TaxTMI 
TaxTMI 
2025 (3) TMI 2175
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....3(3) r.w.s. 144C(13) for the A.Y.2017-18. 2. The only ground which has been argued before us reads as under:- 3. That the AO/ DRP erred on facts and in law in holding that the corporate guarantee commission is taxable in India in terms of Article 22-Income from other sources of the India Mauritius DTAA which provides that "Notwithstanding the provisions of paragraphs 1 and 2 items of income of a resident of a Contracting State not dealt with in the foregoing Articles of Convention and arising in the other Contracting State may also be taxed in that other State" without appreciating that Paragraph (3) of Article 22 of the DTAA is not applicable for assessment year 2017-18 4. That the AO/ DRP erred on facts and in law in ....
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....2CA(1) for the determination of ALP, wherein one of the issue was the corporate guarantee, the TPO held that ALP of 1.16% should be applied on the corporate guarantee provided of Rs. 410 Crores which worked out to Rs. 4,75,60,000/-. 4. To justify the ALP of the corporate guarantee, assessee had chosen 'other method' as MAM and it was contended that DMI Ltd., did not charge any commission considering this transaction to be in the nature of shareholders activity and further, assessee did not incur any cost. Apart from that, during the course of TP proceedings various objections were raised which has been rejected by the ld. TPO. One of the contention which was raised by the assessee before the ld. TPO was, that the corporate guarantee comm....
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....itted that it is not in dispute that guarantee commission does not fall under any other heads of income provided in India Mauritius DTAA. At the most, it will fall as 'other income' under Article 22. He submitted that ld. TPO has himself interpreted it falls under Article 22. However, prior to 01/04/2017, other income which is not covered under any of the Articles of the DTAA, Article 22 provided that same shall be taxable as 'income' in the resident state, i.e., in Mauritius. It was only after 01/04/2017 para (30 has been inserted wherein source country has also been given the right to tax. Once such right to tax has come into force from 01/04/2017 as per notification dated 10/08/2016 therefore, it is apparently clear till 01/04/2017, the ....
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.... the head 'other income', then same is not taxable in the source country. For the sake of ready reference, the relevant Article which was applicable prior to 01/04/2017 reads as under:- "ARTICLE 22 Other income 1. Subject to the provisions of paragraph (2) of this article, items of income of a resident of a Contracting State, wherever arising, which are not expressly dealt with in the foregoing articles of this Convention, shall be taxable only in that Contracting State. 2. The provisions of paragraph (1) shall not apply to income, other than income from immovable property as defined in paragraph (2) of article 6, if the recipient of such income, being a resident of a Contracting State, carries on business in the other Con....
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....aid income cannot be taxed in the source jurisdiction, i.e. India. We, therefore, uphold the plea of the assessee that Guarantee Commission in question cannot be taxed in India in the hands of the assessee. 11. The amended para now reads as under:- "(3) Notwithstanding the provisions of paragraphs 1 and 2, items of income of a resident of a Contracting State not dealt with in the foregoing Articles of Convention and arising in the other Contracting State may so be taxed in that other State." The aforesaid insertion of para 3 makes it very clear that till 01/04/2017, the residuary income which was not specifically covered by any of the specific Articles of the treaty and also not covered by exclusion of clause under Article 22....