Galderma Pharma Sa v. Income Tax Officer

$~50 *IN THE HIGH COURT OF DELHI AT NEW DELHIDate of Decision: 14[th]December, 2021 +W.P.(C) 14206/2021 GALDERMA PHARMA SA ..... PetitionerThrough:Mr.Kamal Sawhney, Advocatewith Mr.PrashantMeharchandani and Mr.ArunBhaduria, Advocates. versus INCOME TAX OFFICER..... RespondentThrough:Mr.Puneet Rai, Sr. StandingCounsel. CORAM:HON'BLE MR. JUSTICE MANMOHANHON'BLE MR. JUSTICE NAVIN CHAWLAMANMOHAN, J. (Oral) 1.Present writ petition has been filed challenging the certificatedated 18[th]November, 2021 read with the impugned order passed bythe Respondent directing Galderma India to deduct tax @ 10% ondividend income to be paid to the Petitioner for the relevant FinancialYear. Petitioner also seeks a direction allowing Galderma India to paydividend to the Petitioner for the relevant Financial Year afterdeducting tax @ 5% in terms of the Protocol to the DTAA betweenIndia and Switzerland at the time of payment of such dividend. 2.Learned Counsel for the Petitioner states that the impugnedcertificate dated 18[th]November, 2021 read with the Impugned Ordercommunicating the reasons passed under Section 197 of the Actrejecting the Petitioner’s request for lower withholding of tax @ 5% on dividends proposed to be distributed by Galderma India to thePetitioner for Financial Year 2021-22 illegal and should be quashed. 3.Learned counsel for the Petitioner states that even thoughArticle 10 of the India-Switzerland DTAA provides for withholdingtax @10% on dividend paid by an Indian resident to a Swiss residententity, the Petitioner claims lower tax rate of 5% provided in India-Columbia DTAA by relying on the MFN clause in para 5 of theprotocol to the India-Switzerland DTAA which was signed betweenIndia and Switzerland on 30[th]August, 2010 and is effective from 27[th]December, 2011. 4.Learned Counsel for the Petitioner submits that this issue isalready settled by this Court in Steria (India) Ltd. v. CIT [2016] 386ITR 390 (Del) and Concentrix Services Netherlands B V v/s. IncomeTax Officer TDS & Anr W.P.(C) 9051/2020 and by the KarnatakaHigh Court in Apollo Tyres Ltd. v. CIT [2018] 92 taxmann.com 166(Karnataka) holding that the protocol signed by contracting states isan integral part of the DTAA and provides for automatic applicationof benefit agreed by India with a member of OECD and that noseparate notification/amendment is needed to apply such protocol.5.Issue notice. 6.Mr.Puneet Rai, learned counsel accepts notice on behalf of therespondent. He states that since no notification has been issued by theGovernment of India, the petitioner is not entitled to lower tax rate of5% provided in India-Columbia DTAA, India-Lithuania DTAA andIndia-Slovenia DTAA. 7.He further reiterates that the Revenue has not accepted thedecision of this Court in the cases of Concentrix Services NetherlandsB.V. v. ITO (TDS) and Nestle SA v. Assessing Officer, Circle v.ACIT WP(C) 3243/2021 and is in process of filing Special LeavePetitions before the Hon’ble Supreme Court. 8.Having heard learned counsels for the parties this Court findsthat the issues raised in the present writ petition are no longer resintegra as they are fully covered by the judgments of this Court inConcentrix Services Netherlands B.V. (Supra) as well as in Nestle SA(Supra). In Concentrix Services Netherlands B.V. (Supra) it has beenheldthatnoseparatenotificationisrequiredinsofarastheapplicability of the protocol is concerned and the same forms anintegral part of the Convention. 9.It is well settled law that the Department cannot refuse to followbinding jurisdictional decision merely on the basis that the Departmentproposes to file an appeal. The Supreme Court in UOI v. KamlakshiFinance Corpn Ltd. AIR 1992 SC 711: (1992) 1 SCC 648 has heldthat order of higher appellate authorities should be followed‘unreservedly’ and mere fact that decision is not acceptable to theRevenue cannot be a ground for not following the decision of higherauthority. 9.It is well settled law that the Department cannot refuse to followbinding jurisdictional decision merely on the basis that the Departmentproposes to file an appeal. The Supreme Court in UOI v. KamlakshiFinance Corpn Ltd. AIR 1992 SC 711: (1992) 1 SCC 648 has heldthat order of higher appellate authorities should be followed‘unreservedly’ and mere fact that decision is not acceptable to theRevenue cannot be a ground for not following the decision of higherauthority. 10.Keeping in view the aforesaid, the impugned order andcertificate are set aside and the respondent is directed to issue acertificate under Section 197 of the Act indicating therein, that the rateof tax, on dividend, as applicable qua the Petitioner is 5% in India- Switzerland DTAA as held in Nestle SA (Supra) which was also underthe India-Switzerland DTAA. Writ petition is disposed of in theaforesaid directions. MANMOHAN, J NAVIN CHAWLA, J DECEMBER 14, 2021/rv