GOLDMAN SACHS INVESTMENTS ( MAURITIUS ) LTD,MUMBAI vs. DCIT (IT) 2(3)(2), MUMBAI

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ITA 2201/MUM/2017Status: DisposedITAT Mumbai24 September 2020AY 2013-1419 pages
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What did the Tribunal hold?

The Tribunal held that brought forward long-term capital losses are eligible for carry forward. It also ruled that interest under Section 234C should not be levied on income where tax was deductible at source but not deducted by the payer.

What were the facts?

The assessee, a tax resident of Mauritius, claimed exemption for capital gains under the India-Mauritius DTAA. The Assessing Officer (AO) disallowed the carry forward of capital losses, arguing that since gains were exempt, losses could not be computed or carried forward. The AO also levied interest under Section 234C.

What were the issues?

Whether brought forward capital losses can be carried forward when capital gains are exempt under a DTAA, and whether interest under Section 234C is leviable when tax was deductible at source but not deducted.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 144C(13),Section 74,Section 234C,Section 45,Section 115AD

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Income Tax Appellate Tribunal, “I” Bench, Mumbai

Before: Shri S. Rifaur Rahman & Shri Ravish Sood

For Appellant: Shri P.J. Pardiwala, Senior Advocate
For Respondent: Shri Avaneesh Tiwari, Senior D.R
Hearing: 16.09.2020Pronounced: 24.09.2020

In order to support his aforesaid contention the ld. A.R had drawn our attention to „Explanation‟ to Sec. 234C of the Act. Further, reliance was placed by him on the order of the Hon‟ble High Court of Bombay in the case of DIT (International Taxation) Vs. NGC Network Asia LLC (2009) 313 ITR 187 (Bom).

16.

We have deliberated at length on the aforesaid issue under consideration and find substantial force in the claim of the ld. A.R. As per the „Explanation‟ to Sec. 234C, for the purpose of computing the interest liability therein contemplated, the tax due on the returned income has to be reduced by any tax deductible at source in accordance with the provisions of Chapter XVII on any income which is subject to such deduction and is taken into account in computing the total income of the assessee. As observed by us hereinabove, the interest income of Rs.1,73,91,400/- received by the assessee from Indian Oil Corporation Ltd. was liable for deduction of tax at source, which however, was not done by the payer. Accordingly, in our considered view the tax deductible at source on the aforesaid amount of interest income, as stated by the ld. A.R, and rightly so, had to be excluded from the tax due on the returned income for the purpose of computing the interest liability under Sec. 234C of the Act. Our aforesaid view is supported by the judgment of the Hon’ble High Court of Bombay in the case of DIT (International Taxation) Vs. NGC Network LLC (2009) 313 ITR 187 (Bom). In its aforesaid order, it was observed by the Hon‟ble High Court that when a duty is cast on a payer to deduct and pay the tax at source, then on the payers failure to do so interest under Sec. 234B cannot be imposed on the payee assessee. Accordingly, in terms of our aforesaid observations, we are in agreement with the claim of the ld. A.R that the tax deductible at source on the aforesaid interest income received by the assessee from Indian Oil Corporation Ltd. was liable to be excluded at the time of working out the assessee‟s liability towards interest under Sec. 234C. We thus direct the A.O to recompute the interest liability under Sec. 234C in terms of our aforesaid observations. The Ground of appeal No. 6 is allowed as above.

19 Goldman Sachs Investments (Mauritius) Ltd. Vs. DCIT (IT) 2(3)(2)

17.

The appeal filed by the assessee is allowed in terms of our aforesaid observations.

Order pronounced in the open court on 24.09.2020

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