TMI Blog2013 (1) TMI 997X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidered it as business loss, ignoring the fact that the assessee did not have any PE in India, hence, the loss could not be business loss, it is in the nature of income from settlement of forward contracts in Foreign Exchange rate and is in the nature of Other Sources . 3. Briefly stated the facts of the case are that during the course of the assessment proceedings, the Assessing Officer observed that the assessee is a 100% subsidiary of M/s. City Bank NA, USA. For the year under consideration, the assessee has shown dividend income of ₹ 5,09,02,011/- and ₹ 5,92,67,125/- received from City Corp, Finance (India) Ltd. and E-Serve International Ltd. respectively which has been claimed exempt u/s. 10(34) of the I.T. Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs have been confirmed by the Ld. CIT(A) vide order dt. 25.2.2005. 4. The assessee carried the matter before the Ld. CIT(A). The Ld. CIT(A) relied upon the decision of the DB International (Asia) Ltd. Appeal No. CIT(A) XXXI/DDIT(IT) 1(2)/IT-266/07-08/09-10 and held that the loss on extension of forward foreign exchange contracts has to be considered on capital account and hence constitutes a capital loss and allowed the appeal. 5. The Revenue is aggrieved by this finding of Ld. CIT(A). Before us, the Ld. Senior Counsel relied upon the decision of Citicorp Investment Bank (Singapore) Ltd., DDIT(International Taxation)-1(2) 54 SOT 119 (Mum), Citicorp Banking Corpn, Baharain Vs ADIT (International Taxation) in ITA No. 6525 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng mechanism against adverse foreign exchange movement, the Tribunal in various cases has taken consistent view that in such a situation, the receipt is to be treated as capital receipt and the income or loss from such a transaction is to be considered as capital gain or capital loss. In Citicorp Banking Corporation, Bahrain (supra) and Citicorp Investment Bank Singapore (supra), it has been held that income on account of cancellation of forward exchange contract is chargeable under the head capital gains because it has a direct nexus with the investment of the assessee. Relevant findings given in Citicorp Investment Bank Singapore Ltd. are reproduced herein below:- We have perused the records and considered the rival submissions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orward contract was treated as capital in nature. The facts in the present case are identical with the only difference that in this case the assessee had acquired the foreign exchange loan for purchase of debentures which are admittedly capital assets. Therefore, in our view the case is covered by the decision of the Tribunal in case of Citicorp Banking Corporation, Bah rain (supra). The case of the assessee is also supported by the decision of DRP in assessee s own case for the assessment year 2007-08 in which it has held that loss arising from settlement of forward contract taken by the assessee to safeguard the foreign exchange loan taken for acquisition of shares/debentures was capital loss. The ld. DR has raised an additiona ..... X X X X Extracts X X X X X X X X Extracts X X X X
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