TaxTMI 
TaxTMI 
TaxTMI 
2025 (9) TMI 95
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....le 13 Para 3A of India Mauritius DTAA for taxability. 2. On the facts and in the circumstances of the case and in law, the learned CIT (A) erred in rejecting the additional grounds of appeal after having admitted the same on the ground that the appellant has not proved its claim with supporting documents /evidence which is improper especially when the appellant has furnished the following to the Commissioner of Income Tax (Appeals) 55 vide letter dated 12th November, 2024 :- a) TRC of the appellant issued by the Mauritius Revenue Authority b) Statement of Capital Gain/Loss for shares purchased prior to 1st April, 2017 c) Statement of Capital Gain/Loss for shares purchased after to 1st April, 2017 d) Copy of ITR Form filed e) Intimation under section 143(1) of the Income Tax Act, 1961 3. On the facts and in the circumstances of the case and in law, the learned CIT (A) erred in not allowing the carry forward of long term capital loss amounting to Rs. 17,96,11,996/- as per section 74 of the Income Tax Act by not appreciating and not following the provisions with regards to grand fathering in the India Mauritius DTAA as per....
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....w of adjustment under section 143(1) of the Act. Further, on merits, the learned CIT(A) held that the choice of Act or the Treaty provisions is qua the stream of income and since, in the present case, both long-term capital gains as well as the long-term capital loss arose from the same stream of income, therefore carry forward of long-term capital loss is not permissible under the Act. Being aggrieved, the assessee is in appeal before us. 6. We have considered the submission of both sides and perused the material available on record. During the year under consideration, the assessee earned long-term capital gain of Rs. 38,60,93,938/- from the sale of shares, which were acquired before 01.04.2017 (grandfathered sale), and the same was claimed as not taxable as per the provisions of Article 13(4) of the India-Mauritius DTAA. It is discernible from the record that the said exemption claimed under the provisions of the India-Mauritius DTAA was accepted by the Revenue. Further, during the year under consideration, the assessee incurred net long-term capital loss from the sale of shares which were acquired after 01.04.2017 (non-grandfathered sale), the details of which are as follows....
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....er the provisions of Article 13(4) of the India-Mauritius DTAA cannot be adjusted against the long-term capital loss incurred by the assessee from the transactions which are arising from non-grandfathered sale. We, at the outset, find that since the long-term capital gains earned by the assessee in the present case, from the transactions which are grandfathered as per the provisions of Article 13(4) of India-Mauritius DTAA, have already been accepted for exemption under the provisions of the Treaty, therefore the present case stands at a different footing on facts. 9. Further, as regards the findings of the learned CIT(A) that the choice of Act or Treaty provision is qua the stream of income and therefore the claim of exemption in respect of long-term capital gains under DTAA and carry forward of long-term capital loss by referring to the provisions of the Act is not permissible as per law, the learned AR by referring to the decision of a Special Bench of the Tribunal in JCIT vs. Montgomery Emerging Marketing Funds, reported in (2006) 100 ITD 217 (Mumbai) (SB), submitted that different transactions will result in different source of income and therefore each transaction resultin....
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....es for the purpose of aggregation and allowable deductions." 10. We find that the learned CIT(A) relied upon the decision of the Coordinate Bench of the Tribunal in Indium IV (Mauritius) Holdings Ltd. V. DCIT - [2023] 155 taxmann.com 336 (Mumbai-Trib.) and are observed as follows: - "6.5 Without prejudice of the above, even on merits, the claims of the appellant are not correct. The legal decisions cited by the appellant have been also rendered on different facts. The Ld. AR was informed that even on merits of the case, the claim of the appellant is not as per the recent decision of jurisdictional Mumbai Hon'ble ITAT in the case of Indium IV (Mauritius) Holdings Ltd. V. DCIT - [2023] 155 taxmann.com 336 (Mumbai-Tribunal). Vide the above decision, Hon'ble Tribunal held that with regard to Choice of Act or Treaty Provisions is qua stream of Income, in terms of section 90(2), the assessee is eligible to apply the provisions of the Act or the Treaty, whichever is more beneficial to it. As per Article 13 of the India-Mauritius Treaty, gains derived by a resident of Mauritius from the alienation of shares shall be taxable only in Mauritius. Hon'ble ITAT pointed ou....
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....ble ITAT pointed out that the Legislature has kept this difference in carry forward and intra-head adjustment separate for LTCG/LTCL and STCG/STCL and pointed out that as per section 70 to section 74, it can be seen that the Legislature has recognized LTCG/LTCL and STCG/STCL as two distinct sources owing to computational dissimilarities. In the instant case, the appellant has sought to claim Long term capital gains as exempt under the DTAA, but for the same source of income being Long term capital loss, it has sought to carry it forward by referring to the provisions of the Income Tax Act, which is not permissible as per law and also as per the above order of jurisdictional Hon'ble ITAT, Mumbai as discussed above." 11. However, from the perusal of the decision of the Coordinate Bench of the Tribunal in Indium IV Mauritius Holdings Ltd. (supra), as placed reliance upon by the learned CIT(A), we find that the Coordinate Bench held that gains/loss arising from different transactions are distinct transactions and a separate source of income and therefore short-term capital gains/loss and long-term capital gains/loss are distinct and separate streams of income arising to an assessee ....
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....fferent contracts at two rates - one under the Act and one under the Treaty, [Para 7.6] 20. The aforementioned decision in case of IBM World Trade Corpn. (supra) has been upheld by the Hon'ble Karnataka High Court in the case of DIT (IT) v. IBM World Trade Corpn. [2020] 120 taxmann.com 151/[2021] 276 Taxman 211/436 ITR 641 ITR 641. The above decision was relied by the coordinate bench in the case of Dimension Data Asia Pacific Pte. Ltd. v. Dy. CIT (IT) [2018] 99 taxmann.com 270 (Mum.) wherein placing reliance on the decision of Hon'ble Karnataka High Court in case of IBM World Trade Corpn. (supra), the ITAT has held as under: - ". ....are of the view that as per Section 90(2), the assessee is entitled to claim benefits of the Double Tax Avoidance Agreement to the extent the same are more "beneficial" as compared to the provisions of the Act. While doing so, in cases of multiple sources of income, an assessee is entitled to adopt the provisions of the Act for one source while applying the provisions of the DTA for the other....." 21. Further, the Special Bench of the Mumbai ITAT in case of Montgomery Emerging Markets Fund (supra) has held that long....
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....y, following the decisions in case of IBM World Trade Corpn. (supra), Dimension Data Asia Pacific Pte. Ltd. (supra) and Montgomery Emerging Markets Fund (supra), the Assessee has claimed beneficial provisions of the India - Mauritius DTAA in respect of STCG and allowed to carry forward the LTCL as per section 74 of the Act." 12. Therefore, from the perusal of the aforesaid decision, we are of the considered view that the same, in fact, supports the case of the assessee and further substantiates its claim that the choice of Act or Treaty is qua the separate source of income and each transaction resulting in gain or loss is a distinct source of income. In the present case, it cannot be disputed that the benefit of the Treaty was claimed by the assessee in respect of gains arising from the sale of shares which were acquired prior to 01.04.2017. However, the assessee claimed carry forward of long-term capital loss from the sale of shares which were acquired after 01.04.2017. Therefore, in the present case, it is quite apparent that both transactions are distinct and, hence, result in different sources of income. Accordingly, we are of the considered view that the reliance placed by ....