DCIT (IT) 2(1)(1), MUMBAI vs. CITICORP INVESTMENT BANK (SINGAPORE ) LTD, MUMBAI

We may first take up the appeal of the Revenue for Assessment Year 2006-07 which is directed against the order of CIT(A)-56, Mumbai dated 29.09.2016, which in turn has arisen from the order passed by the Assessing Officer, Mumbai dated 02.02.2011 under section 143(3) r.w.s. 147 & 144C(3) of the Income Tax Act, 1961 (in short ‘the Act’).

In this appeal, Revenue has raised the following Grounds of appeal :-

Although the Revenue has raised multiple Grounds of appeal, but the sum and substance of the dispute revolves around the characterisation of the gain arising to the assessee from early settlement of forward contract for foreign currency. At the time of hearing, it was a common point between the parties that the issue is covered by the decisions of the Tribunal in assessee’s own case for earlier assessment years and that even the CIT(A) has followed such precedents in assessee’s own case while deciding the issue in favour of the assessee. It was also a common point between the parties that the precedents by way of the respective orders of the Tribunal for various assessment years continue to hold the field as they have not been altered by any higher authority. In this background, in order to impart completeness to the order, the following discussion is relevant.

The respondent-assessee is a tax resident of Singapore and holds a valid Tax Residency Certificate issued by the Singapore tax authorities. It is registered with the SEBI as a Foreign Institutional Investor (FII). In the return

When the matter reached the CIT(A), the orders of the Tribunal in assessee’s own case for Assessment Years 1998-99 and 2005-06 vide and 910/Mum/2009 dated 08.06.2011 was relied upon whereby the income arising on early settlement of forward exchange contracts was held to be in the nature of ‘Capital Gains’. The CIT(A) further noted that for Assessment Year 2007-08 also, the DRP had decided the issue in favour of the assessee, and which was subsequently affirmed by the Tribunal vide ITA No. 8763/Mum/2010 dated 22.06.2016. For the aforesaid reasons, CIT(A) upheld the plea of the assessee that the gain arising from early settlement of forward contracts of foreign currency was to be treated as ‘Capital Gains’ and not as ‘Income from Other Sources’. In this background, Revenue is in appeal before us on the aforestated Grounds of appeal.

At the time of hearing, the learned representative for the assessee pointed out that subsequent to the impugned order of the CIT(A), in Assessment Year 2010-11 also, the matter travelled to the Tribunal and the Tribunal, vide separate orders in the appeals filed by the assessee as well as the Revenue vide and 793/Mum/2015 dated 31.01.2017 and 24.03.2017 (read with Corrigendum dated 08.06.2017), had upheld the stand of the assessee. The said orders of the Tribunal continue to hold the field.

In this view of the matter, we find no reason to interfere with the decision of CIT(A), which is in line with the precedent in assessee’s own case. Before parting, we may also refer to the specific plea raised by the Revenue in Ground of appeal nos. 3 & 4, which is based on Article 24 of the DTAA between India and Singapore. The learned representative for the assessee had pointed out that the aforesaid aspect of the matter was not specifically addressed by the Tribunal in Assessment Years 1998-99 and 2005-06, so however, in an appeal preferred by the assessee for Assessment Year 2010- 11, vide order dated 24.03.2017, such an aspect has been specifically addressed against the Revenue. In this context, he referred to the specific Ground raised by the assessee, namely, Ground no. (ii) in the appeal for Assessment Year 2010-11, a copy of which has been placed in the Paper Book. The Tribunal after considering the relevant aspects of the matter, held that the benefits of Article 13(4) of the India-Singapore DTAA could not be denied on account of limitation prescribed under Article 24 of the DTAA. Therefore, in this view of the matter, the point raised by the Revenue in Ground of appeal nos. 3 & 4 also do not merit acceptance.

In view of the aforesaid discussion, the appeal of the Revenue for Assessment Year 2006-07 is hereby dismissed.

Insofar as the appeals of the Revenue for Assessment Years 2008-09, 2009-10 and 2011-12 are concerned, the facts and circumstances in the said appeals are pari materia to those considered by us in the appeal for Assessment Year 2006-07, therefore, our decision therein shall apply mutatis mutandis to the said appeals also.

Insofar as assessee’s cross-appeal for Assessment Year 2006-07 is concerned, the solitary Ground raised reads as under :-

As a perusal of the aforesaid Ground reveals, the dispute revolves around quantification of the income declared on account of earlier settlement of forward exchange contracts as disclosed in the revised return of income vis-a-vis the amount disclosed in the original return of income.

At the time of hearing, the learned representative for the assessee pointed out that once the income in question is held to be exempt and not taxable, the aspect raised in this appeal pertaining to quantification of such income becomes academic in nature. Since we have upheld the order of the CIT(A) treating such income to be in the nature of Capital Gains and falling within the beneficial provisions of Article 13(4) of the India-Singapore DTAA, the dispute relating to quantification of such income is rendered infructuous and accordingly, the Ground raised by the assessee is dismissed as infructuous. In the result, appeal of the assessee is dismissed.

Insofar as the cross-appeal of the assessee for Assessment Year 2011- 12 is concerned, the same assails the interest levied u/s 234C of the Act amounting to Rs.13,56,280/-.

On this aspect also, the learned representative for the assessee pointed out that once the decision of CIT(A) relating to assessability of gain on early settlement of forward exchange contract is affirmed, the said levy of interest u/s 234C of the Act would not arise. Since we have affirmed the decision of CIT(A) while dealing with the cross-appeal of the Revenue for instant assessment year in the earlier paras, the aforesaid Ground raised by the assessee is also treated as infructuous.

In the result, appeal of the assessee for Assessment Year 2011-12 is dismissed as infructuous.

Resultantly, the appeals of the Revenue as well as the assessee stand dismissed.