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January 2025

Article 11 of India-China DTAA — Interest received by China Development Bank qualified for exemption under Article 11(3) since, in fact, it was a financial institution owned by the Government of China.

By Geeta Jani | Dhishat B Mehta | K. Prasanna, Chartered Accountants
Reading Time 3 mins

11 [2024] 165 taxmann.com 603 (Delhi - Trib.)

Income Tax Officer vs. Tata Teleservice Ltd

ITA No: 1393 (Delhi) of 2023

A.Y.: 2016-17

Dated: 21st August, 2024

Article 11 of India-China DTAA — Interest received by China Development Bank qualified for exemption under Article 11(3) since, in fact, it was a financial institution owned by the Government of China.

FACTS

For FY 2015-16, the assessee had made interest payments to M/s. China Development Bank (‘CDB’), a tax resident of China without deducting taxes under Section 195. As per the assessee, CDB was wholly controlled by the Government of China. Therefore, in terms of source rule exemption as provided in Article 11(3) of India-China DTAA, the interest received by CDB was not taxable in India.

While the appeal related to AY 2016-17, in 2018, India and China subsequently executed a Protocol to DTAA, and the amended Protocol explicitly mentioned that ‘CDB’ was a qualified entity for Article 11(3).

According to the TDS officer, CDB

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