Payment Made for Arranging Loan From Foreign Establishments Isn’t in Nature of Royalty or FTS; No TDS u/s 195 | ITAT

Case Details: ITO (International Taxation) vs. Hartaj Sewa Singh - [2025] 171 taxmann.com 18 (Kolkata-Trib.)

Judiciary and Counsel Details

• Sanjay Garg, Judicial Member & Rakesh Mishra, Accountant Member
• Sunil Surana, AR. for the Appellant.
• Ruchika Sharma, Sr. DR. for the Respondent.

Facts of the Case

Assessee is working as an investment banker and strategic management consultant. During the relevant assessment year, the assessee entered into an agreement with a company to arrange a loan for them. Simultaneously, the assessee entered into an agreement with a non-resident company so that the loan could be arranged by taking their services.

The non-resident company arranged loans from foreign establishments and non-resident financiers with their efforts from Singapore. The assessee made payment of advisory fees to the non-resident company without deduction of tax at source. AO held that the payment made by the assessee was in the nature of royalty on which TDS was liable to be made.

On appeal, the CIT(A) deleted the additions. The matter reached the Kolkata Tribunal.

ITAT Held

The Tribunal held that the assessee was rendering advisory services to the company through the non-resident company and was working as an investment banker and strategic management consultant. The non-resident company was appointed as advisors and facilitators to raise funds for the company.

Thus, by no stretch of the imagination, the payment of advisory fee could be termed as a royalty or fee for technical services. It was in the nature of commission for the financial services rendered. Therefore, the payment made by the assessee to the non-resident company could not be held as royalty under India-Singapore DTAA.