DDIT(IT) 1(2), MUMBAI V. D.B INTERNATIONAL (ASIA) LTD, MUMBAI

ITA 2954/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8504 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-10-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: L
• Next Hearing Date: 24-09-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 15-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDER KUMAR
• Keywords: Double taxation relief

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'L' BENCH, MUMBAI BEFORE SHRI R.S. SYAL , ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA NO. 2954/MUM/2010 ITA NO. 4583/MUM/2009 (ASSESSMENT YEARS: 2006-07 & 2005-06) D D I T (IT) 1(2) M/S. D.B. INTERNATIONAL (ASIA) LTD. ROOM NO. 119, SCINDIA HOUSE C/O. BSR & CO., CAS 1 ST FLOOR, BALLAD ESTATE VS. LODHA EXCELLUS, APPOLO MILLS COMP. N.M. ROAD, MUMBAI 400038 N.M. JOSHI MARG, MAHALAXM I MUMBAI 400011 PAN AABCB 1383 K APPELLANT RESPONDENT APPELLANT BY: SHRI NARENDER KUMAR RESPONDENT BY: SHRI P.J. PARDIWALLA SHRI NIRAJ SHETH DATE OF HEARING: 25.09.2012 DATE OF PRONOUNCEMENT: 03.10.2012 O R D E R PER BENCH THESE TWO APPEALS BY THE REVENUE RELATE TO A.YS. 20 05-07 & 2006-07. SINCE COMMON ISSUES ARE RAISED IN BOTH THE APPEALS, WE ARE THEREFORE PROCEEDING TO DISPOSE OF THEM BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. GROUNDS NO. 1 TO 3 FOR THE A.Y. 2005-06 ARE AGAINST THE DIRECTION OF THE LEARNED CIT(A) THAT GAIN ARISING FROM FORWARD E XCHANGE CONTRACTS SHOULD BE ASSESSABLE AS CAPITAL GAINS AND HENCE NOT TAXABL E IN THE LIGHT OF THE INDIO-SINGAPORE DTAA . 3. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSES SEE, A FII, IS INCORPORATED IN SINGAPORE AND TAX RESIDENT OF THAT COUNTRY. IT SHOWED SHORT ITA NO. 2954 & 4583/MUM/2010 M/S. D.B. INTERNATIONAL (ASIA) LTD . 2 TERM CAPITAL GAINS ON FORWARD EXCHANGE CONTRACT TRA NSACTIONS AND CLAIMED IT AS NOT TAXABLE. THE AO TREATED THIS AMOUNT AS INCOM E UNDER THE HEAD INCOME FROM OTHER SOURCES AND ACCORDINGLY PUT IT TO TAX. THE LEARNED CIT(A) DECIDED THE ISSUE IN ASSESSEES FAVOUR BY HOLDING S UCH GAIN AS CAPITAL GAIN AND THUS NOT CHARGEABLE TO TAX, AGAINST WHICH THE R EVENUE HAS COME UP IN APPEAL BEFORE US. 4. AT THE VERY OUTSET THE LEARNED COUNSEL FOR THE ASSE SSEE PLACED ON RECORD, COPIES OF ORDERS PASSED BY THE TRIBUNAL IN CITICORP BANKING CORPORATION VS. ADIT (IT) 2011-TII-40ITAT-MUM-INTL AND CITICORP INVESTMENT BANK (SINGAPORE) LTD. VS. DCIT (IT) [201 2] 24 TAXMANN.COM 211 (MUM) IN WHICH IT HAS BEEN CONSISTENTLY HELD THAT I NCOME ON ACCOUNT OF CANCELLATION OF FORWARD EXCHANGE CONTRACT IN CASE O F A FII IS CHARGEABLE UNDER THE HEAD CAPITAL GAINS BECAUSE THERE IT HAS A DIRECT NEXUS WITH THE INVESTMENT OF THE ASSESSEE. IT WAS, THEREFORE, SUBM ITTED THAT SIMILAR VIEW AS TAKEN BY THE TRIBUNAL IN OTHER CASES, SHOULD BE TAK EN. 5. THE LEARNED D.R. SIMPLY RELIED UPON THE ASSESSMENT ORDER. 6. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD IT IS OBSERVED THAT THE ASSESSEE IS A FII . THE PURPOSE OF ENTRY INTO FORWARD EXCHANGE CONTRACT IS TO PROVIDE A HEDGING M ECHANISM AGAINST ADVERSE FOREIGN EXCHANGE MOVEMENT. THE TRIBUNAL IN THE AFORE NOTED CASES HAS CONSISTENTLY TAKEN A VIEW THAT IN SUCH A SITUAT ION INCOME OR LOSS FROM SUCH TRANSACTIONS IS TO BE CONSIDERED AS CAPITAL GA IN OR CAPITAL LOSS. NO CONTRARY PRECEDENT HAS BEEN BROUGHT TO OUR NOTICE B Y THE LEARNED D.R. RESPECTFULLY FOLLOWING THE ABOVE ORDERS, WE UPHOLD THE IMPUGNED ORDER BY HOLDING THAT INCOME ARISING FROM FORWARD EXCHANGE C ONTRACT IS ASSESSABLE AS CAPITAL GAIN AND RESULTANTLY THERE CAN BE NO CHA RGE TO TAX UNDER THE DTAA. ITA NO. 2954 & 4583/MUM/2010 M/S. D.B. INTERNATIONAL (ASIA) LTD . 3 7. GROUND NO. 4, AGAINST THE CHARGING OF INTEREST UNDE R SECTION 234B, HAS IN OUR CONSIDERED OPINION, BECOME CONSEQUENTIAL IN THE PRESENT FACTS AND CIRCUMSTANCES OF THE CASE. 8. FACTS AND CIRCUMSTANCES FOR THE A.Y. 2006-07 ARE MUTATIS MUTANDIS SIMILAR TO THOSE FOR THE A.Y. 2005-06. IN FACT, NO SEPARATE SUBMISSION HAS BEEN ADVANCED BY THE EITHER SIDE IN RELATION TO THI S LATER YEAR. FOLLOWING OUR VIEW TAKEN HEREINABOVE, WE UPHOLD THE IMPUGNED ORDE R TO THIS EXTENT FOR THIS YEAR AS WELL. 9. IN THE RESULT, BOTH THE APPEALS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 03 RD OCTOBER, 2012. SD/- SD/- (AMIT SHUKLA) (R.S. SYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 03 RD OCTOBER, 2012 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) XXXI, MUMBAI 4. THE DIT (INTERNATIONAL TAXATION), MUMBAI 5. THE DR, L BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.