IN RE: IDEA CELLULAR LIMITED Vs. STATE

JUDGEMENT

(1.) THE applicant is a company incorporated under the Indian Companies Act. It is a tax resident of India. It is engaged in the business of providing telecommunication services across different circles in India. During the course of its business, it entered into a contract with Ericsson India (P) Ltd and Ericsson AB for procuring cellular telecommunication equipments, software, service and documentation. To facilitate the financing for such procurements, the applicant availed of a loan facility for $ 300 million from ABN Amro Bank NV Stockholm Branch and NORDEA Bank AB Sweden under a facility agreement dated 30.12.2009. That agreement was amended and restated on 28.1.2010.

(2.) THE loan under the facility agreement was guaranteed by the Swedish Export Credits Guarantee Board (EKN)to the extent of 95% in respect of risk arising due to political and commercial events. The guarantee is provided in respect of the actual amount drawn down by the applicant from time to time. On 10.12.2010, the Royal Bank of Scotland NV, the successor of ABN Amro Bank and NORDEA transferred all their rights and obligations under the Loan Facility Agreement to AB SVENSK Export Kredit (SEK), a company incorporated in Sweden. SEK is a tax resident of Sweden.

(3.) THE applicant approached this Authority with the present application seeking an Advance Ruling on a plea that all the agreements relating to this transaction were negotiated and concluded outside India. It takes the stand, that the loan having been guaranteed by EKN, the interest paid under the transaction is not liable to charge to tax in India under the Income -tax Act in view of Article 11.3 of the Double Taxation Avoidance Convention between India and Sweden. While allowing the application under section 245R(2) of the Act, this Authority framed the following questions for the ruling: