TaxTMI 
TaxTMI 
2026 (4) TMI 1545
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.... (hereafter as "the Act"). The impugned order itself is passed after incorporating the directions of Dispute Resolution Panel (DRP), dated 29.10.2025. 1.1 The assessee is aggrieved with the stand of Ld. AO whereby short-term capital gains (hereafter STCG) has been brought to tax, amounting to Rs. 3,93,63,55,924/-. The facts in brief are that the assessee earned the impugned STCG by trading in index-based derivatives. The resultant STCG has been claimed exempt under Article 13(4) of the India-Mauritius DTAA (hereafter DTAA). On the other hand, the Ld. AO, following the DRP's direction, taxed it under 13(3A) of the DTAA. 1.2 The assessee has approached the ITAT with the following grounds of appeal: "1. That the Assessing Office....
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....Act. That the appellant respectfully craves leave to add, amend, alter and/or forego any ground(s) at or before the time of hearing." 1.3 The Ld. AR has stated at the Bar that they are not pressing GOAs 1 and 2, pertaining to limitation. 2. Before us the Ld. AR argued that "shares" as envisaged in Article 13(3A) of the DTAA were entirely distinct from index based derivatives and thus could be considered only under Article 13(4) of the DTAA. The Ld. AR drew our attention to the relevant portions of Article 13 of the DTAA, which deserves to be extracted for reference: "3A. Gains from the alienation of shares acquired on or after 1st April 2017 in a company which is resident of a Contracting State may be taxed in that S....
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....curities such as debentures from its purview. The Ld. AR also relied on the distinctive treatment u/s 43(5) of the Act given to stocks and shares, [section 43(5)(b) of the Act] as compared to trading in derivatives [section 43(5)(d) of the Act], to drive home the point that equity shares and derivatives are not one and the same. The Ld. AR relied on several cases in his support, some of which deserve to be mentioned: i. 3 Sigma Global fund [176 taxmann.com 708 - Mum.], paras 10, 11 & 12 were underlined for their relevance in the present matter. ii. Vanguard Emerging Markets Stock Index Fund [172 taxmann.com 515 (Mum.)]. This case was cited to stress the point that capital gain on sale of rights entitlement was distinct fro....
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....nce to the Government press statements made at the time of the signing of the protocol to support their argument. However, such statements are indicative and do not determine the legal position on the matter. Such statements are contextual and should not be interpreted as excluding derivatives that in substance effect an alienation of shares. There is a scope for a dynamic interpretation of the treaty in the context of evolving market Instruments Freezing of the treaty's scope to time context conceptions can lead to a defeat of its objects and purpose. 4.4.3 Further, the assessee has claimed that in its case there has been no "alienation of shares and thus such transactions cannot be considered to be covered under Article 13(3A....
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....ection 43(5) of the Act [section 43(5)(b) and (d) of the Act]. Furthermore, it is seen that in the case of M/s Estee India Fund (supra), there is a clear finding on page 9 of the order, which we wholeheartedly support. For reference the relevant portions from this order deserve to be extracted as under: - "From the decisions referred above, it would be evident that trading in stock derivatives and trading in shares is not one and the same. Gain from trading in derivatives, even though the underlying asset may be shares, cannot be treated as gain from trading in shares. Therefore, the provisions of Article 13(3A) would not get attracted. Article 13(3A) of India-Mauritius DTAA only refers to gain from alienation of shares. It does no....