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Facts
The assessee, a Mauritius-incorporated company, claimed long-term capital gains as exempt under the India-Mauritius DTAA for AY 2023-24. The assessee also sought to carry forward short-term capital losses from AY 2019-20. The Assessing Officer (AO) denied the carry forward, setting off the losses against the exempt long-term capital gains.
Held
The Tribunal held that the AO's action of setting off brought forward short-term capital losses against exempt long-term capital gains was incorrect. The Tribunal relied on previous judicial pronouncements where it was held that if a treaty provision is beneficial, the assessee can opt for it, and the question of carrying forward losses does not arise in subsequent years once eligibility is determined. Similar wording in India-Singapore DTAA was also noted.
Key Issues
Whether brought forward short-term capital losses can be set off against exempt long-term capital gains under a DTAA, thereby denying their carry forward.
Sections Cited
143(3), 144C(13), 144C(5), 5, 74, 90(2), 270A, Article 13(4), Article 13
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “I” BENCH MUMBAI
Before: SHRI AMIT SHUKLA & SHRI GIRISH AGRAWAL
O R D E R
PER GIRISH AGRAWAL, ACCOUNTANT MEMBER:
This appeal filed by the assessee is against the final assessment order passed by the Assessing Officer u/s.143(3) r.w.s. 144C(13) of the Act dated 14.07.2025, pursuant to the direction issued by the ld. Dispute Resolution Panel – 1, Mumbai vide order no. ITBA/DRP/F/144C(5)/2025-26/1077165542(1), dated 18.06.2025 passed u/s. 144C(5) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”), for AY 2023-24.
Grounds taken by the assessee are reproduced as under:
Goldman Sachs Mauritius NBFC LLC AY 2023-24 1. On the facts and circumstances of the case and in law, the learned AC erred in setting off short-term capital losses amounting to INR 53.47,01,525, brought forward from AY 2019-20, against the long- term capital gains claimed as exempt during AY 2023-24 under Article 13(4) of India Mauritius (IM) Double Taxation Avoidance Agreement (Treaty). 1.1. The learned AO has on the facts and circumstances of the case and in law, erred in not appreciating the fact that the long-term capital gains claimed as exempt under Article 13(4) of IM Treaty do not form part of the "total income" of Appellant under section 5 of the Act, 1.2. The leaned AO has on the facts and circumstances of the case and in law, erred in not appreciating the fact that every year is an independent unit, and it is unto the discretion of Appellant to opt to be governed by the provision(s) of the Act or Treaty, as may be beneficial to the Appellant in one particular assessment year, 1.3. The leaned AO has on the facts and circumstances of the case and in law, erred in not appreciating the fact that the capital losses brought forward do not emanate from non-taxable source and the losses carried forward are in accordance with provisions of section 74 of the Act 1.4. The learned AG has on the facts and circumstances of the case and in law, erred in holding that where an income is exempt under the Treaty, the Appellant is neither required to show income under the capital gain head nor entitled to file return showing capital losses merely for the purpose of getting the same computed and carried forward 1.5. The leaned AD has erred in law and on facts by not considering the decision of the jurisdictional Tribunal in the case of Appellant's group companies viz. Goldman Sachs Investments (Mauritius) Limited [ITA No. 2201/Mum/2017] and Goldman Sachs India Investments (Singapore) PTE Limited [TS-294-ITAT-2021(Mum)) and relying on the rulings in the case of CIT vs Hariprasad & Co Pvt Limited [99 ITR 118 (SC), 1975 CTR 65 (SC)) Kishorebhai Bhikhabhai Virani Vs. ACIT [Tax Appeal No. 440 of 2013], which are clearly distinguishable on facts.
On the facts and circumstances of the case and in law, the learned AO erred in initiating penalty proceedings under section 270A of the Act for under-reporting of income for the AY 2023-24.
2.1 All the grounds including sub-grounds relate to one single issue in respect of setting off short term capital loss (STCL) brought forward from A.Y. 2019-20 against long term capital gains (LTCG) claimed as
Brief facts of the case are that assessee is incorporated as a company in Mauritius and qualifies as a tax resident of Mauritius within the meaning of Article 14 of India-Mauritius DTAA. It carries on activity of making investments in Indian securities under the Foreign Direct Investment (FDI) route. Assessee filed its return of income on 30.11.2023, reporting total income at Rs.36,99,15,840/-. In its return so filed, assessee claimed long-term capital gain of Rs.583,57,90,010/- as exempt under Article 13 of India-Mauritius DTAA which arose on shares acquired before 01.04.2017. Assessee also claimed carry forward to the subsequent assessment year, the brought forward short-term capital loss pertaining to A.Y. 2019-20 amounting to Rs.53,47,01,525/-.
3.1. In the course of assessment proceedings, ld. AO denied the carry forward of short-term capital loss. He set off the same against the long-term capital gain which the assessee had claimed as exempt in its return. According to him, under the DTAA, capital gains is exempt in the hands of the assessee and, therefore, capital loss is also not allowed to be carried forward. Assessee carried the matter before the ld. DRP, who rejected the objections filed by the assessee by observing the following: a) Under the provisions of the Act, income under the head “capital gains” is to be computed after combining gains from all the sources which would include STCL suffered by the assessee. b) Provisions of DTAA come into play only after the total income under the Act is computed therefore, assessee resorting to the c) Approach of the assessee to take benefit of provisions of the Act in the earlier years and benefit of the provisions of the DTAA in the subsequent year is contradictory and not permissible.
