Delhi High Court rules dividends received by IFFCO from OMIFCO Oman taxable under IT Act
The assessee also made contentions under the India-Oman Double Taxation Avoidance Agreement
Delhi High Court rules dividends received by IFFCO from OMIFCO Oman taxable under IT Act
The assessee also made contentions under the India-Oman Double Taxation Avoidance Agreement
A division bench of the Delhi High Court has held that under the Income Tax Act, 1961, the dividend received by the assessee IFFCO Limited from Oman India Fertiliser Company (OMIFCO) is chargeable to tax in the country.
Falling under 'Income from other Sources', it forms a part of the total income. Therefore, the disallowance under the IT Act is not acceptable.
The assessee contended that the expenditure incurred for earning the dividend income of Rs.113.86 crores from OMIFCO, an overseas company, could not be disallowed under the IT Act. This was because no tax was payable on the dividend in Oman and India, as tax sparing credit of the notional tax was allowed under the India-Oman Double Taxation Avoidance Agreement (DTAA).
Earlier, the Delhi bench of the Income Tax Appellate Tribunal (ITAT) accepted the contentions and allowed relief to the assessee. Aggrieved with ITAT's order, the revenue department approached the high court.
The bench comprising Justice Manmohan and Justice Manmeet Pritam Singh Arora stated that no deduction was to be allowed in respect of the expenditure incurred by the assessee on the income which was not a part of the total income.
The court upheld the order of the tribunal and ruled, "The 'total income' meant the total amount of income computed in the manner laid down in the IT Act. Therefore, it pertains to disallowance of deduction in respect of income, which did not form a part of the total income."
It added, "Since the dividend received by the assessee was chargeable to tax in India, it was included in the taxable income in the assessees' computation of income. However, a rebate of tax was allowed to the assessee from the total taxes in terms of the IT Act and the Indo-Oman DTAA. Thus, the dividend earned can be said to be excluded income. Therefore, the provisions of the IT Act would not be attracted in this case."