iShares MSCI EM UCITS ETF USD ACC Vs DCIT (ITAT Mumbai)
In a significant ruling that clarifies the rules surrounding the set-off of capital losses, the Income Tax Appellate Tribunal (ITAT), Mumbai Bench, has largely sided with iShares MSCI EM UCITS ETF (referred to as “iShares” or “the assessee”) in its various appeals against the Deputy Commissioner of Income Tax (International Taxation) – 2 (2) (2) (DCIT). The core of the dispute revolved around the assessee’s right to set off short-term capital losses against short-term capital gains, particularly when these gains and losses were subject to different tax rates or had different implications regarding Securities Transaction Tax (STT).
The ITAT’s decision, issued on May 31, 2024, addresses multiple assessment years (primarily 2021-22) and consolidates similar issues across several appeals filed by iShares. The consistent stance adopted by the Tribunal underscores the principle that the Income Tax Act, 1961, specifically Section 70, does not prescribe a hierarchy or order for setting off short-term capital losses based on varying tax rates or whether STT has been paid on the underlying transactions.
Case Background: iShares’ Capital Gains and Losses: iShares, a Mauritius-based company registered as a Foreign Portfolio Investor (FPI) with SEBI, had filed its income tax returns declaring various incomes, including short-term capital gains, dividend income, and interest from REITs. A central point of contention emerged from the assessee’s method of setting off short-term capital losses against short-term capital gains.
