Section 90(2) allows transaction-wise treaty benefit and domestic loss set-off for distinct share transactions under the India-Singapore DTAA.

Section 90(2) permits transaction-wise application of the Income-tax Act, 1961 and the applicable DTAA where each is more beneficial. For distinct share transactions in the same year, treaty-exempt capital gains on shares acquired before 01.04.2017 under Article 13(4A) of the India-Singapore DTAA could be claimed under the treaty, while capital losses on other transactions could still be carried forward or set off under the Act. The common head of capital gains did not merge separate sources of income, and treaty-exempt gains could not be forced back into domestic computation merely to absorb losses from other distinct transactions.

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Issues: Whether the assessee could, for different share transactions arising in the same assessment year, apply the India-Singapore DTAA for exempt capital gains on shares acquired before 01.04.2017 and simultaneously apply the Income-tax Act, 1961 for carry forward or set-off of capital losses on other transactions, in view of section 90(2).

Analysis: The arrangement of the Act and the treaty was held to permit the assessee to choose the more beneficial regime for each distinct source of income. Each investment transaction giving rise to capital gains or capital losses was treated as a separate source of income, and the common head of capital gains did not merge their independent character. The computation mechanism under the Act could not be used to bring treaty-exempt gains back into taxable computation merely to offset them against losses from other transactions. The reasoning proceeded on the distinction between source of income and head of income, the beneficial operation of section 90(2), and the principle that income not chargeable under the treaty does not enter the total income computation.

Conclusion: The assessee was entitled to claim exemption under Article 13(4A) of the India-Singapore DTAA for the relevant gains and to claim carry forward or set-off of losses under the Income-tax Act, 1961 for the remaining transactions.

Ratio Decidendi: Under section 90(2), an assessee may apply the Income-tax Act, 1961 and the applicable DTAA transaction-wise, to the extent each is more beneficial, and treaty-exempt income cannot be forced into the domestic computation mechanism for set-off against losses from other distinct sources.

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