DEPUTY COMMISSIONER OF INCOME TAX (INTERNATIONAL TAXATION) - 2(1)(1), MUMBAI V. CITIBANK OVERSEAS INVESTMENT CORPORATION, MUMBAI

ITA 831/MUM/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 8477 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-07-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Assessment Year: 2013-2014
• Appeal Filed On: 09-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR RAJEEV HARIT LD
• Assessee Lawyers: P J PARDIWALA; MADHUR AGARWALLD ARS MS CITIBA
• Keywords: Capital asset; Wholly owned subsidiary; Capital receipt; Set aside
• Section: 143(3)

Judgement Text

1 M/S CITIBANK OVERSEAS INVESTMENT CORPORATION ASSESSMENT YEAR-2013-14 IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI , , BEFORE HONBLE SHRI SANDEEP GOSAIN, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.831/MUM/2018 ( / ASSESSMENT YEAR: 2013-14) D CIT (IT) - 2(1)(1) ROOM NO.1713, 17 TH FLOOR AIR INDIA BUILDING, NARIMAN POINT MUMBAI-400 021. / VS. M/S. C I TIBANK OVERSEAS INVE S TMENT CORP . C/O DELOITTE HASKINS & SELLS TOWER-3, 27 TH 32 ND FLOOR INDIA BULLS FINANCE CENTRE ELPHINSTONE MILL COMPOUND SENAPATI BAPAT MARG, ELPHINSTONE (W) MUMBAI-400 013. ./ ./PAN/GIR NO. AABCC-5333-N ( /APPELLANT ) : ( / RESPONDENT ) & C.O. NO.53/MUM/2019 ARISING OUT OF I.T.A. NO.831/MUM/2018 ( / ASSESSMENT YEAR: 2013-14) M/S. CITIBANK OVERSEAS INVESTMENT CORP. C/O DELOITTE HASKINS & SELLS TOWER-3, 27 TH 32 ND FLOOR INDIA BULLS FINANCE CENTRE ELPHINSTONE MILL COMPOUND SENAPATI BAPAT MARG, ELPHINSTONE (W) MUMBAI-400 013. / VS . D CIT (IT) - 2(1)(1) ROOM NO.1713, 17 TH FLOOR AIR INDIA BUILDING, NARIMAN POINT MUMBAI-400 021. ./ ./PAN/GIR NO. AABCC-5333-N ( /APPELLANT ) : ( / RESPONDENT ) REVENUE BY : DR. RAJEEV HARIT- LD. CIT-DR ASSESSEE BY : S/SHRI P.J. PARDIWALA & MADHUR AGARWAL-LD. ARS 2 M/S CITIBANK OVERSEAS INVESTMENT CORPORATION ASSESSMENT YEAR-2013-14 ! '#$ / DATE OF HEARING : 11/07/2019 % '#$ / DATE OF PRONOUNCEMENT : 16/07/2019 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER): - 1. AFORESAID APPEAL BY REVENUE FOR ASSESSMENT YEAR [IN SHORT REFERRED TO AS AY] 2013-14 CONTEST THE ORDER OF LD. COMMISSIO NER OF INCOME-TAX (APPEALS)-56, MUMBAI, [IN SHORT REFERRED TO AS CIT (A)], APPEAL NO. CIT(A)56 DCIT(IT)-2(1)(1)/2016-17/341-C DATED 23/11/2017 ON FOLLOWING GROUNDS OF APPEAL: - 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, CIT(A) WAS RIGHT IN HOLDING THAT FOREIGN EXCHANGE GAIN ON UNDERLYING FORWARD FOREIGN EXCHANGE CONTRACTS HAS TO BE CONSIDERED ON CAPITAL ACCOUNT AND HENCE CONSTITUTE A CAPITAL GAIN WHEN SUCH A CONTRACT IS NOT A CAPITAL ASSET? 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, CIT(A) WAS RIGHT IN HOLDING THAT FOREIGN EXCHANGE GAIN ON UNDERLYING FORWARD FOREIGN EXCHANGE CONTRACTS IS NOT TAXABLE UNDER THE HEAD INCOME FROM OTHER SOURCES, W HEN FORWARD FOREIGN EXCHANGE CONTRACT IS NEITHER A CAPITAL ASSET NOR IT IS THE B USINESS OF THE ASSESSEE TO ENTER INTO SUCH CONTRACTS? 3. