Treaty between India and Belgium – Decision that interest expense cannot be disallowed in absence of thin capitalisation rules

The High Court issued a decision on 30 August 2012 in the case of DIT v. Besix Kier Dabhol SA (ITA No.776 OF 2011) that, in absence of thin capitalisation rules, there can be no disallowance of interest expense under the Indian Income Tax Act 1961 (ITA) despite a high debt-equity ratio.
(a) Facts. The Taxpayer (i.e. Besix Kier Dabhol SA) was a company incorporated in Belgium and its sole business was to construct a fuel jetty in India. The Taxpayer had fully paid capital divide…