ICDS VI — the law in short
What the courts have decided on section ICDS VI, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.
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IL&FS Tamilnadu Power Company v DCIT — a forward contract gain that cannot be adjusted on capital account must be taxed as revenue
ITATHelps departmentValidity unconfirmed
My client hedged a loan given to its foreign subsidiary and made a gain on the forward contract. It says the gain is capital. Will that hold?
It did not hold here. The Chennai Tribunal upheld the Commissioner (Appeals) and taxed a forward exchange contract gain of Rs.19,90,79,300 as revenue, reasoning that where the exchange fluctuation gain or loss cannot be adjusted on capital account — as it can be under s.43A where a capital asset is acquired from outside India — it must be treated as revenue and offered to tax, because there cannot be a situation in which the fluctuation gain or loss is adjusted neither on capital account nor on revenue account. The Tribunal reached that conclusion after considering, among other things, the ICDS notified on 29 September 2016 and operative from AY 2017-18.
Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.