IN THE INCOME TAX APPELLATE TRIBUNAL “I” BENCH, MUMBAI BEFORE SMT. BEENA PILLAI (JUDICIAL MEMBER)

AND SHRI RENU JAUHRI (ACCOUNTANT MEMBER)

I.T.A. No.4813/Mum/2023 Assessment Year: 2021-22 Loparex Holding BV Assistant

901-902, First Avenue, Commissioner of

9th Floor, Goregaon- Income-tax Mulund Link Road, International Near Inorbit Mall, Vs. Taxation, Malad West, Circle – 3(1)(2), Mumbai – 400 064 Mumbai PAN: AAECL3546M (Appellant) (Respondent)

Appellant by None Respondent by Shri Krishna Kumar, SR. D.R.

Date of Hearing 19.02.2025 Date of Pronouncement 28.02.2025 ORDER Per: Smt. Beena Pillai, J.M.:

The Present appeal filed by the assessee is against the final assessment order dated 27/10/2023 passed by ACIT International taxation Circle (1)(2), Mumbai for assessment year

2021-22 on following grounds:

“1.1. The Ld. AO has erred in finalizing an order of assessment which suffers from legal defects and is erroneous such as being passed without adequate inquiries and as such is liable to be quashed.

1.2. The lower authorities have erred in taxing the dividend income of the Appellant amounting to INR 26,99,97,500 at 10% as per Article 10 of the India-Netherlands DTAA.

1.3. The lower authorities have erred in taxing the dividend income without giving benefit of the lower tax rate of 5% as per the India- Netherlands DTAA read with the India-Slovenia DTAA by invoking the MFN Clause as per Clause IV of the Protocol.

1.4. The lower authorities have, in the facts and circumstances of the case and in law, erred in relying on Circular No. 3/2022 dated February 03, 2022, issued by the Central Board of Direct Taxes ("CBDT") and thereby denying the benefit of the MFN clause to the Appellant.

1.5. On the facts and in the circumstances of the case and in law, the Ld. AO has erred in levying any consequential additional interest under section 234D of the Act.

1.6. On the facts and in the circumstances of the case and in law, the Ld. AO has erred in not granting the TDS credit with regard to the interest amount received on the refund.

1.7. On the facts and in the circumstances of the case and in law, the Ld. AO has erred in initiating penalty proceedings under section 274 read with section 270A of the Act, for underreporting of income.

1.8. On the facts and in the circumstances of the case and in law, the Ld. AO has erred in initiating penalty proceedings under section 274 read with section 270A of the Act, for misreporting of income.”

Brief facts of the case are as under:

2. The assessee is a non-resident company incorporated as per the laws of Netherlands and of wholly-owned subsidiary of Loparex International BV, Netherlands. It filed its return of income for the year under consideration on 14/03/2022 ₹

disclosing total income of 27,84,85,278/-. It was observed that, the assessee earned dividend from its subsidiary company Loparex India Pvt. Ltd. 66 the live video observed that assessee offered the dividend tax at 5%.

2.1 The Ld.AO called upon the assessee to furnish details in order to justify its claim of taxing dividend in India at 5%. In response, the assessee submitted that, as per Article 10 of the India-Netherlands Double Taxation Avoidance Agreement (hereinafter referred to as DTAA), taxes on dividend can be levied in the country in which the company paying such dividend resident. It was submitted that company that paid dividend to the assessee is a tax resident of India and the taxes therefore shall be subject to a maximum rate of 10%.

2.2 It was further, submitted that, assessee being a beneficial owner of dividends, the rate at which tax can be levied in India on such dividend income is capped at 10% as per Article 10 of the India-Netherlands DTAA. The assessee referred to the Protocol of the India-Netherlands DTAA wherein it provides for Clause IV, that reads as under:

The "Most Favored Nation" ("MFN") clause which seeks to restrict India's right to tax under the India-Netherlands DTAA by importing the restricted scope/ lower rate of tax provided in any