It is merely a promise to possibly perform a future act and there was no obligation to pay immediately. Thus, court held that guarantee fee cannot be considered as an interest. The provision of guarantee fees service is not fees for Technical services under article 12 of DTAA. In view of this, assessee is not required to deduct tax at source. (AY. 2009-10, 2010-11)
Lease Plan India P. Ltd. v. Dy.CIT (2020) 206 TTJ 981 (Delhi)(Trib.)
S. 40(a)(i) : Amounts not deductible-Deduction at source-Non-resident-Provision for guarantee fee are not interest-Not liable to deduct tax at source-DTAA-India-Netherlands. [S. 9(1)(vii), Art. 11, 12(5)(b)]