Sophos Technologies Private Limited Vs DCIT (ITAT Ahmedabad)
DDT on UK Shareholders Capped at Treaty Rate; APA-Linked Interest Deleted: ITAT Ahmedabad Grants Major Relief to Sophos Technologies Pvt. Ltd. (AY 2016-17)
The Ahmedabad ‘A’ Bench of the Income Tax Appellate Tribunal, Ahmedabad Bench allowed the appeal of Sophos Technologies Pvt. Ltd. for AY 2016-17, granting substantial relief on Dividend Distribution Tax (DDT), interest under sections 234B/234C, and TDS credit.
On DDT, the Tribunal held that DDT paid on dividends distributed to UK-resident shareholders must be restricted to 10% as prescribed under Article 11 of the India–UK DTAA, notwithstanding section 115-O. Following the Bombay High Court ruling in Colorcon Asia Pvt. Ltd., the ITAT held that DDT is in substance a tax on dividend income of shareholders, and excess collection beyond the treaty rate is contrary to Article 265 of the Constitution. The AO was directed to refund excess DDT.
On interest u/s 234B and 234C, the Tribunal deleted the levy on incremental income offered pursuant to an Advance Pricing Agreement (APA), holding that such income crystallised only upon signing of the APA and could not have been anticipated for advance-tax purposes. Reliance was placed on Colt Technology Services (Delhi ITAT) and High Court precedents.
On TDS credit, the AO was directed to verify and grant short credit of ₹5.78 lakh as claimed in the modified return.
The ground challenging the CIT(A)’s remand direction was treated as consequential. Overall, the appeal was allowed in full, with directions to grant refunds and consequential reliefs.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This appeal is filed by the Assessee as against the appellate order dated 30-12-2024 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, (in short referred to as “CIT(A)”), arising out of the assessment order passed under section 143(3) r.w.s. 144B of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year 2016-17.
2. Brief facts of the case is that the assessee is a Private Limited Company provides Network Security Solutions, Contract Software Development and Contract Support Services. For the Assessment Year 2016-17 assessee filed its original Return of Income on 30-11-2016 declaring total income of Rs.148,86,82,230/- and revised return on 27-03-2018 declaring total income of Rs.149,22,97,140/-. The assessee company entered into an Advance Pricing Agreement (hereinafter referred as APA) with Central Board of Direct Taxes on 1908-2019 under section 92CC of the Act for the Asst. Years 2016-17 to 2020-21. Therefore, a modified Return of Income under section 92CD was filed by the assessee company on 14-11-2019 declaring total income of Rs.157,70,06,240/- and paid the additional tax on the said income.
