Relief for Tata Teleservices: ITAT Rules Interest Payments to China Development Bank Exempt Under India-China DTAA [Read Order]

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) ruled that interest payments by Tata Teleservices to China Development Bank (CDB) are exempt under Article 11(3) of the India-China Double Taxation Avoidance Agreement (DTAA).

Tata Teleservices Limited, the assessee, had made interest payments to CDB during the Assessment Year 2014–15. The Assessing Officer (AO) treated the interest as taxable in India, arguing that the exemption under Article 11(3) of the DTAA was not applicable in this case. The AO raised a demand under Sections 201(1) and 201(1A) of the Income Tax Act, 1961, citing failure to deduct tax at source on these payments.

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On appeal, the Commissioner of Income Tax (Appeals) [CIT(A)] deleted the addition made by the AO. The CIT(A) held that the China Development Bank qualifies as a financial institution wholly owned by the Government of China. So, the interest payments were exempt from taxes under Article 11(3) of the DTAA.

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Revenue challenged the CIT(A) before ITAT arguing that the CIT(A) erred in granting the exemption. The assessee's counsel relied on the prior ruling of the Coordinate Bench of the ITAT in assessee’s own case. The earlier ruling had already recognized CDB as a qualifying government-owned financial institution under the amended Article 11(3) of the India-China DTAA.

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The two-member bench comprising Dr. B.R.R. Kumar (Accountant Member) and Shri Anubhav Sharma (Judicial Member) heard the submissions of both parties. The tribunal observed that the Revenue failed to bring any new facts or legal distinctions to counter the previous ruling.

The tribunal held that the issue is fully covered by the earlier decision in favor of the assessee. The tribunal upheld the deletion of the addition and dismissed the Revenue’s appeal. The tribunal reaffirmed the interest payments made by Tata Teleservices Limited to China Development Bank are exempt from tax under Article 11(3) of the India-China DTAA.

To Read the full text of the Order CLICK HERE

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