Interest on convertible debentures is taxable

By Sumes Dewan and Shradha Puri,KR Chawla & Co
0
1583
LinkedIn
Facebook
Twitter
Whatsapp
Telegram
Copy link

In a recent judgment passed by the Authority of Advance Ruling (AAR) in the matter LMN India Limited (AAR No. 769 of 2007), it was held that payment made to a foreign company (LMCC US) in the form of interest until the conversion of bonds into equity shares, is considered as interest paid on the debt incurred by the applicant (LMN).

It is thus liable to be taxed as income of LMCC US under section 2 (28A) of the Income Tax Act, 1961, (ITA) and under article 11.2 of the double tax avoidance agreement (DTAA).

Sumes Dewan Partner KR Chawla & Co
Sumes Dewan
Partner
KR Chawla & Co

Case background

In this case, LMN, a non-banking financial company incorporated in India, for the purpose of funding its business activities, proposed to borrow money from LMCC US by issuing fully convertible bonds under the foreign direct investments scheme.

You must be a subscribersubscribersubscribersubscriber to read this content, please subscribesubscribesubscribesubscribe today.

For group subscribers, please click here to access.
Interested in group subscription? Please contact us.

你需要登录去解锁本文内容。欢迎注册账号。如果想阅读月刊所有文章,欢迎成为我们的订阅会员成为我们的订阅会员

已有集团订阅,可点击此处继续浏览。
如对集团订阅感兴趣,请联络我们

Sumes Dewan is a partner and Shradha Puri is a senior associate at KR Chawla & Co Advocates & Legal Consultants. The firm is headquartered in New Delhi and has offices in Chennai and Bangalore as well as a representative office in Singapore.

KR_Chawla_-_Logo

Head Office

7th Floor, Kailash Building

26, Kasturba Gandhi Marg

New Delhi – 110 001

India

Tel: +91 11 2335 7658-61

Fax: +91 11 2331 9997

Email: krclo@krcco.com

US Office

KR Chawla Inc.

One Embarcadero Center

Suite 500

San Francisco; CA 94111

Tel: +415 773 2804

Mob: +415 509 2165

LinkedIn
Facebook
Twitter
Whatsapp
Telegram
Copy link