Broken period interest on debenture transfer treated as interest income, not short-term capital gain under the India-Singapore DTAA.

The article states that broken period interest received on transfer of non-convertible debentures was taxable as interest income, not as short-term capital gain under the India-Singapore DTAA. It notes that the debentures were transferred on a cum-interest basis, the interest accrued up to transfer had already been accounted for, and the disputed receipt represented five days' broken period interest paid by the purchaser. Because the payment retained its character as interest and the instrument remained a debt instrument, the amount was assessed under the head "Income from Other Sources" rather than treated as exempt capital gain under Article 13(5).

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Issues: Whether the amount received by the assessee on transfer of non-convertible debentures for the broken period of interest was taxable as interest income or was assessable as short-term capital gain not chargeable to tax under the India-Singapore DTAA.

Analysis: The debentures were sold on a cum-interest basis, and interest up to the date of transfer had already been accounted for as interest income. The disputed amount represented broken period interest for five days and was received from the purchaser of the debentures. The character of the receipt did not change merely because it was paid by the buyer instead of the issuer. The nature of the instrument as a debt instrument supported treatment of the amount as interest rather than capital gain.

Conclusion: The disputed amount was rightly assessed as interest under the head 'Income from Other Sources' and not as short-term capital gain exempt under Article 13(5) of the India-Singapore DTAA.

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