2013 (8) TMI 1113 - AT - Income Tax

Summary

Issues Involved:
The judgment involves the issue of taxability of capital gain arising from the sale of mutual fund units under the Indo-Swiss tax treaty.

Summary:

Issue 1: Taxability of Capital Gain under Indo-Swiss Tax Treaty
The appeal by the revenue concerns the taxability of capital gain from the sale of mutual fund units for the assessment year 2004-05. The assessee, a non-resident individual, claimed the benefit of the Double Tax Avoidance Agreement (DTAA) between India and Switzerland, arguing that the capital gain was taxable only in Switzerland u/s Article 13(6) of the tax treaty. The Assessing Officer (AO) contended that the gain was effectively from the alienation of shares of Indian companies and thus taxable in India u/s Article 13(5) (b). The Commissioner of Income Tax (Appeals) [CIT(A)] held that mutual funds were distinct from shares of Indian companies, relying on the judgment of the Hon'ble Supreme Court in the Apollo Tyres Ltd. case, and concluded that the capital gain was not taxable in India. The Tribunal upheld the CIT(A)'s decision, stating that units of mutual funds cannot be considered as shares, and therefore, the provisions of Article 13(6) applied, rendering the capital gain not taxable in India.

Decision:
The Tribunal dismissed the revenue's appeal, affirming that the capital gain from the sale of mutual fund units was not taxable in India under the provisions of the Indo-Swiss tax treaty.