Goldman Sachs Investments (Mauritius) Ltd. v. Dy.
CIT [ITA No. 2201/Mum/2017, dt. 24-9-2020] : 2020 TaxPub(DT) 3872 (Mum-Trib)
Income if excluded under DTAA would it cover losses as well
thus question of allowability of carry forward losses of Capital gains there in
Facts:
Assessee a Foreign institutional investor (FII) based out
of Mauritius had the following incomes during the assessment year 2013-14 --
S.No.
|
Particulars
|
Amount
|
1
|
Net short-term capital Gains
-- STT paid
|
3,92,43,87,502
|
2
|
Net long-term capital Loss --
STT paid
|
(12,08,15,903)
|
3
|
Net long-term capital Gains --
STT not paid
|
5,63,11,782
|
Assessee claimed the exemption of Article 13 of
Indo-Mauritius DTAA whereby capital gains can be taxed only in Mauritius for
serial numbers (1) and (3) of the above table and claimed carry forward of the
losses of the earlier years as under.
Their brought forward Capital losses of previous years was
as under --
S.
No.
|
Particulars
|
A.Y.
|
Amount
|
1
|
B/f short-term Capital loss
|
2009-10
|
(36,94,17,35,053)
|
2
|
B/f short-term Capital loss
|
2012-13
|
(2,32,19,35,857)
|
|
Total short-term Capital loss
claimed carried forward
|
|
(39,26,36,70,910)
|
3
|
B/f long-term Capital loss
|
2009-10
|
(1,09,800)
|
4
|
B/f long-term Capital loss
|
2012-13
|
(7,62,85,586)
|
|
Total B/f long-term Capital
loss claimed carried forward
|
|
(7,63,95,386)
|
(a) It was the case of the revenue that
when the incomes were not within the ambit of Article 13 of DTAA read with
section 90(2) of Income Tax Act, 1961 then the losses would also not be in the
scope of the Article 13 and thus there cannot be any
carry forward of losses further also allowed as the income of the current year
is added with the brought forward losses and it is only matter this the carry
forward of further losses is to be done as per the act else section 45 becomes
unworkable.
(b) On long-term capital losses assessee was allowed only
after setting off (12.08) minus 5.63 and the balance was allowed to be carried
forward as per the AO-DRP did not give any directions on this effect remaining
silent on its verdict. A rectification request by assessee fell deaf before the
DRP.
(c) As for short-term capital gains STT paid the assessee
claimed exemption of DTAA which was negated and it was set off against the
short-term b/f losses and then the net amount was allowed as carry forward for
adjustment in future assessment years -- (39,26.36) minus 3,92.43 and the
balance was allowed to be carried forward as per the assessing officer and
upheld by the DRP.
Assessee's plea was --
1. The benefit under Article 13
of DTAA is applicable for income under capital gains and it cannot act as a
barrier to claim carry forward of losses brought forward for short-term Capital
losses and thus they be allowed to carry forward the entire short term capital
losses of (39,26,36,70,910) to further assessment years.
2. The long-term Capital losses
brought forward cannot be curtailed citing DTAA provisions thus they were
eligible for the full carry forward of losses of (7,63,95,386) as well.
Aggrieved by the DRP order assessee went in higher appeal
--
Held in favour of the assessee that they were entitled to
the carry forward of the losses without offsetting the gains/losses of the
current year as the provisions of the DTAA cannot be thrust upon on the
assessee and the same cannot be given a unilateral reading denying assessee of
the benefit of carry forward of losses.
Applied: Flagship
Indian Investment Co. (Mauritius) Ltd. v. ACIT (2010) 133 TTJ 792 (Mum)
: 2010 TaxPub(DT) 1710 (Mum-Trib)
"Now coming to the claim of the revenue that as section
45 of the Act, by virtue of India-Mauritius tax treaty was rendered unworkable
in respect of "capital gains" derived by the assessee from transfer
of securities in India, therefore, the "capital losses" would also
not form part of the assessee"s "total income", and thus, could
not be computed under the Act, we are afraid does not find favour with us.
Apropos the aforesaid observation of the assessing officer, we are of the
considered view that the same had been arrived at by loosing sight of the fact
that the "capital losses" in question had been brought forward from
the earlier years and had been determined and allowed to be carried forward by
the assessing officer while framing the assessment for assessment year 2012-13,
vide his order passed under section 143(3), dated 19-3-2015, and had not arisen
during the year under consideration, i.e., assessment year 2013-14.
Accordingly, the claim of the assessing officer that the "capital
losses" b/forward from the earlier years, pertaining to a source of income
that was exempt from tax was thus not to be carried forward to the subsequent
years, being devoid of any merit, is thus rejected. At this stage, we may
herein observe that it is for the assessee to examine whether or not in the
light of the applicable legal provisions and the precise actual position
the provisions of the IT Act are beneficial to him or that of the applicable
DTAA. In any case, the tax treaty cannot be thrust upon an assessee. In case
the assessee during one year does not opt for the tax treaty, it would not be
precluded from availing the benefits of the said treaty in the subsequent
years. Our aforesaid view is fortified by the order of the ITAT, Pune in DCIT
v. Patni Computer Systems Ltd. (2008) 114 ITD 159 (Pune) : 2008
TaxPub(DT) 2400 (Pune-Trib). We thus in terms of our aforesaid
observations, not being able to persuade ourselves 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 assessing officer in context of the issue under
consideration."