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TMI Blog2018 (6) TMI 1111X X X X Extracts X X X X X X X X Extracts X X X X ..... ived from capital gain. The expression ‘exempt’ with reference to the capital gain derived by the assessee, in our view, has been loosely used. On the contrary, the overriding nature of Article 13(4) of the Tax Treaty makes the capital gain taxable only in the country of residence of the assessee. - decided against revenue - ITA no.992/Mum./2015 - - - Dated:- 20-6-2018 - SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI N. K. PRADHAN, ACCOUNTANT MEMBER For The Assessee : Shri P.J. Pardiwala a/w Shri Niraj Sheth For The Revenue : Shri M.V. Raj Guru ORDER PER SAKTIJIT DEY, J.M. This is an appeal by the Revenue against the directions of the Dispute Resolution Panel I (DRP), Mumbai, dated 22.12.2014, pertaining to the assessment year 2011 12. 2. Grounds no.3 and 4, being general in nature need no adjudication. 3. Ground no.1 is against the decision of the DRP in accepting assessee s claim that the income from early settlement of forward foreign exchange contract is to be assessed under the head Capital Gain and not under the head Income from Other Sources . 4. Brief facts are, the assessee is a tax resident of Singapore. For the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the preceding assessment years. 8. We have considered rival submissions and perused materials on record. As could be seen, this is a recurring dispute between the assessee and the Department from the preceding assessment years. While deciding the issue in assessment years 2005 06 and 2006 07 in ITA no.4583/Mum./2009 and ITA no.2954/Mum./2010, dated 3rd October 2012, the Tribunal has held that the gain arising from forward exchange contract should be assessed as capital gain. Following the aforesaid decision, the Tribunal again in assessee s own case for assessment year 2008 09 in ITA no.6984/Mum./2011, dated 17th July 2013, has held that the gain from forward foreign exchange contract has to be treated as capital gain. As a natural corollary the loss arising from such contract has to be treated as capital loss. The DRP having followed the decision of the Tribunal in assessee s own case, we do not see any reason to interfere with the directions of the DRP on the issue. The ground raised is dismissed. 9. In ground no.2, the Department has challenged the decision of the DRP in holding that the capital gain derived by the assessee is not taxable in India in terms of Article 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of equities, debt securities and derivatives in India constitutes trade source income accruing in or derived from Singapore and is subject to tax in Singapore under section 10(1)(a) of the Singapore Income Tax Act by reference to the full amount and not with respect to the amount which is remitted or received in Singapore. Further, DRP observed that the assessee is a tax resident of Singapore and does not have permanent establishment (PE) in India. The assessee is carrying on its business operation including trading in securities from Singapore. Thus, it was held that as per Article 13(4) of the India Singapore Tax Treaty, Singapore has the exclusive right to tax the income and the restriction / conditions imposed under Article 24 of the Tax Treaty would not apply. Referring to the observations of the Assessing Officer that the restriction of exemption would only apply to the extent of repatriation of income to Singapore, the DRP observed that once it is held that the capital gain is to be taxed in the country of residence of the assessee, the applicability of Article 24 becomes redundant, since, the income is taxable in Singapore with reference to full amount and not with referenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Treaty deals with the taxability of capital gain arising from immovable and movable assets situated in one of the contracting State. While Article 13(1) deals with sale of immovable property, Article 13(2) deals with sale of movable property forming part of the business property of a PE. Articl 13(3) deals with alienation of ships and aircrafts operated in International traffic or movable property pertaining to the operation of such ships or aircrafts. Whereas, Article 13(4) deals with gains derived from any other asset which are not mentioned in Article 13(1), 13(2) and 13(3). Thus, on a careful reading of Article 13 as a whole, it becomes clear that the capital gain derived by the assessee from sale of Indian Securities will fall under Article 13(4) of the India Singapore Tax Treaty. As per Article 13(4) of the Tax Treaty, the gain derived by the resident of a contracting State from sale of any property shall be taxable only in that State. In other words, it will be taxed in the Country where the assessee is a resident. In the present case there is no dispute that the assessee is a resident of Singapore. Therefore, as per Article 13(4) of the India Singapore Tax Treaty, the gain ..... X X X X Extracts X X X X X X X X Extracts X X X X
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