Corporate guarantee fee paid to a non-resident entity is chargeable as Fees for Technical Services under Article 12 or Article 11 of the Double Taxation Avoidance Agreement?

This case concerns whether a corporate guarantee fee paid to a non-resident entity, Lease Plan Corporation NV in the Netherlands, should be treated as 'Fees for Technical Services' or 'Interest' under the Double Taxation Avoidance Agreement (DTAA) between India and the Netherlands. The Income Tax Appellate Tribunal reviewed the disallowance of this fee by the tax authorities, who had classified it under Article 11 (Interest) and Article 12 (Fees for Technical Services) of the DTAA.

INCOME TAX APPELLATE TRIBUNAL 
DELHI BENCH “D”: NEW DELHI 
BEFORE SHRI H. S. SIDHU, JUDICIAL MEMBER 
AND 
SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER

ITA No. 6461 & 6462/Del/2015 
(Assessment Year: 2009-10 and 2010-11)

Lease Plan India Pvt. Ltd, Ground Floor, C4C/332, Janakpuri, New Delhi
(Appellant)

Vs.

DCIT, Circle-4(1), New Delhi
(Respondent)

Assessee by : Shri Ajay Vohra, Sr. Adv Shri Aditya Vohra, Adv
Revenue by: Shri Rajat Kumar Kuneel, Sr. DR
Date of Hearing 29/01/2020
Date of pronouncement 15/06/2020

O R D E R 

PER PRASHANT MAHARISHI, A. M.

1. These are two appeals filed by the assessee against the order of the ld CIT(A)-5, Delhi dated 04.09.2015 for the Assessment Year 2009-10 and 2010-11 wherein disallowance made by the learned assessing officer under section 40 (a)(i) on account of non-deduction of tax at source on guarantee commission paid to lease plan Corporation NV Netherland is confirmed holding it to be payment in nature of „Fees For Technical Services‟ as well as „Interest‟ as per the article 11 and 12 of The Double Taxation Avoidance Agreement [ DTAA] between India and Netherland.

2. The assessee has raised the following grounds of appeal for Assessment Year 2009-10:-

1. That the Commissioner of Income-tax (Appeals) erred on facts and in law in confirming the disallowance of guarantee commission of Rs. 1,19,88,958/-, on account of non-deduction of tax at source there from, invoking provisions of section 40(a)(i) of the Income-tax Act, 1961 („the Act‟). 2. That the Commissioner of Income-tax (Appeals) erred on facts and in law in holding that the situs of services rendered by way of the issuance of guarantee by Lease Plan Corporation NV was in India and therefore, the same was income of the non-resident in terms of section 9 of the Act.

3. That the Commissioner of Income-tax (Appeals) erred on facts and in law in holding that guarantee commission being an income from a debt claim in the hands of Lease Plan Corporation NV is in the nature of „interest‟,covered under Article 11 of the Double Taxation Avoidance Agreement entered into between India and Netherlands.

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