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I.T.O Ward 7 (4) , Kolkata Versus M/s. Besco Engineering & Services Pvt. Ltd.

2016 (5) TMI 1103 - ITAT KOLKATA

Taxability of dividend received from brazilian company in India - India Brazil DTAA - Held that:- 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 Brazilian law declared to be not subject to income tax and the assessee is a resident company of India within the meaning of Article 23 paragra .....

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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 be claimed as not taxable in India in the facts and circumstances of the case. 3. The brief facts of this issue is that the assessee is a private limited co .....

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ce certificate issued by UTI Bank Ltd before the Learned AO evidencing the nature of remittance. The Learned AO observed that only the dividend received from domestic company is exempt u/s 10(34) of the Act. In the instant case, the assesseee company had received dividend from Millinium Investimentos Ltd , which is a foreign company, and hence the same would not fall in the ambit of dividend distribution tax contemplated in section 115O of the Act and accordingly concluded that the said dividend .....

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d 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, &q .....

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tate, carries on business in the other Contracting State of which the company paying the dividends is a resident, through a permanent establishment situated therein, and the holding by virtue of which the dividends are paid is effectively connected with such permanent establishment. In such case the provisions of Article 7 shall apply. 5. Where a resident of India has a permanent establishment in Brazil, this permanent establishment may be subject to a tax withheld at source in accordance with B .....

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ing in respect of which the dividends are paid is effectively connected with a permanent 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 .....

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Indian Company, had invested in 40% Equity Capital of a Brazilian Company named Millenium Investmentos Ltda, which is a Joint Venture Investment Company with remaining 60% Equity held by Citra do Brazil (a Brazilian Company), with the main object of making equity investment in industrial venture for making railway wagon under the Banner of Santa Fe Vagoes Ltda, a Brazilian Company. Millinium Investmentos Ltd had invested 60% Equity of Santa Fe Vagoes , Manufacturing Railway Wagon in Brazil, whe .....

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vidend received along with the bank documents and also the Brazilian Audited Balance Sheet of Millinium along with the English translated version which confirm payment of dividend to the assessee after all the statutory compliance of that country. The Learned AR stated that M/s Millinium Investmentos Ltd. had already paid tax 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 .....

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imum portion established in the article of incorporation considering the minimum limit of 25% of the net profit of the year. According to him, in the instant case, the company has fulfilled this criteria also as below:- Millinium Investmentors Ltda has net profit before tax of 2421,277.28 C Dividend distributed by the company during the year 974376.01 D Hence % of dividend distributed from profit = 974376.01 / 2421277.28 * 100 40.24% He argued that minimum limit set is 25% of the net profit for .....

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hich the assessee had filed a rejoinder before the Learned CIT(A). We find that the assessee had produced sufficient material evidence before the lower authorities to show that the dividend had been declared by the Brazilian company from its current profits and that tax had been paid on the same as per Brazilian tax laws. The Learned CIT(A) observed that there are two modes of granting relief under DTAA. One is (a) exemption method and other is (b) tax credit method. Under exemption method, a pa .....

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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 or reducing it; c. In case of difference between the provisions of the Act and of the agreement, the provisions of the agreement prevail over the provisions of the Act and can be enforced by .....

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