TaxTMI 
TaxTMI 
2021 (9) TMI 529
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....n account of deemed interest income is bad in law and against the facts and circumstances of the case. 3. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in rejecting the analysis followed by the appellant and in determining the price of the impugned transaction on the basis of TPO's order. 4. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in not giving due cognizance to the fact that the appellant had to undertake stewardship activities by financial supporting their group companies and reducing their financial burden. 5. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in not giving due cognizance to the fact that it was a case of business exigency and commercial expediency that associated enterprises had to convert and issue fresh FCD at 0% especially considering that the AEs had not remitted the interest accrued earlier as well. 6. That having regard to the facts and circ....
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.... each issued by the above AEs. 5. The TPO held that 15% of the FCDs have been converted into 0% FCDs without assigning any reason, therefore by applying internal CUP as MAM. The TPO charged the interest on FCDs as the same rate of 15% as was being charged prior to 01.01.2009. It has further been submitted that the income generated during the subject year was only interest income on FCDs which was offered to tax at the treaty rate of 10%. 6. Thus, the TPO made adjustments on the interest earned from various investee entities of Rs. 4,02,72,970/- which is as under: Name of the AE No. Of FCD(15%FCD) Face Value of FCD Interest(A) Fresh0%FCD Face Value of FCD Interest(B) Total Interest Charged (A+B) ARVPL 13,34,140 13,34,14,000 49,34,490.4 9,648 9,64,800 39252.8 49,73,743.23 PRVPL 62,19,847 62,19,84,700 2,30,04,913.6 NIL NIL NIL 2,30,04,913.56 SRVPL 16,74,830 16,74,83,000 61,94,576.7 14,94,971 14,94,97,100 60,82,279.3 1,22,76,855.99 ERVPL NIL NIL NIL 4,291 4,29,100 17,457.9 17,457,90 Total 3,41,33,980.7 61,38,990.0....
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....s income from debt claims of every kind, whether or not secured by mortgage and whether or not carrying a right to participate in the debtor's profits, and in particular, income from government securities and income from bonds or debentures, including premiums and prizes attaching to such securities, bonds or debentures. Penalty charges for late payment shall not be regarded as interest for the purpose of this Article. 5. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the interest, being a resident of a Contracting State, carries on business in the other Contracting State in which the interest arises, "Trough a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the debt claim in respect of which the interest is paid is effectively connected with such permanent establishment or fixed base. In such case the provisions of Article 7 or Article 14, as the case may be, shall apply. 6. Interest shall be deemed to arise in a Contracting State when the payer is a resident of that State. Where, however, the person paying the interest, whether he ....
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....the Co-ordinate Bench of ITAT in the case of DCIT Vs. TMW ASPF i Cyprus Holding Company Ltd. in ITA No. 879/Del/2016 dated 09.08.2019. 14. In the appeal filed by the revenue against the order of the ld. DRP reads as under: "(i) Whether on the facts and in the circumstances of the case, the DRP erred in holding that as per Article 11(1) and (2) of Indo- Cyprus DTAA, interest income is chargeable to tax on paid basis when the usage of the word 'paid' always includes 'payable' and vice versa. (ii) Whether on the facts and in the circumstances of the case, the DRP erred in observing that it has been judicially held in various case laws relied upon by the assessee that as per Article 11(1) and (2) of Indo- Cyprus DTAA, interest income is chargeable to tax on paid basis when there are no such findings in any decision cited by the assessee before the Hon'ble DRP." 15. While adjudicating the core issue, it was held as under: India Cyprus DTAA Article 11(1) of India-Cyprus DTAA: "Interest arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State." 20. The afores....