Assessee, a Germany based company, invested in rupee denominated non-convertible debentures (NCDs) of Indian companies. The assessee earned interest income from said NCDs which was offered to tax at rate of 5 per cent in accordance with section 194LD. Assessing Officer held that section 194LD was applicable only in case of interest from rupee denominated bonds (‘RDBs’) of Indian company or a Government security whereas assessee earned interest from NCD and therefore, a concessional rate of 5 per cent as mentioned in section 194LD was not available. Held that in absence of specific definition of bonds in Act, term ‘bonds’ used in section 194LD should be considered as including NCDs and accordingly concessional rate of 5 per cent was to be allowed. (AY. 2017-18)
Heidelberg Cement AG. v. ACIT, IT (2022) 197 ITD 791 (Delhi) (Trib.)
S. 194LD : Interest on certain bonds and Government securities-Interest earned from said NCDs-Bonds-Debentures-In absence of specific definition of bonds in Act, term ‘bonds’ used in section 194LD should be considered as including NCDs and accordingly concessional rate of 5 per cent-DTAA-India-Germany. [S. 9(1)(v) 115A, Art. 11]