G Ltd., a resident Indian Company, on 01-04-2024 has borrowed 80 crores from M/s. M Inc, a Company incorporated in Country F, at an interest rate of…

CA Final · Direct Tax Laws and International Taxation · MTP · September 2025
G Ltd., a resident Indian Company, on 01-04-2024 has borrowed 80 crores from M/s. M Inc, a Company incorporated in Country F, at an interest rate of 8% p.a. The said loan is repayable over a period of 12 years. Further, loan is guaranteed by M/s A Inc incorporated in Country F. M/s. C Inc, a non-resident, holds shares carrying 40% of voting power both in M/s G Ltd. and M/s A Inc. M/s C Inc has also deposited 80 crores with M/s M Inc. Interest payable by G Ltd. to M Inc. would be subject to limitation of interest deduction because – (i) M/s. C Inc. holds shares carrying 40% voting power in G Ltd. (ii) M/s. C Inc. holds shares carrying 40% voting power both in G Ltd. and M/s. A Inc. (iii) M/s. A Inc. guarantees the loan taken by G Ltd. from M/s. M Inc. (iv) M/s. C Inc. has deposited 80 crores with M/s. M Inc. The most appropriate answer is –
(A) (A) (i) and (iv) above
(B) (B) (ii) and (iii) above
(C) (C) (i) and (iii) above
(D) (D) Either (a) or (b)

Suggested Answer and Working Notes:

Correct Answer: Option (D)

(D) Either (a) or (b)

Topics: Double Taxation Relief, Non-Resident Taxation

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