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2019 (7) TMI 1560 - AT - Income TaxForeign exchange gain on underlying Forward Foreign Exchange Contracts - Characterization of income capital gain OR Income from Other sources - whether CIT(A) was right in holding that foreign exchange gain on underlying Forward Foreign Exchange Contracts has to be considered on capital account and hence constitute a capital gain when such a contract is not a capital Asset? - HELD THAT:- The assessee is stated to be incorporated in and a tax resident of USA. It is a 100% subsidiary of Citibank N.A. USA. It makes investment in Indian companies through Foreign Direct Investment route. During the year, it earned gains of ₹ 85.68 Crores on cancellation and rollover of forward foreign exchange contracts which were claimed to be in the nature of capital receipts not chargeable to tax on the logic that contracts were entered into to protect the investment in India from foreign currency fluctuation and there being no cost for entering into these transactions. In the alternative, the attention was, inter-alia, drawn to the fact that in terms of Tribunal’s decision for AY 2001-02, the gains were to be assessed as Short-Term Capital Gains. However, disregarding the same, Ld. AO proceeded to assess the same under the head Income from other sources. As stated earlier, the first appellate authority concurred with assessee’s stand, relying upon its own decision in AY 2012-13, which, in turn, relied upon Tribunal’s order for other years. Since the impugned decision only follows the orders of Tribunal for other years, no fault could be found in the same. - Decided against revenue
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