TMI Blog2016 (5) TMI 1103X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) in this regard. - Decided against revenue - ITA No. 727/Kol/2012 - - - Dated:- 4-5-2016 - Shri Mahavir Singh, Judicial Member And Shri M. Balaganesh, Accountant Member For the Appellant : Shri Sallong Yaden, Addl.CIT, ld.Sr.DR For the Respondent : Smt. Manju Shukla, FCA, ld.AR ORDER Shri M. Balaganesh, AM This appeal of the revenue arises out of the order of the learned CIT(A)-VIII, Kolkata in appeal no. 114/CIT(A)-VIII/Kol/10-11 dated 27-02-2012 against the order of assessment framed for the assessment year 2008-09 u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the Act ). 2. The only issue to be decided in this appeal is as to whether the dividend received from brazilian company could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich is a resident of a Contracting State to a resident of the other Contracting State may be taxed in that other State. 2. However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident and according to the laws of that State, but if the recipient is a company which is the beneficial owner of the dividends the tax so charged shall not exceed 15 per cent of the gross amount of the dividends. This paragraph shall not effect the taxation of the company in respect of the profits out of which the dividends are paid. 3. The term dividends as used in this Article means income from shares, jouissance shares or jouissance rights, mining shares, founders' shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ermanent establishment situated in that other State, nor subject the company's undistributed profits to a tax on the company's undistributed profits, even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in such other State. 4. We find from Article 10 of DTAA between India and Brazil, dividend received by assessee company is taxable in Brazil at the rate of 15% of gross dividend. Where a resident of India has a permanent establishment in Brazil, this permanent establishment may be subject to tax withheld at source in accordance with Brazilian law. However, such tax cannot exceed 15% of gross amount of profits of that permanent establishment determined after the payment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x at the rate of 34% as per Brazilian Tax Rate and the post tax profits were only distributed as dividend to Besco Engineering Services Pvt. Ltd (Assessee herein). The evidences in this regard were also produced before the lower authorities. The main grievance of the assessee seems to be that the Learned AO did not consider the provisions of DTAA while considering the taxability of dividend in India. According to Learned AR, Brazil has concluded double taxation treaty with India as Dividend paid by Brazilian companies on profit generated after 1.1.1996 are not subject to withholding tax. The law requires an annual payment of dividends with reference to the minimum portion established in the article of incorporation considering the minimum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... redit method, an income is taxable in both the countries in accordance with their respective tax laws read with the DTAA. However, the country of residence of the tax payer allows him credit for the tax charged thereon in the country of source against the tax charged on such income in the country of residence. In India s DTAA, double taxation relief is provided by a combination of two modes. The effect of DTAA is as follows:- a. If no tax liability is imposed under the Act, the question of resorting to the agreement would not arise, no provision of the agreement can possibly fasten a tax liability where the liability is not imposed by the Act; b. If a tax liability is imposed by the Act, an agreement may be resorted to for negotiating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of paragraph 2 of Article] 10 may be taxed in the other Contracting State, the firstmentioned State shall exempt such dividends from tax. 4. Where a resident of India derives profits which, in accordance with the provisions of paragraph 5 of Article 10 may be taxed in Brazil, India shall exempt such profits from tax. We also find that the withholding tax rates for dividends is 0% as per Brazilian tax laws and also as per DTAA if dividend is paid to non-residents. 8. From the perusal of DTAA between India and Brazil vide Article 10 paragraphs 1 and 2 as well as Article 23 Paragraph 3 , since dividend is received from Brazil, wherein the same could have been taxed upto a rate not exceeding 15% as per DTAA but have been by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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