TaxTMI 
TaxTMI 
TaxTMI 
2025 (12) TMI 1421
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.... the Hon'ble Dispute Resolution Panel-1, Mumbai ('Ld. DRP) on the following grounds, each of which is without prejudice to and independent of the other. On the facts and circumstances of the case and in law, the Ld. AD and the Ld. DRP have: General 1 erred in assessing the total income of the Appellant at INR 9,127,050,680 as against the returned Income of INR 8,902,242. 100 offered by the Appellant and raising a demand of INR 245,076,007 Merits of the case Rejecting the hierarchy of set-off of short-term capital losses adopted by Appellant. 2. erred in rejecting the hierarchy of set-off of short-term capital losses adopted by the Appellant and thereby, taxing the gross short-term capital gains in respect of transactions on the sale of shares not chargeable to Securities Transaction Tax ('STT): 3. failed to appreciate that income under the head 'Capital gains' is determined as per sections 45 to SSA of the Act of the Act whilst sections 111A and 115AD of the Act only provide for determination of tax in certain cases and therefore, gains arising on transactions subjected to STT and those not subjected....
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....34B of the Act-Rs. 62,183,484 11. erred in levying interest under section 2348 of the Act amounting to INR 62,183,484. Initiating penalty proceedings under section 270A of the Act. 12. erred in initiating penalty proceedings under section 270A of the Act alleging under-reporting of income by the Appellant. 3. The brief facts and the background of the case are that the assessee, Florida Retirement System, is an Artificial Juridical Person organised in the United States of America, which has invested in Indian capital markets under a multi manager structure through investment managers registered as Foreign Portfolio Investors with the Securities and Exchange Board of India. For the assessment year 2022 23 it filed its return of income on 20 July 2022 declaring total income of Rs. 6,00,22,42,100. The return was selected for complete scrutiny under the Computer Aided Scrutiny Selection and a notice under section 143(2) dated 31 May 2023 was issued. 4. Pursuant thereto, a Draft Assessment Order under section 144C was passed on 23 March 2024 proposing to assess the income at Rs. 9,12,70,56,580. In doing so, the Assessing Officer rejected the manner in whi....
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.... Net short-term capital gains (subject to STT) 2,05,55,03,809 0 7. The assessee's treatment, as explained before us, proceeds on the premise that all short term capital losses are first aggregated and then, in the absence of a statutorily prescribed sequence, are set off in a manner that is tax efficient. In conceptual terms, the approach is that the current year short term capital loss is first applied against the non STT paid short term capital gains and only the balance is thereafter applied against STT paid short term capital gains; brought forward short term capital loss is then utilised against the remaining STT paid gains. In substance, therefore, the assessee has, while remaining within the four corners of the computation provisions, exhausted the loss against gains taxable at thirty percent before depleting the gains taxable at fifteen percent. 8.The Assessing Officer, on the other hand, recomputed the capital gains by adopting a different internal sequencing. He first set off the short term capital loss against the fifteen percent short term capital gains and only thereafter allowed the brought forward loss to be adjusted, thereby leaving the non STT gains i....
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....urable to the Revenue. 11.The assessee has rightly pointed out that in several decisions of the coordinate benches the same reasoning has been accepted. In JS Capital LLC, the Tribunal examined short term capital loss arising from STT paid transactions and short term capital gains arising from non STT transactions and held that, since both were computed under the same mechanism, the loss could be set off against the non STT gains notwithstanding the difference in the rate at which such gains would be taxed. The Tribunal explicitly rejected the notion that a differing rate of tax could render the computations dissimilar for the purpose of section 70. 12. Likewise, in earlier decisions such as Legg Mason Asia and VEMF A, the Tribunal has emphasised that where short term capital losses and gains are both arrived at by applying sections 48 to 55, they fall within a common computational field for the purpose of section 70(2). The fact that some transactions attract securities transaction tax and carry a concessional rate of tax, whereas others do not, has been held to be irrelevant for determining the order in which losses are to be set off. The thread that runs through these prec....
