Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
 
 
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
 
 
 
 
Popular Search: ACCOUNTING STANDARDS :: due date for vat payment :: VAT RATES :: ARTICLES ON INPUT TAX CREDIT IN VAT :: TDS :: VAT Audit :: ACCOUNTING STANDARD :: cpt :: Central Excise rule to resale the machines to a new company :: TAX RATES - GOODS TAXABLE @ 4% :: empanelment :: form 3cd :: articles on VAT and GST in India :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: list of goods taxed at 4%
 
 
News Headlines »
 Seven things you must do before 31st March
 Income Tax saving investments: Top 5 options available for high-income individuals
 How to use zero tax rule on long term capital gains on stocks
 GST Returns - Furnishing details of inward supplies
 5 ways to maximise you income tax return
 Income-tax (2nd Amendment) Rules, 2017
 Soon, Faster PAN, An App For Filing Tax Returns
 Changes in income tax return filing process
 New Income Tax Rates And Deductions Applicable From April 1, 2017
 Tax and transparencya
 No decision yet on imposing tax on cash transactions

Interest payment on CDs is TDS-deductible: AAR
November, 06th 2008

Interest paid to a foreign company on convertible debentures (CDs) is like an interest taxable in India, according to a ruling by Authority for Advance Ruling (AAR), a quasi-judicial body on matters of tax.

In the order on an application filed by LMN, an Indian company, the AAR held that interest paid to the US company LMCC on fully convertible bonds cannot be construed as dividend income because dividend income can arise only from shares held in the company.

In this case, the bondholders would become shareholders only when the bonds are converted into shares. Therefore, interest paid up to the date of conversion of bonds to equity shares, are liable to be taxed in India and hence TDS has to be deducted from payment of interest to the US company.

LMNs question was whether interest payable on convertible debentures are within the definition of interest under the Income Tax Act and the Indo-US DTAA.

According to AAR, payment of interest presupposes money borrowed, or incurring of a debt. AAR said issuance of debentures is a form of borrowing money. Raising funds through fully convertible debentures is a common commercial practice and therefore, the interest in this case is related to the debt the Indian company has incurred.

Interest payment on the convertible debenture has all the characters of interest defined under the Income Tax Act and the treaty.

The mode of repayment by issuing equity shares, instead of paying in cash, does not change the legal character of debt and the interest associated with it, the AAR held. It said that under the Income Tax Act, interest payable in any manner to any kind of money borrowed is interest and liable to be taxed.

Under the provisions of the Indo American Double Taxation Avoidance Agreement too, income arising from any kind of debt claim is interest. The AAR held that payment of interest presupposes borrowing of money.

 
 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2017 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Binarysoft Technologies - Our Experience

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions