Dividend Income – Tax Credit to Joint Venture – Oman Tax Laws and Double Taxation Avoidance Treaty

Judgment dated 15.9.2023 of the Supreme Court of India

Civil Appeal No. 836 of 2018 – Principal Commissioner of Income Tax-10 Vs. M/s. Krishak Bharti Cooperative Ltd with connected matters

The respondent – assessee registered in India under the administrative control of the Department of Fertilizers, Ministry of Agriculture, Government of India, had entered into joint venture with 25% share in Oman Oil Company to form Oman Fertilizer Company SAOC (JV) registered company under Oman Laws.

The fertilizers manufactured by the JV are purchased by the Central Government.

The respondent has branch office in Oman independently registered as Company under Omani laws having permanent establishment status in Oman in terms of Article 25 of the DTAA.

The branch office maintains its own account books and files IT returns under Omani Income Tax Laws.

The Assessing Officer had given tax credit for the dividend income received by the assessee from the JV.

Exemption was granted to the said dividend income as per amended Omani Tax Laws with effect from the year 2000.

However, the appellant Principal Commissioner of Income Tax issued notice under Section 263 of Act on the ground that no tax credit was due to the respondent under Section 90 of the Act.

It was held that Article 25 of Omani Tax laws is not applicable to the instant case since tax payable and paid in Oman and the respondent is not covered under the exemption.

The ITAT allowed appeal of the respondent on the ground that the order of the appellant was without jurisdiction.

The Delhi High Court dismissed the IT Appeal of the appellant holding that the assessee is entitled to claim tax credit as per the relevant terms of DTAA between India and Oman.

HELD that the appellant was not able to demonstrate as to why the provisions of Article 25 of DTAA and Article (bis) of the Omani Tax Laws would not be applicable.  The Civil Appeals were dismissed.