India: Lower dividend tax rate under UK treaty not appliable to dividend distribution tax (High Court decision)
Issue referred to larger bench of High Court for further adjudication
The Bombay High Court at Foseco held that the lower tax rate on dividends under the India–UK income tax treaty could not be applied to compute the dividend distribution tax (DDT) under section 115-O of the Income tax Act, 1961, on dividends paid by an Indian company to its UK-resident shareholders.
The court determined that the DDT was a tax on company profits and was a separate levy on the company, rather than a tax paid on behalf of the shareholders. Consequently, the UK treaty provisions dealing with taxation of dividend income did not apply to the operation of section 115-O.
However, since another Division Bench of the Bombay High Court at Goa had taken a contrary view in a separate case, the court referred the proceedings before the Chief Justice for the constitution of a larger bench of the High Court for further adjudication.
The case is: Foresco India Limited Company v. ACIT (ITA 1123/2025)
Read an April 2026 report prepared by the KPMG member firm in India