Capital gains treatment for forward forex contract receipts upheld; India-Singapore treaty relief under Article 13(4) also sustained.

Gain from early settlement or cancellation of forward foreign exchange contracts was treated as capital gains, not income from other sources, because the assessee's own earlier years had already characterised the receipt as capital in nature and that consistent treatment was followed. The Tribunal also held that treaty relief under Article 13(4) of the India-Singapore DTAA could not be denied by invoking Article 24, as the limitation relied on by the Revenue was not accepted on these facts. The lower appellate view was therefore sustained, the Revenue's appeals failed, and the assessee's remaining grounds did not survive.

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Issues: (i) Whether gain arising from early settlement or cancellation of forward foreign exchange contracts was taxable as income from other sources or assessable as capital gains; (ii) whether the benefit of Article 13(4) of the India-Singapore Double Taxation Avoidance Agreement could be denied by invoking Article 24.

Issue (i): Whether gain arising from early settlement or cancellation of forward foreign exchange contracts was taxable as income from other sources or assessable as capital gains.

Analysis: The dispute turned on the character of the receipt arising from early settlement of forward exchange contracts. The Tribunal noted that in the assessee's own earlier years, the same receipt had already been treated as capital gains, and those decisions continued to hold the field. The lower appellate authority had followed that consistent view. The Tribunal found no reason to disturb the settled treatment of the receipt.

Conclusion: The gain was held to be assessable as capital gains and not as income from other sources, in favour of the assessee.

Issue (ii): Whether the benefit of Article 13(4) of the India-Singapore Double Taxation Avoidance Agreement could be denied by invoking Article 24.

Analysis: The Revenue relied on Article 24 to contend that relief under Article 13(4) was unavailable unless the income had been remitted to Singapore. The Tribunal accepted the assessee's submission that this aspect had already been examined in the assessee's later year and that Article 13(4) could not be denied on the basis of the limitation in Article 24. The treaty benefit, therefore, remained available.

Conclusion: The benefit of Article 13(4) could not be denied by Article 24, in favour of the assessee.

Final Conclusion: The substantive tax treatment adopted by the lower appellate authority was affirmed, the Revenue's appeals were rejected, and the assessee's remaining grounds did not survive for adjudication.

Ratio Decidendi: Where a receipt from early settlement of forward foreign exchange contracts has consistently been held to be capital in nature in the assessee's own case, treaty protection under Article 13(4) cannot be withdrawn by a limitation clause in Article 24 unless its conditions are independently satisfied.

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