2024 (1) TMI 274 - HC - Income Tax

Income taxable in India - gains arising from transfer of CCDs - taxability as capital gains - whether not taxable in view of the provisions of Article 13 of the India-Mauritius DTAA? - AO sought to treat the gains as interest, placing reliance upon Section 2(28A) and Article 11 of the India-Mauritius DTAA - HELD THAT - As noted above, this was also the view of the AAR, which was overruled by this court via the aforesaid judgment 2014 (8) TMI 9 - DELHI HIGH COURT . It has been brought to our notice that for AY 2011-12, appeals filed by the appellant/revenue have been dismissed by a coordinate bench, wherein the questions of law proposed were similar to those formulated for consideration in the instant appeal. Thus, having regard to the aforesaid position, the above-captioned appeals are closed. Since the appellant/revenue has preferred a Special Leave Petition, which has been converted into a Civil Appeal i.e., Civil Appeal 10299/2016 2018 (1) TMI 1688 - SUPREME COURT counsel for the parties submit that they will abide by the final decision rendered by the Supreme Court in the said appeal. The appeals are, accordingly, closed. Parties will be bound by the stand recorded in para 15 above

Summary

Issues:
The judgment involves the condonation of delay in re-filing appeals by the appellant/revenue, the nature of gains arising from the transfer of Compulsorily Convertible Debentures (CCDs), the applicability of the India-Mauritius Double Taxation Avoidance Agreement (DTAA) on the taxation of such gains, and the finality of the decision based on previous rulings.

Condonation of Delay in Re-filing Appeals:
The appellant/revenue sought condonation of a 480-day delay in re-filing the appeals, which was not objected to by the respondent/assessee represented by Ms. Ananya Kapoor. The court ordered the condonation of the delay, and the applications were disposed of accordingly.

Nature of Gains from Transfer of CCDs:
The respondent/assessee and Vatika Pvt. Ltd. had invested in Compulsorily Convertible Debentures (CCDs) issued by SH. Tech Park Developers Pvt. Ltd. The gains arising from the transfer of CCDs were claimed by the respondent/assessee to be capital gains, not taxable under the India-Mauritius Double Taxation Avoidance Agreement (DTAA), Article 13. However, the Assessing Officer (AO) sought to treat the gains as interest based on the Income Tax Act, 1961, and Article 11 of the India-Mauritius DTAA.

Applicability of DTAA on Taxation of Gains:
The assessment orders were based on a decision of the Authority for Advance Ruling (AAR) dated 21.03.2012, which was later set aside by a court decision. The Tribunal ruled in favor of the respondent/assessee, considering the judgment that set aside the AAR's ruling. The appeals were closed, and parties agreed to abide by the final decision of the Supreme Court in a related appeal.

Finality of Decision Based on Previous Rulings:
The judgment noted that similar questions of law had been dismissed in appeals for a previous assessment year. The current appeals were closed, and parties agreed to be bound by the decision of the Supreme Court in a related Civil Appeal. The parties were instructed to act based on the digitally signed copy of the order.