Fort Canning Investments Pte. Ltd. and Fort Canning Credit Investments Pte. Ltd. vs. Assistant Commissioner of Income-tax (International taxation) - 2(3)(1) Mumbai

Parties Involved

Facts Summary

The assessees, Fort Canning Investments Pte. Ltd. and Fort Canning Credit Investments Pte. Ltd., are tax residents of Singapore and are registered with SEBI as Category I Foreign Portfolio Investors. They made investments in Non-Convertible Debentures (NCDs) and Masala Bonds of Dewan Housing Finance Corporation Ltd. (DHFL) and equity shares of Bharti Airtel Ltd. For the assessment year 2022-23, they claimed certain capital gains as not taxable in India under the India-Singapore Double Taxation Avoidance Agreement (DTAA). The Assessing Officer re-characterized part of the capital gains as interest and taxed them under Article 11 of the DTAA. The assessees appealed this decision, claiming that the entire consideration received on settlement of NCDs and Masala Bonds of DHFL was towards the principal component and not interest. They also contested the re-characterization of capital gains arising from the renouncement of rights entitlement of Bharti Airtel Ltd.…

Legal Issues

• 1. Whether the order dated 16 January 2025 passed by the Ld. AO under section 144C(13) read with section 143(3) of the Act is barred by limitation, without jurisdiction, bad in law and is liable to be quashed.
• 2. Whether the Ld. AO/Hon'ble DRP erred in treating the 'capital gains' to the extent of Rs. 30,83,52,242 arising on settlement of NonConvertible Debentures and Masala Bonds as 'interest' and not giving the benefit of exemption under Article 13(5) of the India-Singapore DTAA.
• 3. Whether the Ld. AO/Hon'ble DRP erred in treating the capital gains of Rs. 31,62,26,442 on 'renouncement of right entitlement of shares' as akin to capital gain on 'sale of shares' and taxing the same under Article 13(4B) of the DTAA.
• 4. Whether the Ld. AO erred in determining the 'Income chargeable to tax under normal rates' and 'Income chargeable at special rates'.
• 5. Whether the Ld. AO erred in levying interest under section 234B of the Act.
• 6. Whether the Ld. AO erred in computing the 'total interest and fee payable'.

Judgment Outcome

Decided in favour of Assessee.

Precedents Relied Upon

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