Kalyani Maxion Wheels Private Limited Vs DCIT (ITAT Pune)
Assessee, an Indian company, declared dividends to its German shareholder Maxion Wheels Holding GmbH.
While paying Dividend Distribution Tax (DDT) u/s 115-O, Assessee claimed that tax should be restricted to the lower rate prescribed under India-Germany DTAA (Article 11). It contended that since treaty provisions are beneficial, excess DDT paid ought to be refunded.
CIT(A) rejected the plea, following settled view that DDT is a levy on the domestic company and not on the shareholder. Hence, DTAA relief cannot be invoked by the company.
Tribunal noted that the issue is squarely covered by Special Bench decision in DCIT Vs Total Oil India (P.) Ltd. (2023) 104 ITR (T) 1 (Mum-SB).
Tribunal held that:
- Additional tax u/s 115-O is levied on the company itself.
- DTAA applies to taxation of shareholder’s income, not to a company’s liability under 115-O.
- Unless treaty explicitly extends benefit to company paying DDT, no relief is permissible.
Tribunal dismissed all 4 appeals of Assessee.
Domestic companies cannot claim DTAA benefit to reduce DDT liability u/s 115-O on dividends paid to foreign shareholders. Treaty protection extends only to shareholder’s income tax, not to DDT payable by the distributing company.
