2021 (9) TMI 1530

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....and in law, the CIT(A) has erred in holding that the gains arising to the assessee on the transfer of compulsorily Convertible Debentures (CCDs) to M/s Vatika Ltd. is in the nature of capital gain and not in the nature of interest income as held by the Assessing Offsicer on the basis of Advance Ruling dated 21.03.2012 in AAR no. 1048 of 2011 pronounced by the Hon'ble Authority for Advance Ruling. (ii) Whether on the facts and in the circumstances of the case and in law, the CIT(A) has erred in holding that the gains arising to the assessee on the transfer of Compulsorily Convertible Debentures (CCDs) to M/s Vatika Ltd. is in the nature of capital gains and shall not be taxable in India under Article 11 of the Double Taxation Avoida....

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....ienation of any property. Article 11 being a specific provision will be applicable in the present case where Vatika has paid a fixed predetermined return to the Applicant Here we may note that in our opinion, Vatika and SHT are one and the same. Hence the amount paid by Vatika is clearly towards the debt that was taken by SHT from the Applicant. Hence the appreciation in the value of CCDs is clearly payment of "interest" and is taxable under the provision of Article 11 of the DTAC. 20. We, accordingly, answer the question that the entire gains arising to the applicant on the sale of equity shares and CCDs are not exempt from capital gain tax in India under DTAC with Mauritius. The gains arising on the sale of CCDs being interest wi....