TaxTMI 
TaxTMI 
2013 (12) TMI 478
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....AO completed the assessment vide order dated 24.12.2010 u/s 143(3) r.w. section 147 of the Income Tax Act, 1961 (the Act) at an income of Rs.93,26,84,307/- after holding that the net loss of Rs.1,72,18,27,904/- arising from index derivative transactions as business loss and assessable under the head income from business or profession as against the claim of assessee as capital loss. Ld. CIT(A) also confirmed the findings of the AO; b) similarly, in respect of sub-account Platinum International Brands Fund, (ITA No.2788/Mum/2012) the return of income was filed on 25.7.2006 declaring total income at Rs.NIL and claimed refund of Rs.16,02,881/-. It also claimed short term capital loss of Rs.5,42,36,870/-. However, the AO completed the assessment vide order dated 24.12.2010 passed u/s 143(3) r.w.s.147 of the Act at an income of Rs.17,62,78,618/- by treating net loss of Rs.23,05,15,488/- arising from index derivative transaction as business loss assessable under the head business or profession as against capital loss claimed by assessee. The ld. CIT(A) also confirmed the action of AO. Hence, both assessees who are sub-account of FII M/s Platinum Asset Management Ltd, are in appeals....
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....,955,751 and long-term capital gains of Rs 10,728,556 and the balance loss of Rs.789,143,597 should be allowed to be carried forward to subsequent assessment years. 4. Without prejudice to the above, on the facts and in the circumstances of the case, the CIT(A) erred in not allowing set off of business loss of Rs. 1,721,827,904 arising on derivative transactions against capital gains arising on sale of shares under section 71 of the Act and carry forward of balance unabsorbed business loss as per section 72 of the Act in view of the provisions of section 90(2) of the Act 5. The CIT(A) ought to have held the business loss of Rs 1,721,827,904 arising on sale of derivatives should be set off against short-term capital gains of Rs. 921,955,751 and long- term capital gains of Rs 10,728,556 and the balance loss of Rs. 789,143,597 should be allowed to be carried forward to subsequent assessment years. Your Appellant craves leave to add, alter, vary, omit, substitute or amend the above grounds of appeal, at any time before or at, the time of hearing of the appeal, so as to enable the Hon'ble Tribunal to decide this appeal according to law." I.T.A.No.2788/M/2012 "1. On facts ....
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.... the case, the CIT(A) erred in not allowing set off of business loss of Rs. 230,515,488/- arising on derivative transactions against capital gains arising on sale of shares under section 71 of the Act and carry forward of balance unabsorbed business loss as per section 72 of the Act in view of the provisions of section 90(2) of the Act The CIT(A) ought to have held the business loss of Rs 230,515,488 arising on sale of derivatives should be set off against short-term capital gains of Rs. 165,781,163 and long- term capital gains of Rs 10,497,455 and the balance loss of Rs. 54,236,870/- should be allowed to be carried forward to subsequent assessment years. Your Appellant craves leave to add, alter, vary, omit, substitute or amend the above grounds of appeal, at any time before or at, the time of hearing of the appeal, so as to enable the Hon'ble Tribunal to decide this appeal according to law." 3. At the time of hearing, the ld. AR of the assessee submitted that Ground No.1 of both the appeals is not pressed for. Hence, Ground No.1 of both appeals is rejected as not pressed. 4. The ld. AR of the assessee submitted that Ground No.2 in both the appeals is covered by the de....
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....rs of the Tribunal, (supra) relied upon by ld. AR and also the decision of Hon'ble Jurisdictional High Court in the case of Bharat Ruia(supra). We agree with ld. AR that the decision relied upon by ld.DR is not relevant to the facts of the fact of the case before us. Further, the issue is squarely covered by the decision of the Tribunal, order dated 5.12.2012 which has been decided by considering the earlier order of co- ordinate Bench in the case of LG Asian Plus Ltd(supra). We consider it prudent to reproduce paragraph 8 of the said order of the Tribunal dated 5.12.2012 which read as under : "8. We have considered the rival submissions of the parties as well as relevant material on record. As regards the observation of the Assessing Officer that the derivative were sold on same day, we find that there is a factual error on this point because the derivative were settled/closed on various dates, either by subsequent purchases or on the expiry of period within the month. This fact is clear from the details of page Nos.49 and 65-69 of paper book. On the issue of capital gain or business income, we note that an identical issue has been considered by the coordinate Bench of this Tri....
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....aling in securities is also envisaged. We find that sub-sec. (2) of sec. 115AD has two clauses. Clause (a) provides that where the gross total income of a FII consists only of income in respect of security referred to in clause (a) of sub-sec. (1) (i.e. income received in respect of securities, otherwise than from their transfer ), then no deduction shall be allowed to it under sections 28 to 44C or section 57 or Chapter VI-A of the Act. It is but natural that when a lower rate of tax has been provided in respect of income earned by a FII from securities, then that rate of tax is final and the assessee cannot claim double benefit, firstly by being taxed at lower rate and secondly by claiming normal deductions etc. against this income. As sec. 115AD(2)(a) refers to income received in respect of securities and not from their transfer, the same would have no application to the instant case. According to clause (b) of sub-sec. (2) of sec. 115AD, where the gross total income includes any income referred to in clause (a) or clause (b) of sub-sec. (1) (i.e. income received in respect of securities by either retaining them or from their transfer), then the gross total income shall be reduc....
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....ion between such securities as constituting capital asset or stock in trade, which is not contemplated by the Central Government as is evident from SEBI(FII) Regulations and the definition of FII in Explanation (a) to sec. 115AD, then this provision will become otiose. In our considered opinion if a FII receives any income in respect of securities or from the transfer of such securities, the same can be considered under sub-sec. (1) alone and sub-sec. (2)(b) cannot be invoked to construe it as `Business income" . 8.14. The position has been clarified by way of a Press Note : F No. 5(13)SE/91-FIV dated 24.03.1994 issued by the Ministry of Finance, Department of Economic Affairs (Investment Division) , New Delhi, the relevant part of which is as under : "The taxation of income of Foreign Institutional Investors from securities or capital gains arising from their transfer, for the present, shall be as under:- (i) The income received in respect of securities (other than units of off-shore funds covered by section 115AB of the Income-tax Act) is to be taxed at the rate of 20%; (ii) Income by way long-term capital gains arising from the transfer of the said securities is to b....
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....e distinct from derivatives, and their taxation may also differ in the case of non- FIIs, but such distinction is obliterated in the context of FIIs due to the inclusion of both shares and debentures etc. on one hand and derivatives on the other, in the definition of "securities" for the purpose of sec. 115AD and subsection (1) providing for the income from their transfer to be considered as long term or short term capital gain. 8.17. It is noticed that sec. 115AD falls in Chapter XII which deals with the determination of tax in certain special cases. This Chapter consists of sections 110 to 115BBC. Each section contains special provisions dealing with specific types of incomes for which a specified rate of tax is provided. If a particular item of income is covered in any of these sections, it shall be strictly governed by the prescription of that relevant section alone. We are reminded of the legal maxim `Generalia specialibus non derogant", which means that special provisions override the general provisions. It is a well settled legal position that specific provisions override the general provisions. In other words, if there are two conflicting provisions in an enactment, the ....