Whether the clients liable to tax in India on the capital gains and if yes, whether the bank is required to deduct tax at source on the remittance?

ADIT (International Taxation)-3(1) Vs. ICICI Bank Ltd. (ITAT Mumbai)- The issue in this appeals is with reference to the capital gains arising to various persons of Indian origin or non-resident Indians residing in UAE, who are clients of the Bank. These clients have invested in Government of India T-Bills, which has a tenure of 364 days. The T-Bills are also transferable before maturity. The clients purchased and sold these T-Bills during the year for which Bank, according to the guidelines of the RBI has opened a second subsidiary general ledger in their own name on behalf of their constituents/investors as required by the guidelines.

They also have separate designated NRE account with the Bank. An agreement has been entered between the bank and the constituents/ investors for opening CSGL account. The constituents/investors purchased and sold Government Bills through the designated account maintained by the ICICI Bank. The funds in the NRE accounts were utilised for purchase of securities whereas the proceedings of sales are remitted to the same account maintained with the bank. The contention of the Revenue is that the capital gains that has arisen to the said constituents!investors is liable to tax in India and since the Bank has not deducted tax at source the liability under section 201(1) and consequently under section 201 (1A) were imposed on the said bank.