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TMI Blog2024 (11) TMI 240X X X X Extracts X X X X X X X X Extracts X X X X ..... om such contract has to be treated as capital loss. Thus, we find no infirmity in the impugned order in considering the loss on rollover/cancellation of FCC to be short-term capital loss eligible for carry forward under the head capital gains . Accordingly, grounds raised by the Revenue dismissed. - Shri Sandeep Singh Karhail, Judicial Member And Shri Omkareshwar Chidara, Accountant Member For the Assessee : Shri Ajit Jain And Shri Siddhesh Chougule For the Revenue : Ms. Jancy Elizabeth, Sr.DR ORDER PER SANDEEP SINGH KARHAIL, J.M. The present appeal has been filed by the Revenue challenging the impugned order dated 09/02/2024, passed under section 250 of the Income Tax Act, 1961 ( the Act ) by the learned Commissioner of Income Tax (Appeals)-56, Mumbai [ learned CIT(A) ], for the assessment year 2020-21. 2. In this appeal, the Revenue has raised the following grounds: 1. Whether on facts circumstances of the case, the Ld CIT(A) has erred in treating the loss of Rs 3,19,33,010 as short term capital loss when there is no transfer of asset or erosion of asset of the assessee. 2. Whether on facts circumstances of the case the Ld CIT(A) has failed to appreciate that the activity/trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther submitted that the reason for this treatment is that the FCC have been entered into by the assessee to protect the principal component of the investment and thus they are on capital account. The assessee submitted that the income from FCC is inextricably linked to the investment activities of the assessee, which is the main business of the company and since the investments are held as capital assets, the gains/losses from cancellation/rollover of FCC entered into to hedge the foreign currency exposure arising due to such capital assets must be considered as arising into capital field. On a without prejudice basis, the assessee submitted that even if the gains/losses from cancellation/rollover of FCC are not considered as falling into the capital field, the same should be considered as business income/losses as the FCC are inextricably linked to the business (investment business) of the assessee and in the absence of the permanent establishment of the assessee in India, such gains are not taxable in India. The assessee further submitted that it has carried forward the net loss of INR 3,19,33,010 incurred during the year under consideration on rollover/cancellation of FCC as sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncludes the securities held by a Foreign Institutional Investor within the definition of capital asset . During the year under consideration, the net loss of INR 3,19,33,010on FCC was considered as loss under the head capital gains as the underlying securities were held as capital assets. The AO, on the other hand, treated the loss as losses under the head income from other sources . 8. We find that while considering a similar issue pertaining to the nature of income from settlement of forward cover taken in foreign exchange, the coordinate bench of the Tribunal in Citicorp Investment Bank (Singapore) Ltd (supra) held that profit earned by a Singaporean bank on termination of forward contracts entered into for safeguarding it from foreign exchange fluctuation in respect of debentures purchased in India would be a capital gain exempt under Indo-Singaporean DTAA. The relevant findings of the coordinate bench, in the afore-noted decision, are reproduced as follows: 4.3 We have perused the records and considered the rival submissions carefully. The dispute is regarding nature of income arising from early settlement of forward foreign exchange contract. There is no dispute that the forw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 in the case of sister concern Citicorp Banking Corporation, Bahrain (supra) we hold that gains arising from early settlement of forward foreign exchange contract has to be treated as capital gain. We accordingly set aside the orders of the CIT(A) and allow the appeals filed by the assessee. 9. We find that similar findings were rendered by another coordinate bench of the Tribunal in D.B. International (Asia) Ltd. (supra), as follows: 8. We have considered rival submissions and perused materials on record. As could be seen, this is a recurring dispute be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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