TMI Blog2017 (10) TMI 1239X X X X Extracts X X X X X X X X Extracts X X X X ..... t has nothing to do with the determination of the nature of gain or loss, whether same is on account of capital or revenue account. Accordingly, grounds taken by the assessee are allowed. Treating gain on sale of shares of companies, engaged in the real estate development, as eligible to benefit of exemption under Article 14 (6) of the India Spain treaty - Held that:- We find that the assessee had invested in certain companies that were in the business of developing properties, that it was not holding any property directly or indirectly, that the provisions of Article 14(5)were applicable for the properties held by a Spanish Company. The FAA had given a categorical finding of fact that assessee was not holding any property in India. In o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the ncome on account of gain on foreign exchange transaction under the head income from capital gains as per Article 14(6) of the India Spain tax treaty. During the assessment proceedings, the AO found that the assessee had earned a profit of ₹ 32.57 crores on account of its transaction in Foreign Exchange, that it had treated the same as Short-Term Capital Gain (STCG),that referring to the provisions of Article 14 of the Indo-Spain DTAA the assessee had claimed it as exempt. He directed the assessee to explain as to why said gain should not be taxed under the head income from other sources as per the Article 23 of the tax treaty. After considering the submission of the assessee, the AO held that FII in India had to carry out its a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ins and not taxable in India. 4. During the course of hearing before us, the Departmental Representative (DR) supported the order of the AO. The assessee relied upon the order of the FAA. We find that the issue of taxation of gains arising out of forward contracts to hedge against the fluctuation in the rate of foreign exchange has been deliberated upon the tribunal in the case of Citicorp Banking Corpn. (supra). We would like to reproduce the relevant portion of the order and it reads as under: So far as the facts before us are concerned, nowhere it is controverted by both the authorities below that the dominal purpose for entering into foreign exchange forward contract by the assessee was for clearly to hedge against the depreciat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares of such companies should not be covered under Article 14 (5) of the DTAA and charged to tax in India. After considering the submission of the assessee, he held that the language of Article 14(5)of the treaty was very simple, that nothing more could be read into it, that right to occupy immovable property is nowhere mentioned in the Article, that India was not signatory to UN model, that no outside help was necessary when language of DTAA was very clear, that various companies dealing in real estate sector, that they would derive their value of shares from the value of immovable properties owned by them, that it was immaterial that immovable properties were held as stock in trade, that there was no bar in the treaty to hold immovable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee. 7. Before us, the DR stated that the assessee was deriving income from immovable properties. The AR supported the order of the FAA. We find that the assessee had invested in certain companies that were in the business of developing properties, that it was not holding any property directly or indirectly, that the provisions of Article14(5)were applicable for the properties held by a Spanish Company. The FAA had given a categorical finding of fact that assessee was not holding any property in India. In our opinion, the order of the FAA does not suffer from any legal or factual infirmity. So, confirming his order, we decide the effective GOA against the AO. ITA/Mum/4987/2012 /IT/4578/Mum/2014-AYs. 2008-09, 2009-10: 8. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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