TaxTMI 
TaxTMI 
2025 (6) TMI 393
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....re DTAA. " 2. At the outset, it is noted that there is a delay in filing the present appeal by 21 days as pointed out by Registry. After hearing both the parties and considering the material available on record including the affidavit placed by the assessee, the contents of which has not been rebutted by the Revenue, we find that there is a reasonable cause for the delay in filing the present appeal. The delay is hereby condoned and the appeal of the assessee is admitted for adjudication. 3. Further, the Ld. AR has brought to our notice that the assessee has moved an application seeking permission to raise following additional grounds of appeal which read as under: "1. On the facts and circumstances of the case and in law, the learned Assessing Officer erred in taxing capital gains on a net basis after setting off the capital loss of Rs. 53,13,457/- of Short term Capital loss. 2. On the facts and circumstances of the case and in law, the learned Assessing Officer shall be directed to allow the Appellant the benefit of Article 13(4) of India Singapore Double Taxation Avoidance Agreement in respect of the capital gains and allow the capital loss to be carried ....
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....d. which have been sold to Mr. Neel Kothari, were held by the assessee for not more than 36 months, immediately prior to the date of transfer. Hence, gains on transfer of these shares were held as short term capital gains instead of long term capital gains and the set off of short term loss against short term gain in respect of these shares were recomputed and thereafter, worked out the net short term capital gains of Rs. 73,21,510/- from sale of unlisted shares was determined. Further, as regards the shares of Adception infotech Pvt Ltd which were sold to Mr. Neel Kothari, the AO observed that the assessee has shown long term capital loss in respect of these securities and in terms of Section 70(3) of the Act, the same cannot be set off against short term capital gains and will be liable to be carry forward under the provisions of the Act. 10. The AO thereafter referred to the Article 13(4) and Article 24 of India Singapore DTAA and the submissions of the assessee that capital gains which arise in India are not taxable under the provisions of article 13(4) of India Singapore DTAA as well as the facts that Article 24 is not applicable and also referred to the decision relied on ....
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....as taxed net short term capital gains on listed shares (STT paid) of Rs. 57,94,288/- @ 15% and short term capital gain on unlisted shares (STT not paid) of Rs. 73,23,150/- at normal tax rate and the assessed income was determined at Rs 1,34,36,600/- accordingly. 11. The assessee thereafter carried the matter in appeal before the learned CIT(A). During the appellate proceedings, the appellant submitted that the India-Singapore DTAA was amended w.e.f. 01.04.2017 with a savings clause in form of para 4A to Article 13 that investment made prior to 01.04.2017 to continue to enjoy the benefit of pre-amended Article 13(4) of DTAA. The appellant submitted that prior to amendment in India-Singapore DTAA, there was no different treatment in the case of capital gains arising from shares or that arising from debentures. Even though shares and debentures are different types of assets, for taxation purpose, it makes no difference in the DTAA. The appellant also submitted that the amendment made in India-Singapore DTAA is not applicable to A.Y 2016-17. The appellant also submitted that for the purpose of Article 24 of DTAA, the item of income on first principles should be taxable and thereafte....
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....ore DTAA without reference to amount remitted or received in Singapore. The Ld. CIT(A) further stated that the Hon'ble Bombay High Court in the said decision has taken note of certificate given by Singapore authorities to the effect that capital gains income would be brought to tax in Singapore. 14. The ld CIT(A) further referred to the decision of the Hon'ble Bombay High Court in case of CIT vs APL Co. Pte Ltd [2023] 156 taxmann.com 530 (Bom) and stated that in the said case, the Hon'ble Bombay High Court held that since the assessee submitted certificate issued by Singapore Tax Authority confirming taxability of income in Singapore on accrual basis, the same would constitute sufficient evidence and freight income from shipping business would not be taxable in India. 15. The ld CIT(A) held that in the present case, the AO asked the assessee to give details of global income offered in Singapore however the assessee never provided such details to the AO. Even during the appellate proceedings, the assessee has not provided such details, even the certificate from Singapore Authorities to the effect that such capital gain income would be brought to tax in Singapore has not been p....
