India-Cyprus DTAA benefit allowed on capital gains and dividends, and allegations of DTAA abuse and ultimate beneficiary being a US company rejected – Delhi bench of the Tribunal

In brief

The Delhi bench of the Income-tax Appellate Tribunal (Tribunal)¹ upheld the order of the tax officer (TO) and Dispute Resolution Panel to deny the benefits of lower tax rate on interest income as per the Double Taxation Avoidance Agreement (DTAA) between India and Cyprus. The Tribunal, based on the facts on record, upheld that the taxpayer is not the beneficial owner of the interest income from the compulsorily convertible debentures and functions as a mere conduit company. Accordingly, it upheld that the interest income is taxable at 20% under section 115A of the Income-tax Act, 1961 (the Act).