2023 (9) TMI 850 - SUPREME COURT

Income taxable in India - dividend income earned by the assessee - such income is exempted under Omani Tax Laws - Entitlement to assessee to the benefits of India and Oman DTAA - HELD THAT:- As per letter of the Omani Finance Ministry that the dividend distributed by all companies, including the tax-exempt companies would be exempt from payment of income tax in the hands of the recipients. By extending the facility of exemption, the Government of Oman intend to achieve its object of promoting development within Oman by attracting investments.

Since the assessee has invested in the project by setting up a permanent establishment in Oman, as the JV is registered as a separate company under the Omani laws, it is aiding to promote economic development within Oman and achieve the object of Article 8 (bis). The Omani Finance Ministry concluded by saying that tax would be payable on dividend income earned by the permanent establishments of the Indian Investors, as it would form part of their gross income under Article 8, if not for the tax exemption provided under Article 8(bis).

A plain reading of Article 8 and Article 8 (bis) would manifest that under Article 8, dividend is taxable, whereas, Article 8(bis) exempts dividend received by a company from its ownership of shares, portions, or shareholding in the share capital in any other company. Thus, Article 8(bis) exempts dividend tax received by the assessee from its PE in Oman and by virtue of Article 25, the assessee is entitled to the same tax treatment in India as it received in Oman.

Assessee not having PE in Oman - As it is significant to note that from the year 2002 to 2006, a common order was made under Article 26 (2) of the Income Tax Law of Oman. As apparent that the assessee’s establishment in Oman has been treated as PE from the very inception up to the year 2011. There is no reason as to why all of a sudden, the assessee’s establishment in Oman would not be treated as PE when for about 10 years it was so treated, and tax exemption was granted basing upon the provisions contained in Article 25 read with Article 8 (bis) of the Omani Tax Laws.

Letter issued by the Secretary General for Taxation, Ministry of Finance, Sultanate of Oman has no statutory force as per Omani Tax Laws, hence, the same cannot be relied upon to claim exemption. In our view, the above letter, as has been reproduced in the preceding paragraph of this judgment, is only a clarificatory communication interpreting the provisions contained in Article 8 and Article 8 (bis) of the Omani Tax Laws. The letter itself has not introduced any new provision in the Omani Tax Laws. In this view of the matter, the argument raised by the learned senior counsel would not convince us to deny exemption to the assessee.

Appellant has not been able to demonstrate as to why the provisions contained in Article 25 of DTAA and Article 8 (bis) of the Omani Tax Laws would not be applicable and, consequently, we hold that the appeals have no substance and deserve to be dismissed which are hereby dismissed.