Anushaka Sanjay Shah v. ITO (International Taxation)

Case snapshot

Sections / provisions: 90; India-Singapore DTAA Article 13

Questions before the Court / Tribunal

• Singapore resident's capital gains on redemption of mutual-fund units: The reported Tribunal ruling treats sale/redemption of mutual-fund units by a Singapore resident under the India-Singapore treaty capital-gains article and reports the gain as not taxable in India on the facts.

Material facts and background

Brief facts of the case are that the assessee is a non-resident Indian and

filed return declaring income of Rs. 4,53,768/- on 27.06.2022. The case was selected for scrutiny. The assessee had shown income from short-term capital gain on debt funds of Rs. 88,75,230/- and short-term capital gain on equity funds of Rs. 46,91,140/- in respect of which deduction was claimed under the Double Taxation Avoidance Agreement (DTAA). The assessee had claimed that capital gains earned on the transfer of equity shares can not be charged as she

Page |3 IT(IT)A No. 174/Mum/2025 A.Y. 2022-23 Anushka Sanjay Shah

is a tax resident of Singapore and the provisions of Article 13 of DTAA are applicable. However, Ld. AO did not accept the contentions of the assessee and proposed to tax on the entire amount in the draft assessment. The assessee filed objections before the Ld. DRP. However, the action of the Ld. AO was endorsed by Ld. DRP which held that the capital gains arising from the units of mutual funds that derived substantial value from assets located in India are taxable in India. Accordingly, Ld. AO proceeded to tax the short-term capital gain of Rs. 1,35,66,368/- vide assessment order u/s 143(3) r.w.s. 144C(13) on 21.12.2024. 6.

Aggrieved with the order of Ld. AO, the assessee has preferred an appeal

before the Tribunal. Before us, Ld. AR has submitted a breakup of short-term equity and debt mutual funds and claimed that the investment was made directly by the assessee and not by the portfolio manager. Bank statements show investments made to mutual funds and sale consideration credited directly by mutual funds to the assessee’s bank account. With regard to the application of DTAA. Ld. AR has filed the following written submissions: “(i) The short term capital gains arising from sale/redemption of mutual fund units would fall within the ambit of Para 5 of Article 13 of DTAA between India and Singapore. Para 5 of Article 13 of India Singapore DTAA reads as under: "5. Gains from the alienation of any property other than that referred to in paragraphs 1,2,3,4A and 4B of this Article shall be taxable only in the Contracting State of which the alienator is a resident." Hence, Sale/redemption of mutual fund units would be covered by Para 5 of Article 13 of India Singapore DTAA and thus not taxable in India.”

In this regard, Ld. AR has placed reliance on the decision of the co-

Appellant / assessee submissions

before the Tribunal. Before us, Ld. AR has submitted a breakup of short-term equity and debt mutual funds and claimed that the investment was made directly by the assessee and not by the portfolio manager. Bank statements show investments made to mutual funds and sale consideration credited directly by mutual funds to the assessee’s bank account. With regard to the application of DTAA. Ld. AR has filed the following written submissions: “(i) The short term capital gains arising from sale/redemption of mutual fund units would fall within the ambit of Para 5 of Article 13 of DTAA between India and Singapore. Para 5 of Article 13 of India Singapore DTAA reads as under: "5. Gains from the alienation of any property other than that referred to in paragraphs 1,2,3,4A and 4B of this Article shall be taxable only in the Contracting State of which the alienator is a resident." Hence, Sale/redemption of mutual fund units would be covered by Para 5 of Article 13 of India Singapore DTAA and thus not taxable in India.”

In this regard, Ld. AR has placed reliance on the decision of the co-

by Article 13(5) India-UAE DTAA, which is identical to Article 13(5) of the IndoSingapore DTAA. Hence Ld. AR has argued that the issue stands covered by the decisions of the different coordinate benches. Ld. DR, on the other hand, has strongly relied on the orders of the lower authorities. 10.

Revenue / respondent submissions

is a tax resident of Singapore and the provisions of Article 13 of DTAA are applicable. However, Ld. AO did not accept the contentions of the assessee and proposed to tax on the entire amount in the draft assessment. The assessee filed objections before the Ld. DRP. However, the action of the Ld. AO was endorsed by Ld. DRP which held that the capital gains arising from the units of mutual funds that derived substantial value from assets located in India are taxable in India. Accordingly, Ld. AO proceeded to tax the short-term capital gain of Rs. 1,35,66,368/- vide assessment order u/s 143(3) r.w.s. 144C(13) on 21.12.2024. 6.

by Article 13(5) India-UAE DTAA, which is identical to Article 13(5) of the IndoSingapore DTAA. Hence Ld. AR has argued that the issue stands covered by the decisions of the different coordinate benches. Ld. DR, on the other hand, has strongly relied on the orders of the lower authorities. 10.

