DDT on dividends to non-residents restricted to DTAA rate (10%) as it is tax on shareholder's dividend income; prevails over domestic law. Management fees ALP restored for fresh consideration of evidences.

ORDER

PER PAVAN KUMAR GADALE, JM:

The assesse has filed the appeal against the order of the Assessing Officer passed u/s 143(3) r.w.s 144C(13) of the Income Tax Act, 1961 passed in pursuance to the directions of the Dispute Resolution Panel (DRP) u/s 144C(5) of the Act. The assesse has raised grounds of appeal challenging the action of lower authorities in determining the ALP pertaining to management fees as Nil and also the lower authorities erred in passing the orders without considering the submissions and evidences.

2. The assessee has raised two additional grounds of appeal as under.

(i) To allow deduction of education cess on income tax and secondary and higher education cess payable for the year under consideration while computing the total income.

(ii) To restrict the Dividend Distribution Tax (DDT) prescribed under the India-Netherlands tax treaty read with protocol to tax treaty and the excess DDT paid should be refunded along with the interest.

3. At the time of hearing, the Ld.AR has not pressed the additional ground of appeal no (i) and accordingly this ground of appeal is treated as withdrawn and is dismissed.

4. The second additional ground of appeal (ii) raised by the assesse for applicability of Dividend Distribution Tax (DDT) tax rate @10% under the India-Netherlands tax treaty read with protocol treaty and the excess DDT paid should be refunded along with the interest and the Ld.AR substantiated the submissions with the factual paper book and judicial decisions. Per Contra, The Ld.DR submitted that this issue is covered in favour of the Revenue by the decision of the Special Bench of the Tribunal in DCIT Vs Total Oil India Private Ltd, reported in [2023] 149 taxmann.com 332 (Mumbai - Trib.) (SB). The Ld.AR highlighted and relied on recent decision of the Hon’ble High Court of Bombay in Colorcon Asia (P.). Ltd. v/s JCIT, reported in [2025] 181 taxmann.com 301 (Bom.).We heard both the parties and perused the material available on record, we find that the Hon’ble High Court of Bombay in Colorcon Asia (P.). Ltd. (supra), after considering the decision of the Special Bench of the Honble Tribunal in Total Oil India Private Ltd (supra), held that where an Indian company, paid dividend to its non-resident shareholder company, since such payment was in nature of dividend covered under definition of “dividend” under the DTAA and section 115-O, the taxpayer was entitled to restrict tax rate on dividends distributed by it to its non-resident shareholder company to the rate of tax provided under the DTAA.

“”The findings of the Hon’ble High Court of Bombay in Colorcon Asia (P.). Ltd. Vs JCIT (supra), are as under: -

“ D : CONCLUSION “55. We find ourself fortified by the observation of Delhi Tribunal in Giesecke & Devrient (India) (P.) Ltd. (supra), where with reference to the legislative history of Section 115-O, it emerges with clarity, that DDT, is a levy on the dividend distributed by payer company, being an additional tax is covered within 'Tax' as defined in Section 2(43) of Act and, hence, is chargeable as per Section 4, which is subject to other provisions, which include Section 90 and sub-clause (2) thereof, then specially in case of Avoidance of Double Tax, the provisions more beneficial to assessee must be preferred. Considering that the international treaties involve extensive negotiations between two nations, and deinitely being conscious of the respective Nation's power to tax, the benefits and detriments of a treaty and particularly a double tax treaty and its avoidance, can only be reciprocal when the low of trade and investment