NEW DELHI: In a first of its kind legal dispute over taxation of bitcoins, the Jodhpur Income Tax Appellate Tribunal (ITAT) has ruled that gains for sale of bitcoins even before the introduction of virtual digital asset (VDA) regime in 20202 should be treated as capital gains for the purpose of taxation.
The ITAT order says that even though Bitcoin is intangible, it qualifies as a capital asset since it grants ownership rights and can be bought, sold, or transferred.
The Tribunal further clarified that the amendments made by the Finance Act, 2022, did not alter the fundamental nature of VDAs as assets. Thus, even before the formal introduction of the VDA regime, Bitcoin could be classified as a capital asset.
In its ruling, the ITAT invoked the principle of interpreting tax laws in a manner favorable to taxpayers.
“This ruling has significant implications for the treatment of cryptocurrency transactions under Indian tax law. It not only recognizes Bitcoin as a capital asset but also provides clarity on how such transactions should be treated for the period before the introduction of the formal VDA regime in 2022,” said Sandeep Jhunjhunwala, M&A Tax Partner at Nangia Andersen.