The assessee provided guarantee to various banks to extend credit facilities to its Indian subsidiaries and the guarantee fee charged by it would not fall within expression of ‘interest’ and in view of clause (3) of article 23 India-UK Treaty, in absence of any specific provision dealing with corporate/bank guarantee recharge, same had to be taxed in India as ‘Income from other sources’.
The assessee received certain amount from its subsidiary on account of services rendered by senior management employee seconded to it. The assessee submitted that the said amount represented expenditure incurred by them on employee and same was reimbursed by Indian entity whereas the AO took a view that seconded person was rendering specialist consultancy services for benefit of India AE and chargeable to tax in India. However, since the assessee failed to bring the secondment agreement and the salary reimbursement agreement on record, the matter was restored back to the AO to determine the nature of services rendered (ITA No.1143/Del/ 2016 dt. 06-12-2017) (AY. 2011-12).
Johnson Matthey Plc v. Dy. CIT(IT) (2018) 161 DTR 132 / 191 TTJ 1 (Delhi)(Trib.)
S. 9(1)(v) : Income deemed to accrue or arise in India – Interest – Guarantee fee earned by the assessee on providing guarantee to various banks to extend credit facilities to its Indian subsidiaries would not fall within the term interest and also in view of clause 3 of Article 23 of the India UK treaty in the absence of any specific provision dealing with corporate or bank guarantee recharge, had to be taxed in India as ‘Income from Other Sources’. Also amount paid by AE for seconding its employee was taxable in India or not was remanded back to determine the nature of services rendered in light of the secondment agreement-DTAA-India –UK . [S. 9(1)(vii)]