The assessee has 25% share in the JV. The JV manufactures fertilizers, which are purchased by the Central Government. (Para 4)
The Assessing Officer allowed credit for the said tax, which would have been payable in Oman, but exemption was granted. (Para 6)
Because there is tax payable on dividend in Oman and, accordingly, no tax has been paid and that assessee is not covered under the exemption. (Para 6)
Which allowed the appeal holding that the order passed by the PCIT under Section 263 of the Act is without jurisdiction and is not sustainable in law. (Para 7)
High Court by the impugned judgment holding that as per the relevant terms of the DTAA between India and Oman, the assessee is entitled to claim the tax credit, which has been rightly allowed by the Assessing Officer. (Para 8)
The same cannot be relied upon to claim exemption. (Para 9)
Whether the dividend income earned by the assessee is taxable, although exempted under Omani Tax Laws to entitle the assessee to the benefits of the Double Taxation Avoidance Agreement (for short, ‘DTAA’) between India and Oman. (Para 11)
It is, thus, clear from the above letter of the Omani Finance Ministry that the dividend distributed by all companies, including the tax-exempt companies would be exempt from payment of income tax in the hands of the recipients. By extending the facility of exemption, the Government of Oman intend to achieve its object of promoting development within Oman by attracting investments. Since the assessee has invested in the project by setting up a permanent establishment in Oman, as the JV is registered as a separate company under the Omani laws, it is aiding to promote economic development within Oman and achieve the object of Article 8 (bis). The Omani Finance Ministry concluded by saying that tax would be payable on dividend income earned by the permanent establishments of the Indian Investors, as it would form part of their gross income under Article 8, if not for the tax exemption provided under Article 8(bis). (Para 16)
A plain reading of Article 8 and Article 8 (bis) would manifest that under Article 8, dividend is taxable, whereas, Article 8(bis) exempts dividend received by a company from its ownership of shares, portions, or shareholding in the share capital in any other company. Thus, Article 8(bis) exempts dividend tax received by the assessee from its PE in Oman and by virtue of Article 25, the assessee is entitled to the same tax treatment in India as it received in Oman. (Para 17)
It is, thus, apparent that the assessee’s establishment in Oman has been treated as PE from the very inception up to the year 2011. There is no reason as to why all of a sudden, the assessee’s establishment in Oman would not be treated as PE when for about 10 years it was so treated, and tax exemption was granted basing upon the provisions contained in Article 25 read with Article 8 (bis) of the Omani Tax Laws. (Para 18)
In our view, the above letter, as has been reproduced in the preceding paragraph of this judgment, is only a clarificatory communication interpreting the provisions contained in Article 8 and Article 8 (bis) of the Omani Tax Laws. The letter itself has not introduced any new provision in the Omani Tax Laws. In this view of the matter, the argument raised by the learned senior counsel would not convince us to deny exemption to the assessee. (Para 19)
In our considered view, the appellant has not been able to demonstrate as to why the provisions contained in Article 25 of DTAA and Article 8 (bis) of the Omani Tax Laws would not be applicable and, consequently, we hold that the appeals have no substance and deserve to be dismissed which are hereby dismissed. (Para 20)
SUPREME COURT OF INDIA
2023 STPL(Web) 272 SC
[2023 INSC 834]
Principal Commissioner Of Income Tax-10 Vs. M/S Krishak Bharti Cooperative Ltd.
Civil Appeal No. 836 Of 2018 With Civil Appeal No. 3369 Of 2019, Civil Appeal No(S). 2256 Of 2018, Civil Appeal No(S). _______ Of 2023 @ Slp(C)No(S). _______Of 2023 @ Slp (C) Diary No(S). 4647 Of 2018, Civil Appeal No(S). ______ Of 2023 @ Slp(C) No(S). 11204 Of 2023 & Civil Appeal No(S). _______ Of 2023 @ Slp (C) No(S). _______ Of 2023 @ Slp (C) Diary No(S). 15333 Of 2023-Decided On 15-09-2023
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