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2012 (12) TMI 1195 - AT - Income TaxDispute regarding nature of income from the settlement of forward contract? - Hedging - Activity from outside India to be treated as Business activity or investment activity - HELD THAT:- Gains arising from early settlement of forward foreign exchange contract has to be treated as capital gain. The orders of the CIT(A) were set aside and appeals were allowed. The Assessee's contention of purchase and sale of foreign currency to be treated as Business income and not chargeable to tax as having no permanent establishment in India was rejected on the ground that the assessee being a Non-Resident Company invested in equity shares of Citicorp Finance India Ltd. by bringing capital in foreign currency and to protect its investments from the attraction of FEMA, 1999 where overseas investors were hedging their capital investment and thus assessee entered into Forward Contract rolled over periodically. Since no contrary decision has been brought to the department's notice, it has followed the ratio laid down by the aforesaid decisions which has been consistently followed by the Tribunal, Mumbai Benches, and held that the income arising from forward exchange contract is assessable as capital gain. Consequently, the grounds raised by the Assessee are treated as partly allowed. Decision in the case of CITICORP INVESTMENT BANK (SINGAPORE) LTD. VERSUS DEPUTY DIRECTOR OF INCOME-TAX (INTERNATIONAL TAXATION) -1(2), MUMBAI [2012 (9) TMI 44 - ITAT MUMBAI] followed. In the result, Assessee's appeal is partly allowed.
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