Case Law Details
Lease Plan India Pvt. Ltd. Vs DCIT (ITAT Delhi)
In the present case apparently, AE has not provided any capital to the appellant on which income is earned. It is a corporate guarantee , being a surety to the lender bank of the appellant that, if in a case, in future, the appellant fails to pay the due amount owed to those lenders, the Netherland Company will pay to those lenders. Thus, there was promise to reimburse the amount to those lenders on happening of an event i.e. failure of payments by the appellant of the dues owed to the lenders and lenders invoking the guarantee issued by the Netherlands company in favour of those lenders. Therefore it needs to examine whether there is any provision of capital by the Netherland Company to Indian Company appellant, answer is in negative. Further, there should be a “debt claim and “form” such claim income should arise to qualify as “interest”. Thus the word “debt claim “predicate the existence of debtor – creditor relationship [lender – borrower]. That relationship can arise only when there is a provision of capital. In view of this, we hold that guarantee fee paid by the assessee to Netherlands company, in the above facts, cannot be covered in the definition of interest as per Article 11 of The DTAA.
In absence of provision of capital and any debt claim between the parties the impugned guarantee fees paid by the appellant to the Netherlands based company cannot be held to be “interest” in terms of Article 11 of the DTAA.
Looking to the nature of “Service” provided by the Netherlands company in providing guarantee, it is a financial service and can by no stretch of imagination is called a “Consultancy services. Even otherwise, it does not cross the threshold of “make available” in 12 (5) (b) of the DTAA. Therefore we also hold that, provision of Guarantee fees service is not fees for Technical services under article 12 of The DTAA.
FULL TEXT OF THE ITAT JUDGEMENT
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