Case Note: The Bombay High Court Answers the Eligibility of Covering Dividend Distribution Tax under Tax Treaties in Colorcon

This article analyses the Bombay High Court (Goa Bench) ruling in Colorcon Asia Pvt. Ltd. v. Joint Commissioner of Income Tax (December 2025), on whether dividend distribution tax (DDT) qualified for relief under the India-United Kingdom double taxation avoidance agreement (DTAA). Under India’s pre-2020 dividend taxation regime, dividends were exempt for shareholders, while companies declaring dividend paid DDT under Indian tax law. The Court held that DDT is an additional income-tax on dividend income within article 2 of the the India-United Kingdom DTAA and thus subject to article 11’s 10% limitation, notwithstanding its collection from the company. Rejecting the Special Bench ruling in Total Oil and distinguishing the Supreme Court’s ruling in Godrej & Boyce, the judgment confirms treaty supremacy, clarifies DDT’s nature and opens the door for refund claims where excess tax was collected. Though likely to reach the Supreme Court, the ruling significantly reshapes India’s treaty-based dividend taxation framework.