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Saturday 9 April 2016

Amount recoverable from wholly owned Indian subsidiary was assigned to another company by non resident company assessee for loss. Held by ITAT Mumbai that even though an advance, a debt or a recoverable amount is a 'current asset' from an accountant's perspective, as long as such an advance, debt or recoverable amount satisfies the requirements of Section 2(14), it will have to be treated as a 'capital asset' for the purposes of computation of capital gain. The concept of 'current asset' is alien to the law on taxation of capital gains, or, for that purpose, to the law on taxation of income. Further as per Section 9(1)(i) any income, "through the capital asset situated in India" is deemed to accrue or arise in India, the debt being recoverable from company in India is a capital assets in India. As a corollary to this taxability of income, the loss through the capital asset situated in India is also required to be taken into account. Also the transaction satisfies the definition of term “transfer” u/s 2(47) as it is sale of debt. The sale of trade debts, or even loans, is a part of day to day trade and commerce. Hence loss from assigning the amount recoverable from Indian entity is short term capital loss which can be set off against capital gain Income of the assessee non resident company

Siemens Nixdorf Informationssysteme GmbH [2016] 68 taxmann.com 113 (Mumbai - Trib.) MARCH  31, 2016