Assured return from builder treated as treaty interest where advance created a debt-claim under the India-UK DTAA.

Assured return received from a builder on advance payments for booking of units was treated as interest under Article 12 of the India-UK DTAA because the advance created a debt-claim and no proprietary interest in the unit arose until conveyance was executed and registered. The fixed monthly payment was therefore regarded as return on finance made available for construction, not income from other sources. The coordinate bench's earlier view on identical facts was followed, and the receipt was taxed as treaty interest.

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Issues: Whether the assured return received by the assessee from the builder, in respect of amounts paid for booking of units, constituted interest taxable under Article 12 of the India-UK DTAA and could not be assessed as income from other sources.

Analysis: The payment made by the assessee was in advance against units not yet conveyed, and the allotment terms showed that no lien or interest in the unit accrued until execution and registration of the conveyance deed. On that footing, the amount advanced created a debt claim against the builder. The fixed monthly assured return paid in lieu of the advance was therefore a return on finance made available for construction, falling within the treaty meaning of interest as income from debt-claims. The earlier view of the coordinate bench on identical facts was followed, and the contrary treatment of the receipt as income from other sources was not accepted.

Conclusion: The assured return was held to be interest taxable under Article 12 of the India-UK DTAA and the assessee succeeded on this issue.

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