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| The Tax Publishers2020 TaxPub(DT) 2522 (Del-Trib) : (2020) 206 TTJ 0981 INCOME TAX ACT, 1961
Section 195 Section 90
In absence of provision of capital and any debt claim between assessee and overseas AE and also on account of no technological knowledge made available by AE to assessee, guarantee fee paid by assessee to AE towards corporate guarantee obtained from AE could not be regarded as interest or fee for technical services.
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Tax deduction at source - Under section 195 - Corporate guarantee fee paid to AE based at Netherlands -
Assessee-company obtained corporate guarantee from its Netherland based AE for a fee. AO treated guarantee fee paid by assessee as interest or fee for technical services and accordingly, disallowed deduction for want of TDS under section 195. Held: In absence of provision of capital and any debt claim between parties impugned guarantee fees paid by assessee to the Netherlands based company could be held to be 'interest' in terms of Article 11 of concerned DTAA as there was no debtor-creditor relationship [lender-borrower]. Further, looking at the nature of 'service' provided by AE in providing guarantee, it was financial service and could by no stretch of imagination be called 'Consultancy services'. Even otherwise, it did not cross threshold of 'make available' in terms of article 12(5)(b) of DTAA. Therefore, guarantee fees was not fees for technical services under article 12 of DTAA between India and Netherlands. Accordingly, assessee was not required to withhold tax.
REFERRED :
FAVOUR : In assessee's favour.
A.Y. :
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