No taxability of dividend on ADR/GDR if tax was deducted at source before it was credited to depository bank ITAT Florida Retirement System vs. Assistant Commissioner of Income-tax (INTERNATIONAL TAX)-2(3)(1) [2025] 181 taxmann.com 232 (Mumbai – Trib.)
Facts of the case:
Florida Retirement System, a non-resident investor, held shares of Indian companies in the form of ADR/GDR. The Indian companies declared dividends on the underlying shares. Before the dividend amount was credited to the overseas depository bank, the Indian company deducted tax at source (TDS) as per Indian tax laws. Despite this, the Assessing Officer sought to tax the dividend income again in the hands of the assessee.
Issue:
Whether dividend income on ADRs/GDRs is taxable in the hands of the non-resident investor when tax has already been deducted at source before credit/payment to the depository bank.
Held:
The ITAT Mumbai held that no further tax liability arises in the hands of the assessee. Once tax has been validly deducted at source at the time of payment/credit, the dividend income cannot be taxed again. The Tribunal observed that the depository bank merely acts as an intermediary, and the requirement of tax deduction stood fully complied with.
