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TMI Blog2024 (1) TMI 1406X X X X Extracts X X X X X X X X Extracts X X X X ..... edit facility which has not been utilized. Thus, even the definition of interest in the domestic law, in our view, covers all kinds of payment attached to the loan. AO, no doubt, has accepted the claim of the assessee that interest along with other fees, such as, commitment fee, documentation fee attached to the loan granted are exempt under Article 11(3)(b) of the Act. Even the management fee is of similar nature as commitment fee and documentation fee, as it is closely linked to the loan granted, hence cannot be distinguished from the documentation fee and commitment fee. Thus, in our view, management fee partakes the character of interest u/s 2(28A). Hence, would be exempt from taxation in India in terms of Article 11(3)(b) of the treaty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in Federal Republic of Germany and tax resident of Germany in course of its banking business. The assessee had advanced External Commercial Borrowing (ECB) Loan to certain Indian entities including M/s Filatex India Ltd. granted by Harmes Deckung Germany. As against the loan granted to M/s Filatex India Ltd., the assessee had received interest along with connected fees, such as, management/ processing fee, documentation fee and commitment fee. Originally, the assessee did not file any return of income in India. Subsequently, based on information received internally, indicating that as per 15CA data uploaded by M/s Filatex India Ltd., foreign remittance of Rs. 87,34,375/- was remitted towards management/processing fee, on which no tax had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt order. 9. Before us, ld. Counsel appearing for the assessee reiterated the stand taken before learned DRP, whereas, learned Departmental Representative strongly relied upon the observations of the Assessing Officer. 10. We have considered rival submissions and perused the material available on record. We have also applied our mind to the decisions cited before us by learned counsel for the assessee. As discussed earlier, the bone of contention between the assessee and the Revenue is with regard to the nature and character of management/processing fee received by the assessee on loan advanced to M/s Filatex India Ltd. It is evident, on 09th October, 2015, the assessee had entered into loan agreement with M/s Filatex India Ltd. to finance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt fee is not covered under the said provision. On reading of Article 11(3)(b) of the India Germany tax treaty, it is observed that interest paid to a resident of Federal Republic of Germany in consideration of loan granted by Hermes-Deckung shall be exempted from Indian Tax. 12. As per Article 11(4) of the treaty, interest has been defined to mean, income from debts claim of every kind, whether or not secured by mortgage and whether or not carrying a right to participate in the debtor s profit, and in particular, income from Government securities and income from bonds or debentures, including premiums and prizes attached to such securities, bonds or debentures, except, penalty charges for late payment shall not be regarded as interest. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxation in India in terms of Article 11(3)(b) of the treaty. While coming to such conclusion, we find support from the decision of the Co- ordinate Bench in case of DCIT vs Sisecam Flat Glass India Ltd. in ITA No.2475/Kol/2019 dated 15.01.2021. Thus, in view of the aforesaid, we hold that the amount in dispute, being covered under Article 11(3)(b) of the India Germany DTAA is not taxable in India. Ground No.3 is allowed. 14. In view of our decision on merits, ground No.1 and 2 have become academic, hence, are kept open. 15. Ground No. 4 being consequential in nature and ground No.5 being premature at this stage, do not require adjudication. 16. In the result, the appeal is partly allowed. Order pronounced in the open court on 19/01/2024. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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