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2024 (5) TMI 953 - ITAT DELHIDenial of Benefit under Article 11 of the India-Cyprus DTAA - Right to receive the income - Whether Appellant is not the beneficial owner of the interest income earned by it on Compulsory Convertible Debentures ('CCDs')? - assessee was incorporated in Cyprus and is tax resident of Cyprus and is wholly owned subsidiary of IL & FS India Reality Fund-II, LLC which is based in Mauritius - HELD THAT:- We hold that the assessee is tax resident of Cyprus and has complete right to receive the interest income on CCDs and that there is no compulsion or contractual obligation to simultaneously pass on the same to another entity. The foreign currency risk as well as counter party risk in relation to the interest income was completely borne by the assessee herein. All these facts categorically go to prove that the assessee is indeed the beneficial owner of the interest income on CCDs from the Indian entity. When it is held to be beneficial owner of the income, it is entitled for the taxability at a concessional rate as provided under Article 11(2) of India-Cyprus Treaty. Hence, the action of the AO in taxing the interest income @ 40% as per domestic law by denying the treaty benefit is not upheld and same is hereby reversed. We hold that the interest income on CCDs would be taxed @10% as per Article 11 of the India Cyprus DTAA Treaty. Accordingly, grounds raised by the assessee are allowed.
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