EMERGING MARKETS GROWTH FUND, INC,MUMBAI vs. ASST. CIT (IT)-2(2)(1), MUMBAI

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ITA 7399/MUM/2018Status: DisposedITAT Mumbai28 February 2020AY 2015-165 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the computation of capital gains is distinct from the rate of tax applicable. Therefore, STCLs on which STT was paid can be set off against STCGs on which STT was not paid, following a coordinate bench decision.

What were the facts?

The assessee, a non-resident FII, claimed to set off short-term capital losses (STCLs) from shares on which STT was paid against short-term capital gains (STCGs) from shares not subject to STT. The AO denied this set-off, distinguishing between losses with STT and gains without STT.

What were the issues?

Whether short-term capital losses on shares with STT can be set off against short-term capital gains on shares without STT.

Which sections of the Income-tax Act were involved?

Section 45,Section 48,Section 111A,Section 115AD,Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(1)Show list

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Income Tax Appellate Tribunal, MUMBAI BENCHES “I”, MUMBAI

Before: SHRI PRAMOD KUMAR (VP) & SHRI RAM LAL NEGI (JM)

For Appellant: Shri Niraj Sheth (AR)
For Respondent: Shri N.V. Nadkarni (Sr. DR)
Hearing: 02/12/2019Pronounced: 28/02/2020

O R D E R

PER RAM LAL NEGI, JM

1.

This appeal has been filed by the assessee against the order dated 26.10.2018, passed by the Asstt. Commissioner of Income Tax u/s 143(3) read with section 144C(13) of the Income Tax Act (for short ‘the Act’) in pursuance of directions issued by the Ld. Dispute Resolution Panel (DRP) u/s 144C(5) of the Act.

2.

The assessee has challenged the impugned order passed by the Ld. CIT (A) on the following effective grounds:- “1. On the facts and circumstances of the case and in law, the learned AO has erred in not allowing the Appellant to set – off its short term capital losses (STCLs) incurred during AY 2015- 16, amounting to Rs. 575,839,785, from sale of equity shares on which securities transaction tax (STT) has been paid, against the short term capital gains (STCGs) realized during AY 2015- Assessment Year: 2015-16 16, amounting to Rs. 30,170,588/- from sale of equity shares which were not subject to STT. 2. Without prejudice to Ground No. 1, on the facts and circumstances of the case and in law, the learned AO has erred in not allowing the Appellant to set off its brought forward STCLs relating to AY 2008-09 and AY 2009-10, amounting to Rs. 60,750,351 and Rs. 2,595,699,655 respectively from sale of equity shares on which STT has been paid, against the STCGs realized during AY 2015-16, amounting to Rs. 30,179,588, on sale of equity shares which were not subject to STT. 3. The learned AO has erred in holding that the Appellant has furnished inaccurate particulars of its income and thereby initiated penalty proceedings under section 271 (1) (c) of the Act.” 3. Brief facts of the case are that the assessee a non-resident company incorporated under United States of America and registered with the Security and Exchange Board as a Foreign Institutional Investor (FII), filed its return of income for the assessment year under consideration declaring total loss at Rs. 83,95,90,499/- Since the return was selected for limited scrutiny, the AO issued notice u/s 143(2) and 142(1) of the Act. In response thereof, the authorized representative of the assessee attended before the AO and submitted the details. The assessee had claimed set off or adjustment of short term capital loss chargeable @ 15% against short term capital gain chargeable @ 30% tax rate. AO denied the claim of the assessee holding that the losses having the nature of STT not paid (30%) cannot be allowed to be set of against the income arising out of short term capital gain with STT. The draft assessment order was accordingly passed u/s 143 (3) r.w.s. 144C (1) of the Act determining the taxable income of Rs. 3,01,79,590/-. 4. The assessee filed objection before the Ld. DRP. The Ld. DRP after hearing the assessee affirmed the action of the AO and rejected the objection raised by the assessee. Based on the directions of the Ld. DRP, AO passed the assessment order dated 26.10.2018. The assessee is in appeal against the assessment order passed by the ACIT pursuant to the directions passed by the Ld. DRP. Assessment Year: 2015-16 5. At the outset, the Ld. counsel for the assessee submitted that sole issue raised by the assessee in this appeal is covered in favour of the assessee by the order of the “F” Bench of the ITAT, Mumbai rendered in the case of First State Investments (Hong Kong) Ltd. vs. Assistant Director of Income Tax (International Taxation), Mumbai AY 2005-06, reported in [2010] 132 TTJ 218. Since, the Tribunal has decided the identical issue in favour of the assessee in the similar set of facts in the aforesaid case, the impugned order, which is contrary to the findings of the Tribunal, is liable to be set aside. 6. On the other hand, the Ld. Departmental Representative (DR) did not controvert the fact that the issue involved in the present case is identical to the issue involved in the present case and the Tribunal has decided the identical issue in favour of the assessee. However, the Ld. DR supported the impugned order. 7. We have heard the rival submissions and perused the material on record including the decision of the coordinate Bench relied upon by the Ld. counsel for the assessee. We notice that the coordinate Bench in the case of First State Investments (Hong Kong) Ltd. vs. Assistant Director of Income Tax (International Taxation), Mumbai (supra), the coordinate Bench has decided the identical issue in favour of the assessee holding as under:-

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