TaxTMI 
TaxTMI 
TaxTMI 
2025 (5) TMI 192
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....are not in the nature of prima facie adjustment and requires thorough examination of facts and application of mind and hence, amounts to extraterritorial jurisdiction exercised by the tax authorities, which is bad in law. 3. The Ld. CIT(A) erred in upholding the Impugned Order passed by Ld. CPC without appreciating the fact that Ld. CPC is precluded from making such adjustments in the Impugned Order. 4. The Ld. CIT(A) has erred in making reference to the provisions and corresponding explanations to section 251 of the Act without appreciating that actions taken by Ld. CPC against the appellant are without any jurisdiction and that powers of CIT(A) are co-terminus and co-extensive to the powers of CPC. 5. The Ld. CIT(A) erred in enhancing the Appellants income and ignoring binding judicial precedents which is in gross violation of the principles of judicial discipline. 6. The Ld. CIT(A) failed to appreciate that in case of multiple sources of income, an Assessee is entitled to adopt provisions of the Act for one source of income while applying the provisions of Double Taxation Avoidance Agreement (DTAA) for the other source of income. 7. The Ld. CIT(A) failed to consider th....
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....f the CIT(A). 3. The ld. AR submitted that the CIT(A) has enhanced the denial of carry forward of LTCL for the reason that the LTCG are exempt under the DTAA and that the loss from same source of income cannot be allowed to be carried forward. The ld. AR further submitted that the gains are claimed to be exempt under the DTAA and the loss is carried forwards under the provisions of the Act which permissible since loss or gain arising out of each transaction is a separate source which is to be considered separately for the purpose of taxation. The ld. AR in this regard relied on the decisions of the Co-ordinate Bench in the case of ACIT vs. J.P. Morgan India Investment Company Mauritius Ltd., (2022) 143 taxmann.com 82, Bay Capital India Fund Ltd., Mauritius vs. ACIT (ITA No. 4475/Mum/2023 dated 20.06.2024) and Matrix Partners India Investment Holdings LLC vs. DCIT (ITA No. 3097/Mum/2023 dated 29.01.2025). 4. The ld. DR on the other hand relied on the orders of the lower authorities. 5. We heard the parties and perused the material on record. The assessee during the year under consideration has earned LTCG which have been claimed as exempt under Article-13 of the DTAA between Indi....
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....ven solely to the country of source. The country of residence gives up the right to tax the income or alternatively gives full credit of the tax paid in the country of source. (b) Income is taxed in the country of source and also the country of residence but as the income is taxed in the country of residence, the country of source limits its right to tax the income. In this case, the computation income is also provided in the treaty (e.g. Royalties/FTS are taxed on gross basis in the country of source but at a lower rate). (c) Income is taxed only in the country of the taxpayer's residence. In this case, the country of source gives up its taxing rights of such income entirely and therefore the computation of income in the country of source is immaterial, [e.g. Business income in the absence of the Permanent Establishment (PE) when a foreign enterprise does not have a PE in India, there is no computation done when the income is reported in India]. 14. In the case of a situation of tax relief, the country where a particular income arises (source country), consciously gives up its taxing rights in respect of a particular income arising from source(s) in that country in favou....
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....cle 8 of the shipping income which as pointed out by Id. Senior Counsel has been specifically provided in some of the Articles like Article 20, 21 & 22. Hence, it cannot be reckoned that shipping income earned from India is to be treated as exempt from tax or taxed at reduced rate, which is a condition precedent for applicability of Article 24, albeit India at the threshold does not have the jurisdiction to tax the shipping income of the non-resident entity........." 16.1 Eminent author Klaus Vogel in his commentary on "Double Taxation Conventions" has opined as under-" "19. [Allocation of taxing rights; exclusive or shared] For the purpose of eliminating double taxation, the Convention establishes two categories of rules. First Articles 6 to 21 determine, with regard to different classes of income, the respective rights to tax of the State of source or situs and of the State of residence, and Article 22 does the same with regard to capital. In the case of a number of items of income and capital, an exclusive right to tax is conferred on one of the Contracting States. The other Contracting State is thereby prevented from taxing those items and double taxation is avoided. As a r....
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....ed to the provisions of the Act; the taxpayer has right to rely on the treaty provisions. 20. Section 90(2) of the Act reads as under: "90(2) Where the Central Government has entered into an agreement with the Government of any country outside India or specified territory outside India, as the case maybe, under sub-section (1) for granting relief of tax, or as the case maybe, avoidance of double taxation, then, in relation to the assessee to whom such agreement applies, the provisions of this Act shall apply to the extent they are more beneficial to that assessee." 21. From the above, it is clear that the provisions of the Act can be resorted to only when these are more beneficial (compared to Treaty). 22. The said proposition has been accepted by the Supreme Court in the case of Azadi Bachao Andolan (supra), wherein it was held as under:- "A survey of the aforesaid cases makes it clear that the judicial consensus in India has been that section 90 is specifically intended to enable and empower the Central Government to issue a notification for implementation of the terms of a double taxation avoidance agreement. When that happens, the provisions of such an agreement, with....
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....year they were suffered. The entire capital gains earned during the previous year were claimed to not be taxable under the treaty. As a result, the capital losses were carried forward as it is to the subsequent years. 27. In the instant case, in the earlier years (A.Y. 2009-10, A.Y. 2011-12 to A.Y. 2014-15) the Assessee had incurred capital losses. 28. Thus, it is for an assessee to examine whether or not, in the light of the applicable legal provisions and in the light of the precise factual position, the provisions of the Income-tax Act are beneficial to him or that of the applicable double taxation avoidance agreement. Thus, these losses were therefore computed under the provisions of the Act, as in those earlier years, the Assessee chose not to be governed by provisions of the treaty for those years but by the provisions of the Act. These provisions included the provisions of section 74 of the Act which deal with carry forward and set off of these losses. 29. In so far as reliance placed by Ld. DR in the case of RM. Muthaiah (supra), the Hon'ble Court has clearly held as under.- When a power is specifically recognized as vesting in one, exercise of such a power by o....
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....a particular income and its taxability to the extent of inconsistency between the two. (iv) The right of the tax payer not to avail the benefit under the treaty and to choose to compute the income under the Act cannot be restricted (v) Once the source country has given up the right to tax the income as per the terms of the DTAA, then the question of computation in the source country does not arise. (vi) If the particular income is not to be taxed at all, the question of including the same under the total income and determining the taxability on the same will not arise 7. Now when we will apply the above principles to assessee's case - As per Article 13 of India Singapore DTAA, the gain on transfer of shares acquired prior to 01.04.2017 cannot be taxed in the source country i.e. India. Therefore the LTCG earned on sale of shares in assessee's case cannot be taxed in India. Accordingly the LTCG does not enter in the computation of total income of the assessee. The assessee has computed the LTCL to be carried forward under the provisions of the Act and the assessee cannot be restricted from choosing not to avail the DTAA benefits. When the LTCG does not enter into the c....
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....ns/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. (emphasis supplied) 6.5.1. From the above one can infer that there is no basis in grouping long term/short term capital assets. It can also be inferred that, long term and short term are different sources of income. Further, Hon'ble Special bench also observed that even the different short term assets and long term assets involv....