TaxTMI 
TaxTMI 
2026 (8) TMI 882
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of brought forward Short-term losses to the subsequent years without appreciating that there is no provision for carry forward of losses in the India Mauritius DTAA and as such the carry forward of short term losses has necessarily to be governed by the provisions of section 74 of the Income Tax Act in entirety? 2 Whether on the facts & circumstances of the case, Ld. CIT(A) has erred in allowing carry forward of brought forward Short-term losses to the subsequent years by ignoring the provisions of Section 74 of the Act as per which any brought forward short term losses have first to be set off against current year Short term/Long term gains which are assessable for that AY as per the IT Act? 3 Whether on the facts & circumstances of the case, Ld. CIT(A) has erred in allowing carry forward of brought forward Short-term losses to the subsequent years by allowing piecemeal application of section 74 of the Act and ignoring the fact that the necessary precondition for carry forward of capital lossess is set off against the available capital gains? 4 Whether on the facts & circumstances of the case, Ld. CIT(A) has erred in allowing carry forward of brought fo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....DTAA and that the brought-forward losses should continue to be carried forward. The Ld. AO, however had passed the final reassessment order on 20.05.2022, making the proposed adjustment, although the assessed total income remained NIL. 7. Aggrieved with the aforesaid adjustments by the AO, the assessee preferred an appeal before the Ld. CIT(A). The CIT(A) decided the appeal in favour of the assessee, partly by rendering following findings: "7. DECISION 7.1 In Ground 3 of appeal, the appellant has disputed the action of the AO in denying the Carry forward of short term capital losses, which were brought forward losses from earlier years for set-off purpose to subsequent Assessment Years and vide ground 4 of appeal, the appellant has disputed the action of the AO in not only setting b/f losses against the Capital gains exempt under the IM Treaty but also setting them off against the long term capital gain otherwise exempt under section 10(38) of the Act. The said grounds are without prejudice to each other. 7.2. The appellant has claimed that the AO has erred in not appreciating the fact that the Appellant had disclosed short term/ long term capital loss....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... earlier assessment year, carried forward to the assessment year in question, would be available for set-off against taxable income earned in subsequent assessment years and the same were not required to be adjusted against the income not chargeable to tax of the current assessment year. It is noted that the facts of the instant AY are similar to the facts of this decision of Hon'ble ITAT and hence the said decision of Hon'ble ITAT is found to be squarely applicable to the instant case. 7.4. It is noted that the AO has relied upon the provisions of Section 74 of the Act to hold that there is no lee-way available to the assessee's to not set-off brought forward losses. Further, the AO has considered these decisions cited by the appellant during the reassessment proceedings, yet not accepted the findings contained therein by referring to provisions of Section 90 of the Act, and holding that before giving any relief as per the provisions of section 90 r.w. the articles of DTAA the income of the assessee is to be computed first as per the normal provisions of the act and for the reason that further appeal has been filed by the department against decision of Hon'ble ITAT, Mumba....
X X X X Extracts X X X X
X X X X Extracts X X X X
....vestment Co. Ltd (2022) (143 taxman.com 82). The relevant portion of this decision is quoted below:- "17. Thus, the application of a treaty can result in the entire (gross) income being not subject to tax in India in a year where a taxpayer claims treaty benefits. Therefore, in a year in which a taxpayer claims benefit of Article 13(4) of the India- Mauritius tax treaty, the entire gains he earns will not be taxable at all as India has given up its taxing rights in respect thereof. Thus, the entire amount of gains for the year (before set off of brought forward losses) will go out of the taxing provisions if Assessee has chosen to be assessed as per Treaty. 18. Further, the provisions of sections 4 and 5 are expressly made subject to the provisions of the Act which means that they are subject to the provisions of section 90 of the Act. By necessary implication they are subject to the terms of the Double TaxationAvoidance Agreement, if any, entered into by the Government of India. If it was not the intention of the legislature to make a departure from the general principle of chargeability to tax under section 4 and the general principle of ascertainment of total i....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the relevant financial year, the appellant had earned short term capital gains and long-term capital gains on equity shares, and the appellant has chosen the provisions of DTAA for the instant assessment year as accepted during the original assessment proceedings. Therefore, there is no dispute that the option available to the appellant has been exercised by the appellant by choosing the DTAA provisions in the instant AY and not the provisions ofthe Income Tax Act. The AO in the reassessment order u/s. 143(3) of the Act has also accepted the applicability of the provisions of the DTAA w.r.t. the LTCG/STCG earned during the relevant financial year. Similarly, the appellant has claimed that it had exercised its option as per the provisions of section 90 of the Act in its ITR filed u/s 139(1) of the Act for earlier AY 2010-11, 2012-13, AY 2013-14 and AY 2014-15 to be governed by the provisions of Income Tax Act and not the DTAA, Further, in its submissions, the appellant has claimed that the short term capital losses were also validly carried forward from prior AY.2010-11 of Rs. 76,34,484, from AY 2012-13 of Rs. 46,92,901/-, from AY.2013-14 of Rs. 11,97,70,349/- and from AY.2014-15 a....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 8. Before us Ld. Sr. DR representing the Revenue submitted that the order of Ld. CIT(A) was totally perverse, as the DTAA between India and Mauritius has no provision for carry forward of losses and as such the carry forward of shortterm losses are necessarily to be governed by the provisions of Section 74 of the Indian Income Tax.The Ld. DR reiterated the grounds of appeal of the revenue and submitted that the losses cannot be carried forward, ignoring the provisions of Section 74 of the Act. According to which any brought forward short-term loss has first to be set off against the current year's short-term and long-term gains, which are assessable for the assessment year as per the IT Act. It was the prayer that the order of Ld. CIT(A), being erroneous needs to be set aside and the additions made by the AO to be restored. 9. Per contra, the learned counsel of the assessee, (in short, "Ld. AR"), submitted that the issue herein is no more res integra. The same has been decided by various tribunals and Hon'ble courts, which are being relied upon by the ld. CIT(A). Therefore, without bringing any material contrary to the facts of the decisions relied upon by the Ld. CIT(A) or....