TaxTMI 
TaxTMI 
2024 (11) TMI 240
X X X X Extracts X X X X
X X X X Extracts X X X X
....following grounds: - "1. Whether on facts & circumstances of the case, the Ld CIT(A) has erred in treating the loss of Rs 3,19,33,010 as short term capital loss when there is no transfer of asset or erosion of asset of the assessee. 2. Whether on facts & circumstances of the case the Ld CIT(A) has failed to appreciate that the activity/transaction resulting in losses of Rs 3,19,33,010 claimed as short term capital loss is not part of the actual activity of the assessee and cannot be categorized under heads of income as defined in section 14A to E and can only be categorized as Income from "Other Sources" as per Sec 14 F and section 56 of the IT Act 1961. 3. Whether on facts & circumstances of the case Ld. CIT(A) has failed to take int....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssee incurred a loss from FCC amounting to INR 3,19,33,010 and the said amount was carried forward as a short-term capital loss. During the assessment proceedings, the assessee was asked to show cause as to why the profit/loss on rollover/cancellation of FCC be not treated as income from other sources. In response, the assessee submitted that the gains earned on cancellation/rollover of FCC are essentially in the nature of capital receipts and consequently not exigible to tax under the Act. It was further submitted that the reason for this treatment is that the FCC have been entered into by the assessee to protect the principal component of the investment and thus they are on capital account. The assessee submitted that the income from FCC ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e business of the assessee to enter into FCC and therefore, the gains from such transactions cannot be business gains. The AO held that the FCC have been entered into by the assessee to stop erosion of capital gain and such gains are taxable as income from other sources. As regards the decision of the Tribunal in Citicorp Investment Bank (Singapore) Ltd V/s DDIT, reported in (2012) 24 taxmann.com 211 (Mum-Trib.), the AO held that the Department is in appeal before the Hon'ble High Court. Accordingly, the AO concluded that the loss of INR 3,19,33,010 is allowed to be carried forward under the head income from other sources. 6. The learned CIT(A), vide impugned order, allowed the appeal filed by the assessee following the decision of the Tri....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 8. We find that while considering a similar issue pertaining to the nature of income from settlement of forward cover taken in foreign exchange, the coordinate bench of the Tribunal in Citicorp Investment Bank (Singapore) Ltd (supra) held that profit earned by a Singaporean bank on termination of forward contracts entered into for safeguarding it from foreign exchange fluctuation in respect of debentures purchased in India would be a capital gain exempt under Indo-Singaporean DTAA. The relevant findings of the coordinate bench, in the afore-noted decision, are reproduced as follows: - "4.3 We have perused the records and considered the rival submissions carefully. The dispute is regarding nature of income arising from early settlement o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dentical with the only difference that in this case the assessee had acquired the foreign exchange loan for purchase of debentures which are admittedly capital assets. Therefore, in our view the case is covered by the decision of the Tribunal in case of Citicorp Banking Corporation, Bahrain (supra). The case of the assessee is also supported by the decision of DRP in assessee's own case for the assessment year 2007-08 in which it has held that loss arising from settlement of forward contract taken by the assessee to safeguard the foreign exchange loan taken for acquisition of shares/debentures was capital loss. 4.4 The ld. DR has raised an additional plea that the assessee should be given benefit of DTAA only when it was proved that m....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rs. While deciding the issue in assessment years 2005-06 and 2006-07 in ITA no.4583/Mum./2009 and ITA no.2954/Mum./2010, dated 3rd October 2012, the Tribunal has held that the gain arising from forward exchange contract should be assessed as capital gain. Following the aforesaid decision, the Tribunal again in assessee's own case for assessment year 2008-09 in ITA no.6984/Mum./2011, dated 17th July 2013, has held that the gain from forward foreign exchange contract has to be treated as capital gain. As a natural corollary the loss arising from such contract has to be treated as capital loss. The DRP having followed the decision of the Tribunal in assessee's own case, we do not see any reason to interfere with the directions of the D....