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....r and affirmed by the Panel. By compelling the assessee to first apply its losses against concessional rate gains, the Revenue has effectively introduced into the statute a constraint which the Legislature has deliberately omitted. Such a reading would rewrite section 70 and is not permissible. The assessee's computation of short term capital gains and losses and the sequence of set off adopted by it must, in our considered view, be accepted. 17. Turning to Ground numbers 6 and 7, the next issue relates to the addition of dividend income earned in respect of ADR and GDR holdings and the consequential denial of credit for tax deducted at source. The assessee is a non resident investor in such depository receipts, whose underlying assets are equity shares of Indian companies. During the relevant year it received dividend income of Rs. 22,48,14,532 in respect of such ADR and GDR investments. 18. The statutory regime for this income is governed by section 115AC, which provides that dividend in respect of such depository receipts, received by a non resident, is taxable at the concessional rate of ten percent. The obligation to deduct tax at source rests upon the Indian company pay....
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.... 8,288 905 6,09,802 66,590 Or Reddy have confirmed that taxes were with held and the understanding with J.P Morgan the depositary bank is that they do not show such dividends to be a part of their income in India and as such do not claim any tax credit for 115-117 HDFC BANK LTD JPM 2,34,872 28,091 1,73,64.109 20,76,748 Yet to hear from them 143-144 FEDERAL BANK LTD DB 3,240 354 2,38.418 26,036 DB have expressly mentioned that they shall not be able to assist with transfer of tax credit since they have no visibility into the ultimate beneficial owner information 124-128 icici BANK LTD DB 2,46,779 26,948 1.79,73,198 19,62.672 Yet to hear from them 141-142 INFOSYS LTD DB 24,77,395 2,70,531 18,10,61,899 1,97,71,957 Infosys Ltd have shared the Rule 37BA declaration format and has expressed willingness to transfer credit, the format alongwith dividend details was shared with client to onward forward to BNYM who in turn shall reach to DB However, DB is not assisting in credit transfer. 118-123 RELIANCE INDUSTRIES LTD BNYM 1,01,828 11,120 75,19,739 8,21,....
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....t cannot be rendered nugatory by a mechanical insistence on procedural formalities. 25.The Pune Tribunal in Anil Ratanlal Bohora has, in the context of section 199 read with rule 37BA, drawn a clear distinction between the substantive right to credit in the hands of the person in whom the income is assessable and the procedural mechanics by which the credit is to be transferred between deductee and ultimate taxpayer. It has been held that the proviso to rule 37BA, which deals with declarations and revised certificates, is merely procedural and that non compliance with such procedural aspects cannot override the legislative command in section 199 that credit shall be given to the person in whose hands the income is ultimately taxed. The purpose of the rule is to ensure that the same tax is not credited twice, not to deprive the rightful taxpayer of credit altogether. 26. Similar sentiments are echoed in the decisions of other coordinate benches such as Naresh Kumar Jain and Reliance Infrastructure, where it has been repeatedly underscored that denial of TDS credit because of mismatches or non reflection in Form 26AS, when the underlying tax has been deducted and the correspond....
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....e has been duplication of credit, it will make good any resulting loss to the exchequer. This offer, though not determinative of the legal position, is a further assurance of the bona fides of the assessee and affords the Assessing Officer an additional safeguard in giving effect to our directions. 31. In the light of the above discussion, we hold that the additions made in respect of the ADR and GDR dividend are unsustainable both on the merits of taxability and on the denial of credit for tax deducted at source. The income having already suffered tax in accordance with the special provisions and the assessee having placed sufficient material to show that there is no prejudice to the Revenue, there is no warrant to tax it again or to refuse the corresponding TDS credit. 32.As regards the remaining grounds, we note that the ground concerning the total income figure is general in nature. The grounds relating to errors in the computation sheet have, on the assessee's own admission, been rendered academic as the mistakes stand rectified by the Assessing Officer by a subsequent order dated 17 July 2025. The challenge to interest under section 234B is purely consequential and will....