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In absence of provision of capital and any debt claim between the parties the impugned guarantee fees paid by the appellant to the Netherlands based company cannot be held to be ‘interest” in terms of Article 11 of the DTAA andprovision of Guarantee fees service is not fees for Technical services under article 12 of The DTAA.

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Sec. 40 & 195 of Income Tax Act, 1961— TDS — Disallowance deleted as guarantee commission paid to AE was not "interest" and "fees for technical service" falling under article 11 and 12 of DTAA between India and Netherlands.

Facts: These are two appeals filed by the assessee against the order of CIT(A) for the Assessment Year 2009-10 and 2010-11 wherein disallowance made by the learned assessing officer under section 40 (a)(i) on account of non-deduction of tax at source on guarantee commission paid to lease plan Corporation NV Netherland is confirmed holding it to be payment in nature of ‘Fees For Technical Services’ as well as ‘Interest’ as per the article 11 and 12 DTAA between India and Netherland.

Held, that two issues need to examined firstly, whether the Guarantee Fee paid by assessee to its AE in Netherlands can be considered as ‘interest’ in terms of Article 11 of the DTAA for which it was held that in absence of provision of capital and any debt claim between the parties the impugned guarantee fees paid by the appellant to the Netherlands based company cannot be held to be ‘interest” in terms of Article 11 of the DTAA. Secondly, whether such guarantee fee can be Fees for technical services within compass of Article 12 (5) of the DTAA for which it was held that, looking to the nature of ‘Service’ provided by the Netherlands company in providing guarantee, it is a financial service and can by no stretch of imagination is called a ‘Consultancy services. Even otherwise, it does not cross the threshold of ‘make available’ in 12 (5) (b) of the DTAA, therefore it was held that, provision of Guarantee fees service is not fees for Technical services under article 12 of The DTAA. - LEASE PLAN INDIA PVT. LTD. V/s DEPUTY CIT. - LEASE PLAN INDIA PVT. LTD. V/s DEPUTY CIT - [2020] 206 TTJ 981 (ITAT-DELHI)