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May 2023

Section 115-O read with Dividend Article of DTAA – Dividend Distribution Tax (DDT) rate prescribed under section 115-O cannot be reduced to rate mentioned in Dividend Article of DTAA rate applicable to a non-resident shareholder.

By Geeta Jani | Dhishat B. Mehta | Bhaumik Goda
Chartered Accountants
Reading Time 8 mins

20. DCIT vs. Total Oil India (Pvt) Ltd [2023] 149 taxmann.com 332 (Mumbai-Trib.) (SB) [ITA No: 6997/Mum/2019] A.Y.: 2016-17 Date of order: 20th April, 2023

Section 115-O read with Dividend Article of DTAA – Dividend Distribution Tax (DDT) rate prescribed under section 115-O cannot be reduced to rate mentioned in Dividend Article of DTAA rate applicable to a non-resident shareholder.

FACTS

Taxation of dividend income under the Act has been subject to various amendments from time to time. Pre-1997, classical system of taxation was prevalent wherein the dividends were taxed in the hands of shareholders and companies declaring these dividends were required to withhold taxes on dividend income. From the year 1997 to 2020 (except for April 2002 to March 2003) the classical system was done away with and DDT regime existed. As per this regime, the company declaring dividend was made liable to pay taxes on dividends declared/distributed or paid. Consequently, such dividend income was regarded as exempt in the hands of the shareholders under the ITL. Vide Finance Act, 2020, DDT regime was abolished, and the classical system of taxation was restored.

On the judicial front, various Courts

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