2018 (8) TMI 2111 - AT - Income Tax

Nature of gain from the transaction of securities - Income from securities as capital gain OR business income - exemption under Article 13(6) of the India Switzerland Tax Treaty - PE in India - HELD THAT - Considering the precedents in assessee s own case for Assessment Years 2008-09 (supra) as well as 2009-10 2016 (6) TMI 1462 - ITAT MUMBAI it has to be held that income of a FII from sale and purchase of securities is liable to be taxed as Capital Gains . PE in India - Taxability of such income, which has been held to be non-taxable in India under Article 13(6) of the India-Switzerland Tax Treaty - Tribunal, in Assessment Year 2009-10 (supra) held that banking branch of the assessee in India would not constitute a PE qua the aforesaid income. Thus, the aforesaid decisions of the Tribunal in assessee s own case, and which continue to hold the field as they have not been altered by any higher authority, fully cover the aforestated Grounds raised by the Revenue before us. Accordingly, we hereby affirm the decision of CIT(A), which is in line with the aforestated precedents in assessee s own case. Thus, the order of CIT(A) is hereby affirmed. Appeal of the Revenue is dismissed.

Summary

Issues Involved:
Nature of income from securities, Taxability of income under India-Switzerland Tax Treaty

Nature of Income from Securities:
The appeal filed by the Revenue pertains to the Assessment Year 2010-11 and challenges the order passed by CIT(A)-58, Mumbai. The dispute revolves around the characterization of income earned by the respondent-assessee from the sale and purchase of securities in India. The Assessing Officer contends that such income constitutes business income due to the FII activities in India and the banking business carried out through a branch. On the other hand, the assessee argues that the income should be treated as Short Term Capital Gain under Article 13(6) of the India-Switzerland Tax Treaty. The CIT(A) relied on precedents in the assessee's own case for earlier assessment years and held that the gains from transactions in securities should be considered as capital gains, not business income. The Tribunal affirmed the CIT(A)'s decision based on the precedents in the assessee's case for previous assessment years, concluding that income from securities is taxable as capital gains, not business income.

Taxability of Income under India-Switzerland Tax Treaty:
The second aspect of the dispute concerns the taxability of the income earned from securities under the India-Switzerland Tax Treaty. The Tribunal, relying on previous decisions, held that the income is not taxable in India under Article 13(6) of the treaty. It was established that the banking branch of the assessee in India does not constitute a Permanent Establishment (PE) concerning the said income. The Tribunal's decisions in the assessee's case for earlier assessment years remain unchanged and provide a basis for affirming the CIT(A)'s decision. Consequently, the Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s order in line with the precedents in the assessee's case.

In conclusion, the judgment addresses the nature of income from securities and the taxability of such income under the India-Switzerland Tax Treaty. The decision emphasizes the distinction between capital gains and business income, as well as the application of treaty provisions to determine the tax liability. The Tribunal's reliance on precedents in the assessee's case for previous assessment years ensures consistency in the treatment of income from securities, ultimately leading to the dismissal of the Revenue's appeal.