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....e) Ltd (2023) 457 ITR 203 (Bombay) and in the case of CIT vs. APL. Co. Pte. Ltd [2023] 156 taxmann.com 530 (Bombay) has upheld the order of the Tribunal on the first line of reasoning and did not adjudicate the second line of reasoning which had been decided by the Tribunal. In other words, the second line of reasoning adopted by the Tribunal has not been disturbed by the Hon'ble High Court. It was accordingly submitted that the CIT(A) was thus wrong in dismissing the appeal of the Appellant by relying on the decision of the Hon'ble Bombay High Court. 19. Per contra, the Ld. DR relied on the order of the lower authorities and our reference was drawn to the reference of the finding of the AO as well as the Ld. CIT(A) as well as the decisions of the Hon'ble Bombay High court in case of M/s. Citicorp Investment Pvt. Ltd. as well as the CIT Vs. APL Co. Pte. Ltd. It was accordingly submitted that there is no infirmity in the order of the Ld. CIT(A) in denying the benefit of Article 13(4) of India-Singapore DTAA to the assessee and the capital gains has been rightly brought to tax. 20. We have heard the rival contentions and purused the material available on record. There i....
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.... it is evident that the shares so alienated were acquired well before 1 April 2017 and the gains on alienation of such shares shall be taxable only in Singapore where the assessee is resident of. Both under the pre-amended and post-amended provisions, gains on alienation of shares of Indian companies acquired prior to 1 April 2017 are taxable only in the state of residence of the assessee, i.e, Singapore and there is thus no ambiguity in this regard. The assessee, a tax resident of Singapore, is thus eligible for benefit of Article 13(4) of India- Singapore DTAA and gains from alienation of shares of Indian companies are not taxable in India. 22. Now, coming to Article 24 which has been invoked by the AO to deny the benefit claimed by the assessee under Article 13(4) of India-Singapore DTAA. In this regard, we refer to the provisions of Article 24(1) which provides that where this Agreement provides (with or without other conditions) that income from sources in a Contracting State shall be exempt from tax, or taxed at a reduced rate in that Contracting State and under the laws in force in the other Contracting State, the said income is subject to tax by reference to the amount t....
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.... India Singapore DTAA doesn't have much relevance in so far as it relates to applicability of Article 13(4) is concerned and by virtue of overriding nature of Article 13(4) of tax treaty makes the capital gains taxable only in the country of residence of the assessee. 26. Similarly, the Coordinate Bench in case of APL Co. Pte Ltd (supra) in the context of Article 8 of India- Singapore DTAA, which is similarly worded to Article 13(4) and which provides that "profits derived by an enterprise of a contracting state from the operation of ships...in international traffic shall be taxable only in that state" held that where India doesn't have any taxation right on the shipping income of non-resident entity, which is exclusive domain of the resident state, there is no question of any kind of exemption or reduced rate of taxation in the source state. It only envisages territorial and jurisdictional rights for taxing the income and India has no jurisdiction for any taxing rights which are governed by Article 8. There is no stipulation about exemption under Article 8 unlike other Articles such as Article 20, 21 and 22 where it has been specifically provided. It was held that it cannot be ....
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....sis and not on remittance basis and held that Article 24(1) would not be applicable. Similarly, in case of Citicorp Citicorp Investment Bank, has relied on a certificate issued by the Singapore tax authorities to the effect that income derived by CIBSL from buying and selling of India Debt securities and from foreign exchange transactions in India would be considered under Singapore tax law as accruing in or derived from Singapore and such income would be brought to tax in Singapore without reference to the amount remitted or received in Singapore. 28. In the instant case, we however find that there is no discussion either by the AO or by the ld CIT(A) as to how such income on alienation of shares of Indian companies is liable to tax in Singapore and what are the taxing provisions in Singapore whether on accrual or remittance basis and onus has been entirely placed on the assessee to produce his Singapore tax filings as well as appropriate certificate from the Singapore tax authorities to the effect that such capital gains would be brought to tax in Singapore. Equally, we find that the assessee in his submissions before the AO besides stating that he is assessed to tax on global....
