Treaty-based interest taxation depends on receipt, not accrual, where the DTAA language turns on income being "paid".

Interest income of a non-resident assessee under the India-Cyprus DTAA was held taxable on receipt basis, because Article 11 taxes interest arising in one Contracting State and "paid" to a resident of the other. Applying the same construction previously adopted for comparable treaty language, the Court treated receipt as the ative factor and rejected accrual-based taxation. The Revenue's challenge failed, and the Tribunal's view that the income was chargeable only when received was left undisturbed.

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Issues: Whether interest income of a non-resident assessee under the India-Cyprus tax treaty is taxable on accrual basis or only on receipt basis.

Analysis: Article 11 of the Double Taxation Avoidance Agreement between India and Cyprus provides that interest arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State. The Court treated this language as materially identical to the corresponding provision considered earlier in the India-Germany treaty context, where it had already been held that royalty or fees for technical services are assessable on receipt and not on accrual. Applying the same construction to interest under the Cyprus treaty, the Court held that the decisive factor is receipt and not mere accrual.

Conclusion: The interest income could be taxed only on receipt basis and not on accrual basis; the Revenue's challenge failed.

Final Conclusion: The appellate challenge was rejected and the Tribunal's view on receipt-based taxation under the treaty was left undisturbed.

Ratio Decidendi: Where the applicable treaty language taxes income when it is "paid", the income is chargeable on receipt basis and not on accrual basis.

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