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2023 (10) TMI 395 - AT - Income TaxApplicability of transfer pricing provisions to companies covered under the Tonnage Tax Scheme - assessee is a company incorporated wholly owned subsidiary of Van Oord Dredging and Marine Contractors BV, a company registered in Netherlands which over the years has become a main contractor directly entering into contracts with Government and port authorities in India - HELD THAT:- As decided in own case [2019 (6) TMI 1238 - ITAT MUMBAI] we hold that the transfer pricing provisions are not applicable to the assessee to the extent of operations carried out through operating qualifying ships where the income is taxed under TTS. Addition on account of allocation of head office expenses - TPO, for the purpose of making the transfer pricing adjustment, has added a sum being 50% of the expenses allocated to the assessee for the cost incurred centrally at head office towards rendering various services - TPO made the adjustment for the reason that the assessee failed to provide details services rendered, breakup of cost allocated etc., and therefore made the adhoc addition - DRP confirmed the disallowance made by the TPO - HELD THAT:- As in assessee’s own case for A.Y. 2008-09 we direct the assessing officer / TPO to delete the adjustment made towards the qualifying activities under TTS only. Benefit of DTAA against Dividend Distribution Tax (DDT) - AR as a counter argument submitted that DDT is a tax on the income of the assessee and is a tax paid in addition to the regular income tax - whether the benefit of DTAA can be extended to domestic company? - HELD THAT:- If we look at the wordings in the India Hungary DTAA, what it provides is that the tax on the profits distributed by an Indian company is taxable at the rate of 10% in the hands of the shareholders. The treaty does not contain anything whereby the domestic company is protected by the DTAA and that the rate mentioned therein shall be considered by domestic company distributing the profit for the purpose of DDT. The clause only specifies that the distributed profits will be taxable in the hands of the shareholders who are residents of Hungary/Netherlands at the rate of 10% which otherwise be subject to tax in accordance with Article 10 of the Treaty. If the tax laws of recipient shareholder country so provides, they can take the benefit of tax credit. DTAAs referred to by the ld AR nowhere suggests that domestic companies are allowed to enter the arena of DTAA. Therefore, in our considered view, the Protocol with reference to Article 10 as per India Hungary DTAA on taxability of distributed profits cannot be interpreted so as to say that it covers the domestic companies, since there is no specific clause in the Treaty to that effect. Consequently assessee's claim of refund of DDT in respect of shareholders covered under India Netherlands DTAA is rejected.
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