Article 22 of India-Korea DTAA – As taxing rights were allocated only to resident country, fee received for providing guarantee in respect of loan obtained by Indian subsidiary of Korean company was taxable only in Korea.

13. [2025] 176 taxmann.com 246 (Bangalore - Trib.)

KIA Corporation vs. ACIT

IT(IT)APPEAL NO.644 (BANG.) OF 2025

A.Y.: 2022-23 Dated: 30 June 2025

Article 22 of India-Korea DTAA – As taxing rights were allocated only to resident country, fee received for providing guarantee in respect of loan obtained by Indian subsidiary of Korean company was taxable only in Korea.

FACTS

The Assessee, a tax resident of Korea, extended guarantee in respect of a loan obtained by its subsidiary in India (“SubCo”). In consideration for such guarantee, it received fee from SubCo. In terms of Article 22 of India-Korea DTAA, Assessee claimed that fee was taxable only in Korea. The AO observed that the loan was utilised by SubCo in India. Accordingly, in terms of Section 5(2), read with section 9(1)(i), of the Act, fee accrued/arose in India. Therefore, rejecting the application of Article 22 of India-Korea DTAA, the AO assessed fee as taxable in India. The DRP upheld the action of the AO.

Aggrieved with the final order, the Assessee appealed to ITAT.

HELD