Taxability and Capital Gains nature of Compulsorily Convertible Debentures under India-Mauritius DTAA: Delhi HC disposes Appeal pending Supreme Court decision [Read Order]

In a significant case, the Delhi High Court while observing the taxability and capital gains nature of compulsorily convertible debentures under India- Mauritius Double Taxation Avoidance Agreement disposed of the appeal due to Special Leave Petition pending before supreme court.

The Appeal was filed by the petitioner/revenue . Which was related to the 2014–15 Assessment Years (AYs). The appellant/revenue seeks to assail two separate orders 1 passed by the Income Tax Appellate Tribunal . The assessment orders in the above appeals are pivoted on the decision of the Authority for Advance Ruling.

The decision of the AAR dated 21.03.2012 was assailed by the respondent/assessee by way of a writ petition. This court allowed the said writ petition, which resulted in the AAR’s ruling dated 21.03.2012 being set aside. Thereafter the matter reached the Tribunal. The Tribunal, having regard to the judgment dated 30.07.2014 rendered by this court ruled in favor of the respondent/assessee.

In This case respondent/assessee and an entity named, Vatika Pvt. Ltd.had invested in Compulsorily Convertible Debentures ( CCDs ) issued by another entity named, SH. Tech Park Developers Pvt. Ltd. The respondent/assessee transferred the CCDs issued to it to Vatika.

respondent/assessee claimed that the gains arising from transfer of CCDs were in the nature of capital gains and, therefore, not taxable in view of the provisions of Article 13 of the IndiaMauritius Double Taxation Avoidance Agreement.

However, the Assessing Officer treats the gains as interest, placing reliance upon Section 2(28A) of the Income Tax Act, 1961 and Article 11 of the India-Mauritius DTAA. This was the view of the AAR, which was overruled by this court. Aggrieved by the order the revenue filed appeal

The court during the proceedings observed that appellant/revenue has preferred a Special Leave Petition, which has been converted into a Civil Appeal

After analyzing the facts and arguments of both parties, a division bench of Justice Rajiv Shakdher and Justice Girish Kathpalia disposed of the appeal due to the Special Leave Petition pending before the supreme court.

Ruchir Bhatia, Sr Standing Counsel. appeared for petitioner Arunima Dwivedi, Sr. Standing Counsel with Ananya Kapoor, Advocate appeared for respondent.

To Read the full text of the Order CLICK HERE

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