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2011 (5) TMI 371 - AT - Income TaxDTAA between India and Cayman Island - Business income or capital gain - assessee is a company incorporated in Cayman Islands and a tax resident of Cayman Islands - It was also argued that the assessee was governed by the special provision contained in section 115AD and as such the resultant income from the derivatives could be taxed only under the head 'Capital gains'. - it is manifest that the income earned by a FII either by way of retention or by way of transfer of securities (including derivates) is subject matter of sub-section (1) of section 115AD - on a close scrutiny of the SEBI (FII) Regulations, 1995 together with section 115AD seen in the light of the Memorandum explaining this provisions of the Finance Bill, 1993, it is visible that a FII is allowed to invest only in the 'securities' and further the income from securities, either from their retention or from their transfer, is to be taxed as per this section alone - it is seen that income arising from the transfer of securities of the FIIs has been included under section 115AD(1)(b) to be categorized as short-term or long-term capital gain depending upon the period of holding - Held that: ld. CIT(A) was not justified in holding that income from Index based or non-Index based derivatives be treated as 'business income', whether speculative or non-speculative - Decided in favor of the assessee
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