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DELHI HIGH COURT
MANMOHAN, NAVIN CHAWLA
Deccan Holdings BV – Appellant
Versus
Income Tax Officer – Respondent
| Table of Content |
|---|
| 1. challenging withholding tax rates under dtaa. (Para 1 , 2 , 3) |
| 2. previous judgments support petitioner's argument. (Para 4) |
| 3. court agrees with petitioner based on established precedent. (Para 5) |
| 4. tax certificate to be issued at lower rate. (Para 6) |
| 5. order to dispose of writ petition. (Para 7) |
JUDGMENT
Manmohan, J. (Oral)--Present writ petition has been filed challenging the certificate dated 29th September, 2021 as well as the order dated 12th August, 2021 (the correct date being 29th September, 2021) issued by the first Respondent. Petitioner seeks directions to the Respondents to issue a fresh certificate under section 197 of the Income Tax Act, 1961 [the Act] permitting the Petitioner to receive dividend of Rs. 65.68 crores for Financial Year 2021-22 subject to deduction of tax at the rate of 5% in terms of the India Netherlands DTAA read with the Protocol and MFN clause.
2. Learned counsel for the petitioner states that the petitioner is a company incorporated under the laws of Netherlands and is engaged in the business of acquiring strategic ownership interests, owning and disposing ownership interests in other companies and enterprises, both in Netherla
The court ruled that a lower withholding tax rate of 5% applies under the India-Netherlands DTAA, invoking the Most Favoured Nation clause, which was supported by previous binding judgments.
A taxpayer is entitled to timely decisions on applications for lower withholding tax rates under the Income Tax Act based on the provisions of applicable Double Taxation Avoidance Agreements.
The court emphasized that the Department cannot refuse to follow binding jurisdictional decisions merely on the basis of proposing to file an appeal.
The protocol attached to a DTAA is binding and automatically applies, negating the need for separate governmental notifications to implement its terms.
The protocol in the DTAA allows for the automatic applicability of lower withholding tax rates based on other treaties, requiring consistent interpretation for equitable tax allocation between contra....
The court ruled that under Section 197 of the Income Tax Act, a 5% tax rate on dividends applies to the petitioner as per the India-Swiss DTAA, reinforcing judicial consistency.
Dividend Distribution Tax is a tax on dividend income and is covered by the DTAA, allowing a maximum tax rate of 10% on such dividends.
Tax authorities must comply with statutory rules when issuing TDS withholding certificates; failure to do so invalidates the order.
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