DCIT(IT)-2(1)(2), MUMBAI vs. M/S. DAL CHI LIFE INSURANCE COMPANY LTD., MUMBAI

: March 3rd, 2020 Dates of hearing of the appeal : May 27th, 2020 Date of pronouncing this order

O R D E R Per Pramod Kumar, VP:

[1] By way of this appeal, the Assessing Officer has challenged correctness of the learned CIT(A)’s order dated 26th November 2018, in the matter of assessment under section 143(3) of the Income Tax Act, 1961, for the assessment year 2015-16.

M/s DAI CHI Life Insurance Company Ltd. Page 2 of 5 [2] Grievances raised by the appellant are as follows:-

Grounds of Appeal Tax Effect relating to each Ground of appeal 1. “Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the computation followed by the AO”

2. The appellant prays that the order of the Rs. 93,63,297/- Ld. CIT(A) on the above grounds be set aside and that of the Assessing Officer restored.

3. The Appellant craves leave to amend or later any ground or add a new ground which may be necessary.

Total tax effect Rs. 93,63,297/- [3] To adjudicate on this appeal, only a few material facts need to be taken note of. The assessee is a company incorporated, and fiscally domiciled, in Japan, and it makes investments in Indian capital markets through portfolio investment scheme. During the course of assessment proceedings, the Assessing Officer noticed that the assessee has computed net Short Term Capital Gains (STT) after setting off of loses incurred in earlier years. The Assessing Officer noticed assessee’s reliance on decisions of this Tribunal but requested the same on the ground that “these decisions were on the provisions of Section 70 of the Income Tax Act 1961” whereas, “in this case, the issue is regarding set off of earlier year’s losses under section 74 of the Income Tax Act”. He

M/s DAI CHI Life Insurance Company Ltd. Page 3 of 5 thus proceeded to apply Section 70(2) on short term capital gain (Non STT) and then aggregated with short term capital gain (STT paid) with short term capital loss (STT paid) brought toward under section 74. The variation in approach of the Assessing Officer is clear from the computations of short term capital gain by the assessee and by the Assessing Officer, which are reproduced below: -

The computation of STCG as per the Assessing Officer is tabulated below:

Particulars Amount in INR Short term capital gains (Not subject to 12,99,20,542 STT)

M/s DAI CHI Life Insurance Company Ltd. Page 4 of 5 Short term capital gain (STT paid) 15,66,68,368 Total Short term capital gains 28,65,88,910 Less: Current year Short term capital (10,15,84,163) Loss Less: Brought forward short term capital (2,40,11,628) losses (STT paid) of AY 2012-13 Less: Brought forward short term capital (9,85,90,587) losses (STT paid) of AY 2014-15 Add: Short term capital loss ignored to the 19,447 extent dividend stripping u/s 94(7) of the Act Net Short term capital gains (Non STT 6,24,21,979 paid) taxable at the rate 30 percent plus surcharge and education cess [4] Aggrieved , assessee carried the matter in appeal before the CIT(A). Learned CIT(A) was of the view that “there is no compartmentalisation in Income Tax Act 1961, in Section 70 and 74, of short term capital gain/short term capital loss as STT paid and non STT paid”. He also noted that since there is are direct binding judicial precedents on the issue, in favour of the assessee, he would rather follow the same. He referred to, and relied upon, a coordinate bench decision, in the case of First State Investments (Hong Kong) Ltd vs ADIT [(2009) 33 SOT 26 (Mum)], to reverse the stand of the Assessing Officer, and accept the plea of the assessee. The Assessing Officer is aggrieved and is in appeal before us.

[5] We have heard the rival contentions perused the material on record and duly considered facts of the case in the light of applicable legal position.

[6] We find that the issue in appeal is squarely covered, in favour of the assessee, by a series of decisions of coordinate benches in the cases of First State Investments (Hongkong) Ltd. Vs DDIT [2010] 132 TTJ 218 (Mum), ACIT Vs. M/s. Mac Charles India Ltd. &

M/s DAI CHI Life Insurance Company Ltd. Page 5 of 5 481/Ban/2012, JCIT Vs. Montgomery Emerging Markets Fund [2006] 100 ITD 271 (Mum) (SB), DDIT vs. M/s. DWS India Equity Fund DDIT Vs. M/s. Central State South East & South West Areas Pension Fund ITA No 3986/Mum/2010, ADIT Vs. M/s. SEI Investments Canada Company Engineering Market Equity Fund ITA No. 3150/Mum/2009, ACIT Vs. M/s. T. Rowe Price International Discovery Fund ITA no. 7627/Mum/2011, HSBC Global Investment Funds, Bric Markets Fund Vs/ DDIT ITA no. 9034/Mum/2010, Capital International Emerging Markets Fund Vs/ DDIT [2013] 145 ITD 491 (Mum), GSB Capital Markets Ltd. Vs DCIT [2016] 156 ITD 770 (Mum) and CIT Vs. Vegetable Product Ltd. [1973] 88 ITR 192(SC). Learned Departmental Representatives has fairly accepted this position and could not point any reason as to why we should deviate from these decisions, even though she relied upon the stand of the Assessing Officer. Respectfully following these judicial precedents, we approve the stand of the CIT(A) and decline to interfere in the matter.

[7] In the result, the appeal is dismissed in the terms indicated above. Pronounced in the open court today on the 27th day of May, 2020.