2021 (9) TMI 1531 - AT - Income Tax

Income taxable in India - gains arising from transfer of CCDs - treating the gains on sale of CCDs to be taxable - interest income or capital gain - HELD THAT - An undisputed fact that identical issue arose in assessee s own case for A.Y. 2011-12 2012-13. For A.Y. 2011-12, the Hon ble Delhi High Court 2014 (8) TMI 9 - DELHI HIGH COURT has held that the gain on CCDs to be treated as capital gains. We further find that the Co-ordinate Bench of Tribunal in assessee s own case for A.Y. 2013-14 2021 (9) TMI 1530 - ITAT DELHI by following the decision of Hon ble Delhi High Court, dismissed the appeal of the Revenue. Before us, no distinguishing feature in the facts in the year under consideration and that of earlier years has been pointed out by the Revenue. Further no material has been placed by Revenue to demonstrate that the decision rendered by Hon ble Delhi High Court in assessee s own case for A.Y. 2011-12 has been stayed/ set aside/ overruled by higher judicial forum. Considering the totality of the aforesaid facts, we find no reason to interfere with the order of CIT(A) 2021 (9) TMI 1530 - ITAT DELHI and thus the grounds of Revenue are dismissed.

Summary

Issues:
1. Tax treatment of gains on the transfer of compulsorily convertible debentures (CCDs) to another company.
2. Applicability of Double Taxation Avoidance Agreement between India and Mauritius.
3. Validity of following the decision of the Hon'ble High Court when the matter is pending before the Supreme Court.

Analysis:
1. The appeal pertains to the tax treatment of gains on the transfer of CCDs by the assessee. The Assessing Officer (AO) considered the gains as taxable, citing consistency with earlier decisions despite the matter being pending before the Supreme Court. The CIT(A) decided in favor of the assessee, following the decision of the Hon'ble Delhi High Court that treated the gains as capital gains. The Tribunal noted the past decisions and dismissed the Revenue's appeal, as no distinguishing features were presented, and no material showed the High Court's decision being overruled.

2. The Revenue raised concerns regarding the applicability of the Double Taxation Avoidance Agreement between India and Mauritius on the gains arising from the transfer of CCDs. The CIT(A) had held that the gains were capital gains and not taxable in India under the agreement. The Tribunal upheld the CIT(A)'s decision, emphasizing the consistency with past rulings and the lack of new evidence presented by the Revenue to challenge the applicability of the agreement.

3. The issue of following the decision of the Hon'ble High Court, which had not been accepted by the Department and was pending before the Supreme Court, was also raised. The Tribunal, after considering the facts and legal precedents, found no reason to interfere with the CIT(A)'s order. The Tribunal highlighted the lack of new developments or legal changes that would warrant a different decision and ultimately dismissed the Revenue's appeal.

In conclusion, the Tribunal upheld the CIT(A)'s decision in favor of the assessee regarding the tax treatment of gains on the transfer of CCDs, the applicability of the Double Taxation Avoidance Agreement, and the validity of following the High Court's decision. The appeal of the Revenue was dismissed, and the order was pronounced on 8th September 2021.