Capital gains on compulsorily convertible debentures treated as capital gains, with prior ruling applied under the India-Mauritius DTAA.

Transfers of compulsorily convertible debentures were treated as giving rise to capital gains rather than interest income, and the Court also considered whether such gains were taxable in India under Article 11 of the India-Mauritius DTAA. The dispute was held to be covered by an earlier decision in the assessee's own case, with no stay operating against that ruling, and that prior decision was applied to the present controversy. The issue was decided in favour of the assessee and against the Revenue, and the appeal was dismissed.

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Issues: Whether the gains arising on transfer of compulsorily convertible debentures were taxable as interest income or as capital gains and whether such gains were taxable in India under Article 11 of the DTAA between India and Mauritius.

Analysis: The appeal challenged concurrent findings in favour of the assessee that the gains from transfer of the compulsorily convertible debentures constituted capital gains and not interest income. The dispute was already covered by an earlier decision in the assessee's own case, and no stay operated against that decision. The Court treated the earlier ruling as governing the present controversy.

Conclusion: The issue was decided against the Revenue and in favour of the assessee; the appeal was dismissed.

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