Case Note: Lenders’ Fees Not Linked to Loan Are Not Interest Income

This case note sets out the ruling by the Authority for Advance Rulings in Societe De Promotion Et De Participation Pour La Cooperation Economique that an appraisal front-end fee charged by the taxpayer to its client borrowers was not taxable in India as interest because it was not linked to the loan and not payable if the loan was not approved. However, all other fees (i.e. non-appraisal front-end fees, commitment fees, cancellation fees, monitoring fees and amendment fees) were taxable in India as interest income in terms of article 12(4) of the France-India Income and Capital Tax Treaty (1992) because they were payable only after the debt claim came into existence.