The Delhi High Court examined whether guarantee charges received by an appellant from its Indian...

The Delhi High Court examined whether guarantee charges received by an appellant from its Indian subsidiaries are taxable in India. The Tribunal found that the appellant's payments did not fall under Article 12 of the DTAA as it was not a party to loan agreements with foreign banks. The guarantee charges were deemed as remuneration for providing parent company guarantees, not interest. The income accrued in India as per the Intra Group Agreement terms. The charges were linked to services provided in India for the benefit of subsidiaries. The Court held that the guarantee fees did not qualify as interest u/s Article 12 of the DTAA. The Court ruled against the appellant, stating that the guarantee charges do not fall under the definition of interest. The issue of whether the charges constitute business income u/s Article 7 of the DTAA was left open for future consideration. .....

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