THE COMMISSIONER OF INCOME TAX - INTERNATIONAL TAXATION -3 vs. TMW ASPF I CYPRUS HOLDING COMPANY LTD.

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ITA/192/2022HC DelhiDLHC01003529202011 July 2022Bench: HON'BLE MR. JUSTICE MANMOHAN,HON'BLE MS. JUSTICE MANMEET PRITAM SINGH ARORA2 pages
AI SummaryDismissed

What did the High Court hold?

The Delhi High Court dismissed the appeal filed by the Revenue. The Court found that no substantial question of law arose for consideration. This conclusion was based on the ITAT's finding, which was reproduced in the High Court's order. The ITAT had noted that the investee companies had requested the waiver of interest, even at the coupon rate of 4%, and that the assessee had acceded to this request. Therefore, the ITAT held that it could not be a case of accrual of interest, as none of the investee companies had acknowledged any interest payment due. The High Court agreed with this reasoning, implicitly upholding the ITAT's decision that interest was taxable only on a paid basis in this specific factual scenario, as no interest was actually paid or acknowledged as due. The operative direction was the dismissal of the appeal.

What were the facts?

The Commissioner of Income Tax - International Taxation -3 (the Revenue) filed an appeal before the Delhi High Court challenging an order dated August 9, 2019, passed by the Income Tax Appellate Tribunal (ITAT) in ITA No. 879/Del/2016 for the assessment year 2011-12. The ITAT had ruled that interest income was taxable only on a paid basis as per Article 11(1) and 11(2) of the Indo-Cyprus Double Taxation Avoidance Agreement (DTAA). The Revenue contended that the ITAT erred by ignoring the applicability of the anti-abuse provisions of Chapter X of the Income Tax Act, relating to transfer pricing, which is recognized under Article 9 of the Indo-Cyprus DTAA. However, the High Court noted that the ITAT's order was based on the finding that the investee companies had requested a waiver of interest, which the assessee had accepted. The assessee was TMW ASPF I CYPRUS HOLDING COMPANY LTD.

What were the issues?

1. Whether the ITAT erred in holding that as per Article 11(1) and 11(2) of the Indo-Cyprus DTAA, interest income is chargeable to tax only on a paid basis, ignoring the applicability of the anti-abuse provisions of Chapter X of the Income Tax Act relating to transfer pricing, which is duly recognized under Article 9 of the Indo-Cyprus DTAA? Assessee's contentions: The judgment does not record any specific contentions made by the assessee before the High Court. The ITAT's finding, as reproduced in the judgment, indicates that the assessee had acceded to the investee companies' request for waiving interest. Revenue's contentions: The Revenue argued that the ITAT erred in holding that interest income is taxable only on a paid basis, failing to consider the anti-abuse provisions of Chapter X of the Income Tax Act concerning transfer pricing, which are recognized under Article 9 of the Indo-Cyprus DTAA.

Which sections of the Income-tax Act were involved?

Article 11(1), Article 11(2), Article 9, Chapter X

AI-generated summary — verify with the full judgment below

$~33 * IN THE HIGH COURT OF DELHI AT NEW DELHI + ITA 192/2022 THE COMMISSIONER OF INCOME TAX - INTERNATIONAL TAXATION -3 ..... Appellant Through: Mr. Ruchir Bhatia, Sr. Standing Counsel with Ms. Mansie Jain, Advocate. versus TMW ASPF I CYPRUS HOLDING COMPANY LTD. ..... Respondent Through: None CORAM: HON'BLE MR. JUSTICE MANMOHAN HON'BLE MS. JUSTICE MANMEET PRITAM SINGH ARORA O R D E R % 11.07.2022 CM APPL. 30024/2022 In view of the averments made in the application, the delay in re- filing the present appeal is condoned. Accordingly, this application stands disposed of. ITA 192/2022 Present appeal has been filed challenging the order dated 9th August, 2019 passed by the Income Tax Appellate Tribunal (ITAT) in ITA No. 879/Del/2016 for the assessment year 2011-12. In the present appeal it has been averred that the ITAT erred in holding that as per Article 11(1) and 11(2) of Indo-Cyprus DTAA, interest This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 15/06/2026 at 02:27:35

income is chargeable to tax only on paid basis ignoring that the anti-abuse provision of Chapter X of Income Tax Act relating to transfer pricing duly recognized under Article 9 of the Indo- Cyprus DTAA applied. However, a perusal of the paper book reveals that a request for waiver of interest was made by the investee company which was accepted by the assessee. The said finding of the ITAT is reproduced hereinbelow: “ ........Here it cannot be the case of accrual of interest also, because none of the investee companies have acknowledge that any interest payment is due, albeit they have been requesting for waiving of interest of even coupon rate of 4%, leave alone the return of 18% which was dependent upon some future contingencies. Assessee despite all its efforts has acceded to such request.” In view of the aforesaid finding, this Court is of the view that no substantial question of law arises for consideration in the present appeal. Accordingly, the present appeal is dismissed. MANMOHAN, J MANMEET PRITAM SINGH ARORA, J JULY 11, 2022/msh This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 15/06/2026 at 02:27:35

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