Goldman Sachs India Investments (Singapore) PTE Limited Vs DCIT (ITAT Mumbai)
1. Section 90(2) of Income Tax Act provides that where the Central Government has entered into an agreement with the Government of any country outside India for granting relief of tax (Double Taxation Avoidance Agreement or DTAA) then, the provisions of the Act shall apply to the extent, they are more beneficial to the assessee.
2. Under section 74 , if capital loss cannot be wholly set off, the amount of loss not so set off shall be carried forward to the following eight assessment years.
Facts:
1. Assessee is a FII incorporated in Singapore, registered with the SEBI and has incurred a short term capital loss (STCL) of Rs 20.59 Cr.
2. The AO claimed that since the capital gains earned by the Assessee is exempt under the provisions of the India- Singapore treaty (DTAA), it follows that capital losses are to be ignored. So the AO did not allow the assessee to carry forward the STCL.
3. The assessee’s contention was that, in view of the provision of Section 90(2) of the Act, the provisions of the Act or DTAA, to the extent more beneficial to the assessee would apply and so instead of DTAA, provisions of Income Tax could be made applicable and losses could be carried forward.
The Mumbai ITAT held as below:
1. The provisions of the DTAA cannot be thrusted upon the Assessee simply because the Assessee is a tax resident of a country with which India has entered into a tax treaty or on account of the mere perception of the AO that the Assessee may claim benefits under the tax treaty in subsequent years.
2. Having regard to the provisions of section 90(2) of the Act and given that the provisions of section 74 of the Act permit the Assessee to carry forward capital losses to subsequent assessment years, the provisions of the Act are more beneficial than the provisions of the IS treaty. Short term losses should be eligible to be carried forward.
3. Accordingly, we are of the view that the capital losses incurred from transactions in the Indian capital markets amounting to Rs 205,969,056 should be construed as income accruing or arising from transactions undertaken in India falling within the scope of section 5 of the Act and therefore, the same should be eligible to be carried forward to subsequent years in accordance with the provisions of section 74 of the Act. We allow this issue of assessee.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal of assessee is arising out of the order of Dispute Resolution Panel-I, Mumbai [in short ‘DRP’], in objection No. 31 vide direction dated 07.07.2016. The Assessment was framed by the Dy. Commissioner of Income Tax, (IT), Circle 2(3)(2), Mumbai (in short ‘DCIT/AO’) for the assessment year 2012-13 vide order dated 21/09/2016 under section 143(3) read with section 144C (13) of the Income Tax Act, 1961 (hereinafter referred to as ‘Act’).
2. The only issue in this appeal of assessee is against the order of DRP and Assessing Officer in denying the carry forward of short-term capital loss. For this, assessee has raised the following two grounds: –
“Aggrieved by the final order passed by the Deputy Commissioner of Income-tax (International Taxation) – 2(3)(2) Mumbai (‘AO’) dated 21 September 2016, under section 143(3) read with section 144C(13) of the Act, in pursuance of the directions issued by Dispute Resolution Panel I (‘DAP’), Mumbai, Goldman Sachs India Investments (Singapore) Pte Limited (‘the Appellant’) respectfully submits that the learned AO has erred in passing the order on the following ground:
1. The learned AO has denied the Appellant’s right to carry forward the short-term capital losses incurred during the Assessment Year 2012-13 amounting to Rs. 205,969,056/- to subsequent years, on the ground that the capital gains earned by the Appellant are exempt from tax under the Double Taxation Avoidance Agreement (DTAA) entered into between India and Singapore. In the course of issuing the final assessment order, the AO has ignored the following –
