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TMI Blog2021 (6) TMI 855X X X X Extracts X X X X X X X X Extracts X X X X ..... ers i.e., Total Marketing Services and Total Holdings Asie, a tax resident of France. 3. Learned Departmental Representative has various preliminary objections to the above issue being raised before us. His first objection is that the cross-objection is time-barred inasmuch as while the appeal was filed by the Assessing Officer on 14th November 2019, the cross-objection is filed much after that date on 17th May 2021. It is contended that the time limit prescribed in section 253(4) of the Income Tax Act, 1961, has clearly lapsed, and, for this short reason alone, the cross-objection is liable to dismissed as time-barred. His second point is this claim about treaty protection, so far as the rate of dividend distribution tax is concerned, was never raised before any of the authorities below, and no fresh issue can be raised by way of a cross objection filed under section 253(4). Learned Departmental Representative relies upon the judicial precedents in the cases of CIT Vs Begum Noor Banu [(1993) 204 ITR 166 (AP)], Ugar Sugar Works Ltd Vs CIT [1982) 141 ITR 326 (Bom)], Puranmal Radhakishan & Co Vs CIT [(1957) 31 ITR 294 (Bom)] and CIT Vs Cellulose Products of India Ltd [(1984) 151 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tribunal as if it were an appeal presented within the time specified in sub-section (3)". When this cross-objection is required to be treated as "an appeal presented", there cannot be any justification in restricting the scope of issues which can be raised in a cross-objection. Whatever issues, therefore, can be raised by way of an appeal are the issues that can be raised by way of a cross-objection. As learned counsel for the assessee aptly points out, as held by Hon'ble Gauhati High Court in the case of Purbanchal Paribartan Gosthi (supra), "it can safely be held on a point of law that there is absolutely no difference between an appeal and a cross-objection. The only difference if at all one can be pointed out is that an appeal can be preferred within 60 days from the date of receipt of the order whereas a cross-objection can be filed within a period of 30 days of the date of service of appeal by the opposite party". We are not aware of any judicial precedent contrary to this judicial precedent. As regards the decisions cited by the learned Departmental Representative, all these decisions are in the context of powers of the Tribunal while dealing with an appeal, and, in any ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt of this line of reasoning, the assessee relies on a decision of the coordinate bench in the case of Giesecke & Devrient India Pvt Ltd Vs ACIT [(2020) 120 taxmann.com 338 (Del)] which has also been subsequently followed by several other coordinate benches as well. What this decision holds, according to a note filed by the learned counsel, can be summed up as follows: - Memorandum to Finance Bill 1997 and 2003 clearly establish that levy of tax on the company was driven by administrative considerations rather than legal necessity and emphasises the fact that the levy is for all intents and purposes, a charge on dividends. - DDT levied on the dividend distributed by the payer company, being an additional tax is covered by the definition of 'Tax' as defined u/s. 2(43) of the Act which is covered by the charging section 4 of the Act and charging section itself is subject to the provisions of the Act which include section 90 of the Act. - A conjoint reading of the Memorandum to Finance Bill 1997, 2003 and 2020 would show that levy of DDT was merely for administrative conveniences and withdrawal of DDT is keeping in mind that revenue was across-the-board, irrespective of marginal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pposes the submissions of the assessee on merits as well. In a written note filed by the learned counsel, which sums up his arguments on this issue, the learned Departmental Representative has submitted as follows: 3.1.1. The tax u/s. 115O is tax on distributed taxes of the domestic companies. The sec.115O sub clause 4 specifies that no further credit can be claimed by the company or by any other person in respect of the amount of tax so paid. Sub sec.1a and 1b of the sec.115O supports the view that sec.115O is tax on the distributed profit of the company and is not a tax on the income of the shareholder. Sub sec.5 of the sec.115O provides that no deduction vide any other provision of the act should be allowed to the company or a share holder in respect of the amount which has been charged to tax u/s. 115O. Further, sec.115O begins with a "not obstante clause" and therefore, the applicability of other sec. including sec.90 cannot be claimed. 3.1.2. The tax u/s. 115O is not a withholding tax or Tax deducted as source on the dividend distributed to the shareholder. It is a secondary tax on corporate profit distributed. The Finance Minister speech in parliament in 1997 at the ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assesse. Under the India France DTAA, France will allow credit to its French resident for taxes paid by it in India and vice versa. There cannot be a situation where either in the Tax Treaty or the Indian domestic tax law, India will be required to give the credit to resident of France of the taxes paid by an Indian resident. 