assessing Officer however, accepted alternate claim of the assessee to the extent that the assessee will get the benefit of India Mauritius tax treaty, however, the benefit of tax treaty shall be eligible to the asssessee as per clause 2(b) of Article -10 and hence, the dividend is eligible to be taxed @15%.
A bench of Shri Vikas Awasthy (Judicial Member) & Shri Gagan Goyal (Accountant Member) observed that all the participants in IDR facility are identical except the IDR holders.
“The holder of IDR in present case is assessee instead of Morgan Stanley Mauritius Co. Ltd. The Tribunal held that in so far as the fact that dividend income is received by assessee in India is not in dispute, hence, the findings of authorities below cannot be faulted in holding that the money is received by the assessee therein from Indian Depository in respect of dividend paid by Standard Chartered Bank Plc UK is taxable in India, hence, the findings of the authorities below to that extent were confirmed by the Tribunal,” the Tribunal said.
Relying on a similar case of Morgan Stanley Mauritius Co. Ltd, ITAT held that “The Co-ordinate Bench in a lucid manner explained the provisions of Article10 and Article-22 and thereafter explained as to how the transaction would not fall within the ambit of Article 10 and hence, is covered by residuary Article – 22. The Tribunal after examining the transaction concluded that the taxability of IDR dividends fail in the light of India – Mauritius DTAA –Article 22”
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