Court / Tribunal analysis and reasoning

taxmann.com 296. It has been pointed out that in the above case, the issue related to Indo-Swiss DTAA and Article 13(6) of India-Swiss DTAA which is identical to Article 13(5) of India-Singapore DTAA. Accordingly, the findings of the co-ordinate bench in this case are squarely applicable to the present case. Relevant portion of the order is reproduced below: "7. We have perused the records and considered the rival contentions carefully. The dispute is regarding taxability of capital gain arising on account of sale of mutual fund units in India by the assessee, who is a non resident based in Switzerland. The assessee has claimed the benefit of Indo-Swiss tax treaty and argued that the capital gain is not taxable in India under the provisions of Article 13(6) of the Indo-Swiss tax treaty. The said Article has been reproduced in para 3 of this order, which deals with taxability of capital gain arising on transfer of different types of assets Article 13(4) and 13(5) deal with gain arising from alienation of shares. As per Article 13(5) gain arising from alienation of share in a company which resident of India can be taxed in India. The AO had treated the units of mutual fund as shares...

as well as the decisions of the co-ordinate benches relied upon by the Ld. AR . We find that the facts of the case of DCIT v/s K. E. Faizal (supra) are identical to the facts of the present case wherein it has been held as under: “As per Article 13(5) of the Tax Treaty, income arising to a resident of UAE from transfer of property other than shares in an Indian company, are liable to tax only in UAE. On the other hand, Article 13(4) of the Tax Treaty provides that income arising to a resident of UAE from transfer of shares in an Indian company other than those specifically covered within the ambit of provisions of other paragraph of Article 13 may be taxed in India. Article 13(4) of the Tax Treaty covers within its purview capital gains arising from transfer of shares' and not any of the property. Therefore, Article 13(4) of the Tax Treaty cannot be applied in the instant case unless the units of the mutual funds transferred by the assessee qualify as shares for the purpose of Tax Treaty. The term 'share' is not defined under the Tax Treaty. As per Article 3(2) of the Tax Treaty, any term not defined under the Tax Treaty shall, unless the context otherwise requires, have the...

incorporated under the Companies Act, 2013 or under any previous company law'. Under the Securities and Exchange Board of India (Mutual Funds) Regulations, 1995, mutual funds, in India can be established only in the form of 'trusts', and not 'companies'. Therefore, the units issued by Indian mutual funds will not qualify as 'shares' for the purpose of the Companies Act, 2013. Further, under the Securities Contract (Regulation) Act, 1956, a security is defined to include inter alia shares, scrips, stocks, bonds, debentures, debenture stock or other body corporate and units or any other such instrument issued to the investors under any mutual fund scheme. From the above definition of 'securities', it is clear that 'shares' and 'units of a mutual fund are two separate types of securities. Applying the above meaning to the provisions of the Tax Treaty, the gains arising from the transfer of units of mutual funds should not get covered within the ambit of Article 13(4) of the Tax Treaty, and should consequently be covered under Article 13(5) of the Tax Treaty. Therefore, the assessee, who is a resident of UAE for the purposes of the Tax Treaty, STCG arising from sale of units of equity...

Singapore DTAA and the decisions of the coordinate benches discussed above, we are of the view that the assessee is entitled to deduction in respect of shortterm capital gains of Rs. 1,35,66368/- under the DTAA between India and Singapore is allowable. The assessee’s appeal is therefore allowed. Order pronounced in the open court on 26.03.2025. Sd/BEENA PILLAI (न्यधनयक सदस्य/JUDICIAL MEMBER)

Operative decision and relief

आदे श की प्रनतनलनि अग्रेनित/Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant 2.

गार्ड फाईल / Guard file. सत्यानित प्रनत //True Copy// आदे शािुसार/ BY ORDER, सहायक िंजीकार (Asstt. Registrar) आयकर अिीलीय अनर्करण/ ITAT, Bench, Mumbai.

Authorities and precedents appearing in the judgment

• No reliable precedent list was extracted automatically; use the full judgment for the citation chain.

This list is machine-assisted from the judgment text and is not a substitute for checking the full citation chain in the PDF.

Ratio and legal principle

The decision turns on Singapore resident's capital gains on redemption of mutual-fund units. The operative result is classified as Quashed / set aside. Read the rule only with the statutory version, factual findings and precedent chain recorded in the full judgment.

Why this judgment matters

The case is relevant to taxpayers, advisers and litigators dealing with Singapore resident's capital gains on redemption of mutual-fund units. Its practical value lies in the interaction between the statutory text, the evidentiary record and the procedural route followed in this case.

Practitioner action points

• Maintain a date-and-payment matrix for transfer, agreement, possession, investment and construction; capital-gains exemptions commonly turn on this chronology.
• Map domestic-law provisions against the applicable treaty article separately; PE, FTS/royalty and withholding conclusions depend on functions, control, contract terms and treaty language.
• For litigation, attach the full judgment/order to the working paper and cite the paragraph/page supporting the proposition rather than relying on a headnote alone.

Full judgment and source trail

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