| COURT: |
|
| CORAM: |
|
| SECTION(S): |
|
| GENRE: |
|
| CATCH WORDS: |
|
| COUNSEL: |
|
| DATE: |
(Date of pronouncement) |
| DATE: |
May 29, 2013 (Date of publication) |
| AY: |
|
| FILE: |
|
| CITATION: |
|
|
|
S. 115AD: FII’s securities transactions’ profits not assessable as “business profits’
The assessee, a Foreign Institutional Investor (“FII”), suffered a loss of Rs. 41 crore on account of derivative transactions. The AO & CIT(A) relied on the AAR Ruling in Royal Bank of Canada 323 ITR 380 and held that as the said loss arose out speculative transactions, it had to be treated as a business loss and could not be set-off against STCG. On appeal by the assessee to the Tribunal HELD allowing the appeal:
Under the policy of the Central Government and the SEBI (FII) Regulations, 1995 a FII can only “invest” in securities and cannot do “business” in securities. S. 115AD also provides that all income arising to a FII from securities, whether from their retention or from their transfer, is taxable as a capital gain. This is also the view expressed in Press Note F. No. 5(13)SE/91-FIV dated 24.03.1994 issued by the Ministry of Finance. If the Revenue is permitted to make a distinction between the securities held by a FII by classifying them as a capital asset or as stock in trade, s. 115AD will become otiose. The result is that all income arising to a FII, including from dealings in derivatives has to be assessed as capital gains. The contrary view of the AAR in Royal Bank of Canada cannot be followed (LG Asian Plus Ltd 46 SOT 159 followed)
Note: In
ABC Equity Fund 250 ITR 194,
Fidelity Advisor Series VII 271 ITR 1,
General Electric Pension Trust 280 ITR 425,
Fidelity Northstar Fund 288 ITR 641 and
Royal Bank of Canada 323 ITR 380 contrasting views have been taken on the issue
Related Posts:
- DCIT vs. Comet Investment Pvt. Ltd (ITAT Mumbai) The broker, through whom the assessee carried on share transactions, were also not imposed any penalty. No co-relation between the assessee on the one hand and the other parties on the other hand has been brought on record to co-relate that the parties to whom the alleged profits or loss…
- The Peerless General Finance And Investment Co Ltd vs. CIT (Supreme Court) It is the true nature and quality of the receipt and not the head under which it is entered in the account books that would prove decisive. If a receipt is a trading receipt, the fact that it is not so shown in the account books of the assessee would…
- Kaybee Pvt Ltd vs. ITO (ITAT Mumbai) Section 92A(2) governs the operation of Section 92A(1) by controlling the definition of participation in management or capital or control by one of the enterprise in the other enterprise. If a form of participation in management, capital or control is not recognized by Section 92A(2), even if it ends up…
- Unnikrishnan V S vs. ITO (ITAT Mumbai) We find that so far as the ESOP benefit is concerned, while the income has arisen to the assessee in the current year, admittedly the related rights were granted to the assessee in 2007 and in consideration for the services which were rendered by the assessee prior to the rights…
- Karmic Labs Pvt. Ltd vs. ITO (ITAT Mumbai) Section 56 allows the assessees to adopt one of the methods of their choice. But, the AO held that the assessee should have adopted only one method for determining the value of the shares. In our opinion, it was beyond the jurisdiction of the AO to insist upon a particular…
- Anandkumar Jain vs. ITO (ITAT Mumbai) It is also well – settled that a judicial decision acts retrospectively. According to Blackstonian theory, it is not the function of the Court to pronounce a ‘new rule’ but to maintain and expound the ‘old one’. In other words, the Judges do not make law; they only discover or…
Leave a Reply