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.... Karmic Labs Private Limited Omnipresent Retail India Private Limited (treated by the AO as short-term capital loss) 7,20,709 10,59,907 Total 17,80,616 Long-term capital loss arising on transfer of shares of Adception Infotech Private Limited 21,77,193 Classification a long-term was accepted by the AO (see paragraph 7.3 and 7.4) Short-term capital gains (listed shares) Gains arising on transfer of listed shares 93,27,131 Classification as short-term was accepted by the AO Less: loss arising on transfer of listed shares 35,32,841 Net short-term capital gains 57,94,288 Total short term capital loss requested to be carried forward under the Income Tax Act 1961: Short term loss on unlisted shares (as per order passed by AO) 17,80,616 Short term loss on listed shares (as per return and confirmed by the AO in his order) 35,32,841 Total Loss 53,13,457 32. It was submitted that by way of the additional grounds, the Appellant prays that the short-term capital losses aggregating to Rs. 53,13,457/- must be allowed to be carried forward in accordance with the provisions of the Act. The Appellant has suffered long-term ....
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....ditional ground so taken by the assessee deserved to be dismissed. 35. We have heard the rival contentions and purused the material available on record. The limited issue under consideration relates to short-term capital losses amounting to Rs. 53,13,457/- incurred during the year on sale of specified listed and unlisted shares which the assessee seeks to carry forward to subsequent years in accordance with the provisions of the Act instead of setting off against the short term capital gains. As far as short term capital gains is concerned, it has been submitted that the assessee seek to avail the benefit of Article 13(4) of India- Singapore DTAA and the short term losses thus should not be set off against short term capital gains and being allowed to be carried forward to subsequent years. We find that the AO has brought to tax the net short term capital gains (after setting off short term capital loss) and has denied the benefit of Article 13(4) of India-Singapore DTAA. We have already held supra that the assessee is eligible for the benefit of Article 13(4) of India-Singapore DTAA. Therefore, in light of the additional ground of appeal, the issue relates to segregation of sho....
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....the year under consideration, claimed as exempt in view of Article 13(4) of the India Mauritius DTAA, Ld.AO allowed it. The Ld.AO disputed only carry forward of the short term capital loss suffered from sale of shares of Maharana, without being set off against the gain earned from sale of shares of Maharana. 6.4. A query was therefore raised by the bench whether, 'Gains' under Article 13(3)/(4) includes 'loss' ? 6.4.1. It was submitted that the primary purpose of a DTAAs amongst others is to provide tax relief by preventing double taxation. Further, section 90(2) of the Act, inter alia, provides that when the Government of India has entered into a DTAA with Government of any other country for granting relief of tax, or as the case may be for avoidance of double taxation, in relation to an assessee to whom such agreement applies, the provisions of the Act shall apply to the extent these are more beneficial to that assessee. It was also submitted that, Section 90 of the Act, only grants relief, it does not impose any liability and the DTAA cannot act to the disadvantage of the taxpayer, and merely because India has entered into DTAA with Mauritius, the assessee can ....
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....ferring an interpretation that fulfils the aims of the treaty and the intent of the contracting states as given in various Articles. 6.4.5. Applying the above rules to Article 13(4) of India Mauritius DTAA, it is clear that non taxability of the capital gains in India prior to 01/04/2017 cannot act to the disadvantage of the tax payer. This is because section 90(2) is clear to mean that Government of India entered into DTAA with the Government of Mauritius, according to which the capital gains is not taxable in India. However, the provisions of the act shall apply to the extent they are more beneficial to the tax payer. 6.4.6. The Ld.AR in support relied on following observations from the decision of Hon'ble Pune Bench in case of Patni Computers Systems Ltd., reported in (2008) 114 ITD 159 8. The law laid down by the Hon'ble Supreme Court in binding on us under Article 141 of the Constitution of India. The prevailing legal position, therefore, is that once an income is held to be taxable in a tax jurisdiction under a double taxation avoidance agreement, and unless there is a specific mention that it can also be taxed in the other tax jurisdiction, the....