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CI T(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. THE ASSESSEE, UPON RECEIPT OF NOTICE OF HEARING, HA S FILED CROSS-OBJECTIONS AGAINST THE SAME. HOWEVER, LD. SR. COUNSEL, SHRI P. J. PARDIWALA, SUBMITTED THAT UPON INSTRUCTIONS, THE ASSESSEE IS NOT INTERES TED IN PURSUING THE SAME FOR THIS YEAR. THEREFORE, THE CROSS-OBJECTION STAND DISMISSED IN LIMINE. 2. SO FAR AS THE REVENUES APPEAL IS CONCERNED, IT IS ADMITTED POSITION THAT THE ISSUE IS SQUARELY COVERED BY SERIES OF TRI BUNALS DECISIONS IN 3 M/S CITIBANK OVERSEAS INVESTMENT CORPORATION ASSESSMENT YEAR-2013-14 ASSESSEES OWN CASE FOR AYS 2001-02, 2006-07, 2007- 08, 2009-10 & 2011- 12, THE COPIES OF WHICH HAS BEEN PLACED ON RECORD. THE LD. CIT-DR IS UNABLE TO CONTROVERT THE FACT THAT SAID RULINGS ARE SQUARELY APPLICABLE TO THE FACTS OF THIS YEAR ALSO. IN FACT, LD. CIT(A) HAS DE LETED THE ADDITIONS BY RELYING UPON ITS OWN DECISION IN ASSESSEES OWN CAS E FOR AY 2012-13 ORDER DATED 18/10/2017 WHEREIN THE AFORESAID DECISIONS OF THE TRIBUNAL HAVE BEEN FOLLOWED. 3. FACTS IN BRIEF ARE THAT THE ASSESSEE BEING FOREIGN COMPANY WAS ASSESSED FOR IMPUGNED AY U/S 143(3) R.W.S. 144C (3) ON 09/02/2017. THE ASSESSEE IS STATED TO BE INCORPORATED IN AND A TAX RESIDENT OF USA. IT IS A 100% SUBSIDIARY OF CITIBANK N.A. USA. IT MAKES INVE STMENT IN INDIAN COMPANIES THROUGH FOREIGN DIRECT INVESTMENT ROUTE. 4. DURING THE YEAR, IT EARNED GAINS OF RS.85.68 CRO RES ON CANCELLATION AND ROLLOVER OF FORWARD FOREIGN EXCHANGE CONTRACTS WHICH WERE CLAIMED TO BE IN THE NATURE OF CAPITAL RECEIPTS NOT CHARGEABLE TO TAX ON THE LOGIC THAT CONTRACTS WERE ENTERED INTO TO PROTECT THE INVESTME NT IN INDIA FROM FOREIGN CURRENCY FLUCTUATION AND THERE BEING NO COST FOR EN TERING INTO THESE TRANSACTIONS. IN THE ALTERNATIVE, THE ATTENTION WAS , INTER-ALIA, DRAWN TO THE FACT THAT IN TERMS OF TRIBUNALS DECISION FOR AY 20 01-02, THE GAINS WERE TO BE ASSESSED AS SHORT-TERM CAPITAL GAINS. HOWEVER, D ISREGARDING THE SAME, LD. AO PROCEEDED TO ASSESS THE SAME UNDER THE HEAD INCOME FROM OTHER SOURCES. AS STATED EARLIER, THE FIRST APPELLA TE AUTHORITY CONCURRED WITH ASSESSEES STAND, RELYING UPON ITS OWN DECISION IN AY 2012-13, WHICH, IN TURN, RELIED UPON TRIBUNALS ORDER FOR OTHER YEARS. 4 M/S CITIBANK OVERSEAS INVESTMENT CORPORATION ASSESSMENT YEAR-2013-14 5. SINCE THE IMPUGNED DECISION ONLY FOLLOWS THE ORD ERS OF TRIBUNAL FOR OTHER YEARS, NO FAULT COULD BE FOUND IN THE SAME. N OTHING ON RECORD ESTABLISHES THAT THERE IS ANY CHANGE IN THE FACTUAL MATRIX. 6. IN RESULT, THE APPEAL AS WELL AS CROSS-OBJECTION STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH JULY, 2019. SD/- SD/- (SANDEEP GOSAIN) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 16/07/2019 SR.PS:-JAISY VARGHESE / COPY OF THE ORDER FORWARDED TO : 1. ! / THE APPELLANT 2. '# ! / THE RESPONDENT 3. $ ( ) / THE CIT(A) 4. $ / CIT CONCERNED 5. %&'' ( , ( , / DR, ITAT, MUMBAI 6. &*+, / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.