3.1.6 The Hon'ble ITAT, Delhi Bench in the case of Giesecke & Devrient India Pvt. Ltd. have noted the decision of the Hon'ble Bombay High Court in the case of Godrej & Boyce Manufacturing Co. Ltd., which held that Section 115-O deals with tax "on the company" and not "on the shareholders". The Hon'ble ITAT has distinguished by treating the tax levied u/s 115-O as tax on income relying on the definition "income" which includes dividend. Thereafter, the Hon'ble ITAT have elaborated on their understanding that the amendment of the statute bringing Section 115-O is of administrative convenience and thereby implying the tax is on dividend. Thereafter, the Hon'ble ITAT have held that the liability u/s 115-O falls on the company is not relevant in respect of rates of dividend tax set out in the Tax Treaty. The Hon'ble ITAT has held that the enactment of Section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as it then was, accepted these recommendations, and the Hon'ble Supreme Court ultimately upheld the action of the Hon'ble President, CEGAT. There was no occasion for conflict of decisions of the coordinate benches, and yet, in the esteemed views of Hon'ble Supreme Court, the recommendation for constitution of the special bench, as indeed the constitution of the special bench itself, was held to be in order. In this view of the matter, learned counsel's submission that Hon'ble President cannot constitute a special bench in the absence of conflict of opinions by the division benches is incorrect and untenable in law. Of course, it is for the Hon'ble President to take a considered call on whether or not it is a fit case for constitution of a special bench, but, in the event of his holding the view that it is indeed a fit case for constitute of a special bench, he is not, in our humble understanding, denuded of the powers to do so on account of lack of conflict in the views of the division benches. 10. The reasons for our doubting the correctness of the decisions of the coordinate benches, on the dividend distribution tax rate being restricted by the treaty provision dealing with taxa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany under section 115-O is to be understood to be in behalf of the recipient assessee" cannot be accepted in law. It is only elementary, as was held by Hon'ble jurisdictional High Court in the case of in the case of CIT v. Sudhir Jayantilal Mulji [(1995) 214 ITR 154 (Bom)], a judicial precedent is only "an authority for what it actually decides and not what may come to follow from some observations which find place therein". The propositions which are assumed by the Court to be correct for the purpose of deciding the same are, according to this judgment of the Hon'ble jurisdictional High Court, lack precedence value and are not binding in nature. The assessee is not relying upon what has been decided in Tata Tea case, but on what logically follows from the said precedent. The inferences drawn on the basis of Tata Tea decision (supra) are thus, in our considered view, misplaced. (c) Under the scheme of the tax treaties, no tax credits are envisaged in the hands of the shareholders in respect of dividend distribution tax paid by the company in which shares are held. The dividend distribution tax thus cannot be equated with a tax paid by, or on behalf of, a shareholder in recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x on the shareholder's dividend income. As far as STC is concerned, same is levied on all South African resident companies when they declare dividends. On the other hand, withholding tax such as non-resident shareholder's tax is applicable only to certain type of shareholders, for example a non-resident shareholder. Furthermore, STC is a tax levied with reference to the net amount of a company's total dividends during a particular period, and on the other hand, non-resident shareholder's tax was levied on the amount of the dividend declared to the affected shareholder. The above-mentioned differences between STC and a withholding tax negate the submission that STC is substantially similar to a withholding tax such as non-resident shareholder's tax. STC is a taxation of the company declaring a dividend and is not a taxation of the recipient of the dividend, and consequently as stated earlier Article 7 of the DTA does not apply to STC. The above conclusion is further supported by a proper reading and analysis of Article 7(2)(a) which refers to a recipient of dividends and not to a company declaring the dividend. The benefits conferred by the said Article are to be enjoyed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia, i.e. the assessee before us, cannot seek treaty protection in India- except for the purpose of, in deserving cases, where the cases are covered by the nationality non-discrimination under article 26(1), deductibility non-discrimination under article 26(4), and ownership nondiscrimination under article 24(5) as, for example, article 26(5) specifically extends the scope of tax treaty protection to the "enterprises of one of the Contracting States, the capital of which is wholly or partly owned or controlled, directly or indirectly, by one or more residents of the other Contracting State". The same is the position with respect of the other non-discrimination provisions. No such extension of the scope of treaty protection is envisaged, or demonstrated, in the present case. When the taxes are paid by the resident of India, in respect of its own liability in India, such taxation in India, in our considered view, cannot be protected or influenced by a tax treaty provision, unless a specific provision exists in the related tax treaty enabling extension of the treaty protection. (h) Taxation is a sovereign power of the State- collection and imposition of taxes are sovereign functions ..... X X X X Extracts X X X X X X X X Extracts X X X X
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