Taxability of guarantee fees received for
guaranteeing group company loans/debt obligations - whether taxable as Article
- 22 Other income under Indo-Korean DTAA
Facts:
Assessee
a Korean company was in receipt of guarantee fees after 10% TDS from their group
company in India for guarantees given to banks so that they would in turn
would grant loans and borrowing facilities in India to
their group companies.This was allegedly taxed as Other income under
Article 22 of the Indo-Korean DTAA. Assessee's plea was this was not taxable in
India in the absence of a PE. DRP upheld the views of the AO. On
further appeal -
Held
in favour of the assessee that the guarantee fees was not taxable in India
under Article 22 Other income clause of Indo-Korean DTAA as the clause mentions
that such income can be taxed only in the contracting state here read as Korea.
The guarantee fee did not create any debt obligations either akin to be taxed
as interest income.
Applied:
Capgemini SA v. DCIT (International Taxation) in ITA
No.6323/Mum/2016, dated 09-01-2017
Ed. Note:
The first 51 pages of the 68 page verdict is about conflict of interest between
legal counsels.
Case: Daechang Seat Co. Ltd. v. DCIT 2023 TaxPub(DT) 4084 (Chen-Trib)