9911796707
TMI Blog2012 (9) TMI 44X X X X Extracts X X X X X X X X Extracts X X X X ..... The identical dispute raised is regarding nature of income from settlement of the forward cover taken in foreign exchange. 2. Briefly stated facts of the case are that the assessee which is an investment bank and is tax resident of Singapore, had been registered in India as foreign institutional investor (FII) with SEBI. The assessee derived income from capital gain from sale of shares/debt instruments, interests and dividend income etc. The assessee had taken forward contract in foreign exchange to safeguard itself against risk of fluctuation in the foreign currency loan used by it for purchase of debentures. On sale of debenture, the said foreign cover was pre-terminated which resulted in profits of Rs. 2,21,69,803/- for Assessment Year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) (SB) in which it was held that gains arising on cancellation of forward transaction, which is dependent and inextricably linked to an underlying asset, would be revenue receipt or capital receipt depending upon whether the underlying asset was capital asset. Since in case of the assessee, the underlying asset i.e., debt security was admittedly a capital asset, it was submitted that the foreign exchange gain should be treated as capital gain. 3. The CIT(A) referred to para-3C.4 of part C of Exchange Control Manual in which in relation to forward cover it was provided as under :- "(iii) Authorized dealers may provide forward cover to Foreign Institutional Investors (FIIs) in respect of their investments in debt instruments in India, at th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Citicorp Banking Corporation Behrain in Assessment Year 2005-06 [ITA No. 6525/M/09] and the issue has been decided in favour of the assessee. It was also submitted that the Assessing Officer himself in the assessment order passed u/s. 143(3) for Assessment Year 2007-08 held that loss arising on account of settlement of forward foreign exchange contract was capital in nature. In that year the assessee had income from other sources and therefore, requested the Assessing Officer to set off the loss which in the earlier year had been treated as loss from other sources against the income from other sources. The Assessing Officer however treated loss as capital loss. The assessee filed application before the Dispute Resolution Panel (DRP) who he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee to safeguard the foreign exchange loan taken for purchase of debentures. There is also no dispute that debentures are capital assets and the income from sale of which has been treated as capital gain. The only dispute is regarding nature of income from the settlement of forward contract. We find that the same issue has already been considered by the Tribunal in the case of sister concern of the assessee i.e. Citicorp Banking Corporation Bahrain [ITA No. 6525/M/09] for the assessment year 2005-06. The Tribunal in the said case referred to the decision of Special Bench in the case of Apollo Tyres Ltd. (supra), in which nature of income arising from cancellation of foreign exchange forward contracts entered into by the assessee t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y being transferred to Singapore nor any such issue is in dispute before us. No doubt the respondent can raise an additional plea for the first time before the Tribunal in support of order of CIT(A) but same should be based on facts already on record. The plea raised on the presumption that money may not have been transferred to Singapore cannot be admitted at this stage. The dispute raised before us is only with regard to the nature of income from early settlement of forward foreign exchange contract taken to safeguard the foreign exchange loan which had been availed by the assessee for purchase of debentures. The income from sale of debenture has been assessed as capital gain. Therefore, respectfully following the decision of the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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