DCIT Vs Merrill Lynch Capital Markets Espana SA SV. (ITAT Mumbai)
The Income Tax Appellate Tribunal (ITAT), Mumbai, adjudicated appeals filed by the Revenue against orders of the Commissioner of Income Tax (Appeals) for Assessment Years 2016–17 and 2017–18 concerning the taxability of capital gains and foreign exchange gains earned by a Spanish company registered as a Foreign Institutional Investor (FII) in India. The assessee had invested in shares of Indian companies, including those engaged in real estate development, and claimed that gains or losses arising from such transactions were exempt from taxation in India under Article 14(6) of the India–Spain Double Taxation Avoidance Agreement (DTAA).
The Assessing Officer held that the gains and losses from sale of shares of real estate companies were taxable in India under Article 14(4) of the DTAA, on the ground that the value of such shares was derived from immovable property situated in India. The assessee appealed, contending that it was a resident of Spain and that Article 14(6), being a residuary provision, applied to gains from alienation of property not covered under specific clauses, thereby making such gains taxable only in the country of residence.
The Commissioner (Appeals) accepted the assessee’s contentions and deleted the additions, following earlier Tribunal decisions in the assessee’s own case. The Revenue challenged this before the Tribunal.
