The assessee, a Foreign Portfolio Investor registered in India,...

The assessee, a Foreign Portfolio Investor registered in India, entered into Forward Foreign Exchange Contracts (FCC) with HDFC Bank to safeguard against foreign currency fluctuation risk. The issue pertained to the treatment of loss arising from FCC as a short-term capital loss. The Tribunal held that while considering a similar issue, the coordinate bench in Citicorp Investment Bank (Singapore) Ltd. ruled that profit earned by a Singaporean bank on termination of forward contracts entered for safeguarding against foreign exchange fluctuation in respect of debentures purchased in India would be a capital gain exempt under the Indo-Singaporean DTAA. Additionally, in D.B. International (Asia) Ltd., it was held that the gain from a forward foreign exchange contract should be treated as a capital gain, and consequently, the loss arising from such a contract should be treated as a capital loss. Thus, the Tribunal found no infirmity in considering the loss on rollover/cancellation of FCC as a short-term capital loss eligible for carry forward under the head "capital gains," dismissing the grounds raised by the Revenue.