Point of Law : Taxation - Issuance of a certificate at a lower withholding tax rate – While interpreting international treaties including Tax treaties rules of interpretation that apply to domestic or municipal law need not be applied, for reason, that international treaties, conventions and tax treaties are negotiated by diplomats and not necessarily by men instructed in law.

JUDGMENT :

RAJIV SHAKDHER, J.

Preface: -

1. The moot issue, which arises for consideration, in the captioned writ petitions is: as to what should be the withholding rate of tax in respect of dividend?

2. The petitioners, in both cases, before us, are the deductees, i.e., the ultimate tax-payers. The grievance of the petitioners is that their request to respondent no. 1, for issuance of a certificate at a lower withholding tax rate of 5%, was rejected, despite The Government of the Republic of India and the Government of the Kingdom of Netherlands Agreement for Avoidance of Double Taxation and Prevention of Fiscal Evasion [in short “subject DTAA”], [when read, along with] the appended protocol, making a provision qua the same.

2.1. What is not in dispute is that the impugned certificates issued by respondent no. 1, with the approval of respondent no. 2, have stipulated a withholding tax rate of 10% on dividends receivable by the petitioners.

3. Therefore, insofar as W.P. (C) 9051/2020 [hereafter referred to as the “first writ petition”] is concerned, a challenge is laid to the certificate dated 16.09.2020 issued by respondent no. 1. The relief sought is that the same be quashed. The consequential relief sought is that the petitioner’s Indian counterpart, i.e., the deductor be permitted to remit dividend, after deducting withholding tax at the rate of 5%. Likewise, in W.P. (C) 882/2021 [hereafter referred to as the “second writ petition”], the relief sought is for quashing the certificate dated 04.01.2021 issued by respondent no. 1 with the approval of respondent no. 2 whereby the withholding tax rate is pegged at 10%.

Background facts: -

4. Thus, to adjudicate upon the captioned writ petitions, the following broad facts are required to be noticed:

4.1. India entered into the subject DTAA with the Kingdom of Netherlands on 21.01.1989. A notification, in that behalf, was issued on 27.03.1989 which was amended by a subsequent notification dated 30.08.1999.

4.2. The petitioner, in the first writ petition, is an entity going by the name Concentrix Services Netherlands B.V. [hereafter referred to as “Concentrix Netherlands”] while the remitter of the dividend is an Indian company, i.e., Concentrix Daksh Services India Private Limited [hereafter referred to as “Concentrix India”]. Similarly, insofar as the petitioner in the second writ petition is concerned, it is an entity going by the name Optum Global Solutions International B.V. [hereafter referred to as “Optum Netherlands”] and the remitter of the dividend is once again an Indian entity described as Optum Global Solutions (India) Private Limited [hereafter referred to as “Optum India”]. What is not in dispute is that Concentrix Netherlands and Optum Netherlands hold 99.99% share in their Indian counterparts i.e. Concentrix India and Optum India respectively.

4.3. It is in this background that Concentrix Netherlands, on 29.07.2020, had applied to the concerned statutory authority under Section 197 of the Income Tax Act, 1961 [in short "the Act"] in the prescribed form, i.e., Form 13 seeking issuance of a certificate that would authorize Concentrix India to deduct withholding tax at a lower rate of 5% in consonance with the subject DTAA read with the protocol appended thereto.

4.4. Likewise, Optum Netherlands had applied to respondent no. 1 on 15.07.2020 under Section 197 of the Act for issuance of a certificate that would authorise Optum India to deduct withholding tax at the rate of 5% under the subject DTAA and the protocol appended thereto.

4.5. In the case of Concentrix Netherlands, respondent no. 1, after obtaining approval of respondent no. 2 issued the impug