TaxTMI 
TaxTMI 
2023 (8) TMI 139
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....s are decided in seriatim of assessment years. ITA NO.1007/MUM/2022 - A.Y. 2016-17: 2. Shri P.J. Pardiwala appearing on behalf of the assessee submits that the assessee is a company incorporated in Singapore. The assessee is a tax resident of Singapore. The assessee is registered with Securities and Exchange Board of India as Foreign Portfolio Investor. The assessee filed its return of income for the assessment year 2016-17 declaring total income of Rs. 363,71,29,440/-. In the impugned assessment year the assessee suffered capital loss of Rs. 577,71,58,413/-. The assessee carried forward the said loss to be set off in the future as per law. In Notes to the Income Tax return (at page 35 of paper book), the assessee had categorically mentioned about the capital loss suffered by the assessee and after set off of the capital loss against capital gains from same source of income, the unabsorbed capital loss was carried forward to the next financial year. The Assessing Officer allowed carry forward of the said capital loss. Admittedly, no specific query was raised by the Assessing Officer with respect to carry forward of capital loss in scrutiny assessment proceeding. The CIT invok....
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....ing Officer to conduct enquiry in scrutiny assessment makes the assessment order erroneous. Merely for the reason that the assessee has made disclosure in books does not mean that the assessee would get immunity from revisional jurisdiction. The Assessing Officer has to make enquiries and examine veracity of assessee's claim. The Assessing Officer cannot accept claim of the assessee blindly. To support her submissions the ld. Departmental Representative placed reliance on the following decisions: (i) CIT vs. Jawahar Bhattacharjee, 341 ITR 434(Gawahati); (ii) CIT vs. Emery Stone Manufacturing Company, 213 ITR 843(Raj); (iii) Rampyari Devi Saraogi vs. CIT, 67 ITR 84 (SC); (iv) ITO vs. DG Housing Projects Limited, 343 ITR 329 (Del); (v) Gee Vee Enterprises vs. Additional CIT, 99 ITR 375 (Del); & (vi) CIT vs. Ballarpur Industries Ltd. I.T. Reference No.27 of 2002 decided on 31/07/2017 by the Hon'ble Bombay High Court. The ld. Departmental Representative prayed for dismissing appeal of the assessee. 4. We have heard the submissions made by rival sides and have examined the orders of authorities below. The ld. Counsel for the as....
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....e head 'Capital Gains'. The assessee has applied beneficial provisions of DTAA selectively, which is not permissible under the Act. 6. The assessee has segmented various sources of income under the head 'Capital Gains'. The assessee claimed long term/ short term capital gains realized during the relevant period as exempt under Article -13(4) of the India-Singapore DTAA. The source of incomes/segments on which the assessee has claimed treaty benefit are: (a) Net LTCG on sale of equity shares; (b) Net LTCG on sale of units of equity oriented fund; (c) Net STCG on sale of exchange traded derivatives; (d) Net STCG on sale of preference shares; and (e) Net STCG/LTCG on sale of debt securities. Whereas, net Short Term Capital losses on: (a) Sale of equity shares; (b) Sale of units of equity oriented funds; and (c) Sale of equity shares underlying IDRs have been carried forward for set off in future Financial Years under section 74 of the Act. The arguments of the assessee is that the assessee has different sources of income under the head "Capital Gains". The assessee has set of losses within the same segmen....
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....assessee. Both, short term capital gains/loss and long term capital gains/loss are different sources of income, falling under the same head "capital gains". Even under short term capital gains, different transactions will be different sources of income resulting in short term capital gains/loss. Likewise, different transactions of long term capital assets will be different sources of income for an assessee to arrive at long term capital gains/loss. This is reflected in the scheme of computation of capital gains provided in section 48 where gains or loss is computed on the basis of individual asset and transaction and not on the basis of class of assets. Therefore, we have to agree with the argument of the learned senior counsel that every transaction of a property is a different source of income for the assessee. Head of income is not the source of income. Source of income is having the direct nexus with the stream or fountain out of which the income springs to the assessee. Head of income is provided for clubbing purpose of those like minded incomes derived from different sources for the purpose of aggregation and allowable deductions. 45. We, therefore, find that there i....
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....capital losses are also exempt. When the issue reached before the Tribunal, the Coordinate Bench placing reliance on the decision in the case of CIT vs. Western India Oil Distributing Co. Ltd., 249 ITR 517 (SC) and CIT vs. Manmohan Das 59 ITR 699(SC) and also after considering CBDT Circular No.22 of 1944 dated 29/07/1944 held that the assessee is justified in claiming carry forward of brought forward losses of the earlier years to the subsequent years and at the same time upheld assessee's claim of capital gains as exempt under the provisions of Article -13 of the DTAA. Thus, the Tribunal accepted the theory of segregation of capital gains and capital losses for drawing benefits of DTAA/the Act to the extent they are more beneficial to the assessee. 9. In the case of Goldman Sachs Investments (Mauritius) Ltd. (supra), the Co-ordinate Bench placing reliance on the decision of Flagship Indian Investment Co (Mauaritius) Ltd.(supra) reiterated the position that the assessee is entitled to the benefit of Article-13 of DTAA in respect of capital gains and allowed carry forward of capital loss under the provisions of the Act. For the sake of completeness relevant extracts of the findin....
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....ins" derived by the assessee from transfer of securities in India, therefore, the "capital losses" would also not form part of the assessee's "total income", and thus, could not be computed under the Act. we are afraid does not find favour with us. Apropos the aforesaid observation of the A.O, we are of the considered view that the same had been arrived at by loosing sight of the fact that the "capital losses" in question had been brought forward from the earlier years and had been determined and allowed to be carried forward by the A.O while framing the assessment for A.Y 2012-13, vide his order passed u/s 143(3), date 19-3-2015 and had not arisen during the year under consideration i.e A.Y 2013-14. Accordingly, the claim of the A.O that the "capital losses" b/forward from the earlier years, pertaining to a source of income that was exempt from tax was thus not to be carried forward to the subsequent years, being devoid of any merit, is thus rejected. At this stage, we may herein observe that it is for the assessee to examine whether or not in the light of the applicable legal provisions and the precise factual position the provisions of the IT Act are beneficial to him or tha....
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....de by the Assessing Officer on the issues which were confined to limited scrutiny. The CIT cannot exercise jurisdiction u/s. 263 of the Act on the issues which were not within the ambit of limited scrutiny. In support of his submissions, the assessee placed reliance on the decision of Tribunal in the case of M/s. Su-Raj Diamond Dealers Pvt. Ltd. in ITA No.3098/Mum/2019 decided on 27/11/2019 and the decision in the case of Mrs. Sonali Hemant Bhavsarin ITA No.742/Mum/2019 decided on 17/05/2019. 12. Per contra, ld. Departmental Representative vehemently supported the impugned order and prayed for dismissing appeal of the assessee. 13. Both sides heard. A perusal of the documents on record reveal that the assessment for assessment year 2017-18 was selected for limited scrutiny. The limited scrutiny was confined to examine outward foreign remittances and whether receipt of foreign remittances had been correctly offered to tax. The issue raised by the CIT in proceedings u/s. 263 of the Act relating to carry forward of capital gains was not within the scope of limited scrutiny. Hence, the Assessing Officer could not have enquired into the issue of assessee's claim of carry forward o....