ACIT Vs Durr India Pvt Ltd (ITAT Chennai)
DTAA Cannot Override DDT Provisions-ITAT Chennai Allows Only 30% Disallowance u/s 40(a)(ia), But Denies DDT Refund Claim
Assessee, engaged in providing paint finishing systems to automobile manufacturers, had filed return declaring Rs.29.64 crore. CPC made adjustments u/s 143(1), disallowing Rs.58,00,953 u/s 40(a)(i) for non-deduction of TDS on payments allegedly made to non-residents.
CIT(A) found that the payees were resident Indians & restricted disallowance to 30% u/s 40(a)(ia), amounting to Rs.17,40,286. Tribunal noted that documents clearly established payees’ resident status & upheld CIT(A)’s restriction, dismissing Revenue’s ground.
The other issue concerned refund of Dividend Distribution Tax (DDT). Assessee had distributed dividends to its German parent & paid DDT at 20.56% u/s 115-O, but claimed refund of excess tax beyond 10% as per India-Germany DTAA. CIT(A) allowed the claim relying on ITAT precedents (Giesecke & Devrient, Indian Oil Petronas). Tribunal, however, held that DDT is a tax on company’s profits, not on shareholder’s income & therefore DTAA rates do not apply. Relying on Supreme Court ruling in Godrej & Boyce Mfg Co. Ltd. & Special Bench decision in Total Oil India Pvt Ltd, Tribunal set aside CIT(A)’s order & held that no refund of DDT is allowable.