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.... taxation avoidance agreement. There is no specific bar on such an approach of the assessee, and in the absence thereof, we cannot impose the same. In any event, this question is relevant only in the year in which the assessee claims the treaty benefits and not in this year in which the provisions of the Act are clearly more beneficial to the assessee, and, therefore, the assessee does not claim the treaty protection. Just because the assessee may, in Assessing Officer's perception, may claim treaty protection in a subsequent year, the treaty provisions cannot be thrust on the assessee this year as well. In this view of the matter, the assessee was indeed eligible to claim taxation on worldwide basis, disregard the scheme of taxability under the India-Japan tax treaty, and, in effect, claim deduction of loss incurred by the PE in Japan. The CIT(A) was thus justified in his conclusion to the effect that losses of assessee's PE in Japan are to be taken into account while computing assessee's total income liable to tax in India. Now coming to the contention whether each transaction can be considered as a separate source of income. 6.5. The Ld.AR placed re....
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.... 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 involved in the respective transactions are again different sources of income. In the present facts of the case, losss earned from sale of shares of Maharana and the gain earned from sale of shares of Maharana are therefore different sources of income. And further as per the observations of Hon'ble Special Bench, even under short term/long term computation, every transaction is a different source. 6.5.2. Further, the Co-ordinate Bench of this Tribunal in the case of Credit Suisse (Singapore) Co. (Mauritius) Ltd. In ITA....
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....come. Our aforesaid view is squarely covered by the order of the ITAT, Mumbai in the case of Flagship Indian Investment Company (Mauritius) Lid. (supra). In the case of the assessee before the Tribunal that pertained to A. Y. 2005-06 the assessee had brought fonvard capital loss of Rs. 87,06,49,335/-from transfer of securities in A.Y. 2002-03. The aforesaid loss was determined in the hands of the assessee vide an intimation under Sec. 143(1) for A.Y 2002-03. Observing, that since the capital gains were not taxable in India as per Article 13 of the IndianMauritius Tax Treaty, the A.O being of the view that capital loss would also be exempted, and therefore, the assessee would not be entitled to claim the set-off of the same against the capital gains for the relevaye assestment years. On benefit of carry forward of such capital losses of the earlier years, thus, declined the appeal, the CIT(A) upheld the order of the A.O. On further appeal, the Tribunal concluded that the assessee was fully justified in claiming the carry forward of the capital losses of the earlier years to the subsequent years, and both the A.O and the CIT(A) were in error in not allowing the same. Accordingly, the....
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.... to subscribe to the view taken by the A.O/DRP, who as noticed by us hereinabove had sought adjustment of the b/forward STCL against the exempt short term and long term capital gains earned by the assessee during the year in question, thus 'set aside' the order of the A.O in context of the issue under consideration. Accordingly, we direct the A.O to allow carry forward of the b/forward STCL of Rs. 3926,36,70,910/- to the subsequent years." From the reading of above decisions, it is evident that there is no impedement in segregating capital losses and capital gains from different source of income under the head 'capital gains' for the purpose of claiming the benefit of DTAA/ provisions of the Act as the case may be, whichever is more beneficial to the assessee in terms of section 90(2) of the Act." 7. It is relevant to understand the scheme of the act, to find out if the capital gains earned by the assessee from sale of shares that does not form part of total income of virtue of DTAA would enter the computation of total income. Section 4 of the act is the charging section that describes the rates on income charged for a particular assessment year. S....
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....uccession to the business carried on and no tax is payable by the assessee, the sum which is exempted under this sub-section does form part of the total income for the purpose of determining the rate. Total income is defined in Section 2(15) of the Act, and it means total amount of income, profits and gains computed in the manner laid down in this Act. Therefore, it would be erroneous to suggest that total income is to be determined only in the light of Section 4, sub-section (3), of the Act. How total income is to be computed and determined depends upon the various provisions contained in the Act as a whole. Then we might look at various sections which provide for exemptions from the payment of tax. There is Section 7 which contains various provisos which cover sums not liable to tax. Similarly Section 8. Section 14 also contains exemptions with regard to certain sums on which no tax is payable, and Section 15 contains exemptions in cases of life insurance. It will be noticed that the language used in all these sections, to which I have referred, is similar, if not indentical, with the language used in Section 25(4), viz., that the tax is not payable on these different sums. Now, ....