3.2. Before the ld. DRP, assessee asserted that this issue is no longer res integra as held in favour of the assessee by long line of judicial pronouncements in the following cases, including: i. Goldman Sachs Investments (Mauritius) Limited vs. DCIT 120 taxmann.com 23, ii. Goldman Sachs Investments (Singapore) Pte vs DCIT in iii. ACIT vs. JP Morgan India Investment Company Mauritius Limited 143 taxmann.com 82 3.3. Ld. DRP did not accept the submission so made by the assessee by observing that these decisions have not been accepted by the Revenue for which it has filed appeal before the Hon’ble High Court.
We have heard both the parties and perused the material on record including the judicial pronouncements relied upon as stated above. Admitted fact is that short-term capital loss of Rs.53,47,01,525/- was incurred in AY 2019-20 which was allowed to be carried forward to the subsequent years u/s 74 of the Act as assessee chose to take the benefit of Section 74 by virtue of provisions of Section 90(2) in the assessment year 2019-20. In the year under consideration, assessee has claimed the benefit of India-Mauritius DTAA under Article 13 for the long-term capital gain of 4.1. According to the provisions of Article 13(4) of the said treaty, India does not have right to tax capital gains and, therefore, the said long-term capital gain does not enter computation of total tax. Accordingly, there would be no occasion for setting off the brought forward short-term capital loss against the said long-term capital gain. Assessee has thus, contended that it is rightful to claim the carry forward of the said brought forward short-term capital loss to the subsequent year.
4.2. Identical issue had come up before the Co-ordinate Bench of ITAT, Mumbai in the case of Goldman Sachs (Singapore) Pte vs ACIT in and 2063/Mum/2025 dated 10.10.2025, wherein it was observed that in such a situation as in the present case, if the view of ld. AO is to be accepted then, it would mean that to the extent of the loss set off against current year gain, the gain is brought to tax under the Act which is not a correct view. It also noted that Article 13 of India-Singapore DTAA is similarly worded as in India-Mauritius DTAA. It was thus, held that lower authorities are not correct in setting off the brought forward short-term capital loss of AY 2014-15 against the short-term capital gain of AY 2016-17, thereby denying the benefit of carry forward. While coming to this conclusion, Co-ordinate Bench had placed reliance on the other two decisions in the case of Goldman Sachs Investments (Mauritius) Limited vs. DCIT [2020] 120 taxmann.com 23 (Mum) and in the case of ACIT vs. J.P. Morgan India Investment Company Mauritius Limited [2022] 143 taxmann.com 82 (Mum). Relevant paragraph from the decision of Co-ordinate Bench in Goldman Sachs Mauritius NBFC LLC AY 2023-24 the case of Goldman Sachs Singapore Pte (supra.) is extracted below for ready reference: "7. We heard the parties and perused the material on record. The assessee during the year under consideration has offered net STCG of Rs. 888,94,64,645 as exempt under Article 13 of the India-Singapore DTAA, Accordingly in the return the assessee has carried forward STCL brought forward from AY 2014-15 amounting to Rs. 37,55,67,388. The AO did not allowed the carry forward of the loss stating the when the gain is exempt the loss also should be treated as exempt. Accordingly, the AO set off the brought forward loss against the current STCG thereby denying the carry forward of the loss. From the perusal of the AO's order, we notice that the AO has given a finding that if the brought forward losses are accepted by the Department in earlier years then the same cannot be denied to be carried forward. Having held so, the AO still proceeded to set off the brought forward loss against current year gain. From the perusal of the judicial pronouncements relied on by ld AR we notice that the coordinate bench has laid down the ratio that where the treaty provisions are beneficial as compared to the provisions of the Act the taxpayer has right to rely on the treaty provisions and that the question of touching the brought forward does not arise in subsequent AYs once the eligibility to carry these losses forward was determined in the year they were suffered, For AY 2016-17, the assessee has chosen to be governed by Treaty provisions thereby claiming the capital gain as exempt since it is more beneficial. The assessee in AY 2014-15 has chosen to be governed by the Act since it was more beneficial and accordingly has claimed the carried forward of the capital loss in said AY. The coordinate bench has allowed the carried forward from AY 2014-15 and the relevant observations of the coordinate bench is extracted in the earlier part of this order. Further if AO's view is to be accepted then it would mean that to the extent of the loss set off against the current year gain, the gain is brought to tax under the Act which is not correct. From the perusal of Article - 13, the India-Singapore DTAA we notice that both are similarly worded and accordingly, we see merit in the submission of the Id.AR that the ratio laid down by the Co-ordinate bench in the above case are applicable to the assessee also. In view of this discussion we hold that the lower authorities are not correct in setting off the brought forward STCL of AY 2014-15 against the STCG of the AY 2016-17 thereby denying the benefit of carry forward. The grounds raised by the assessee in this regard are allowed."
Considering the factual matrix in the present case similar to the judicial pronouncements as stated above, we hold that denial of carry forward of short-term capital loss of Rs.53,47,01,525 is not tenable.
Goldman Sachs Mauritius NBFC LLC AY 2023-24 Accordingly, the set off made by Ld. AO is deleted and carry forward of the same is allowed in terms of the discussion made above. Grounds raised by the assessee in this respect are allowed.
In the result, appeal of the assessee is allowed.
Order is pronounced in the open court on 17 February, 2026 Sd/- Sd/- (Amit Shukla) (Girish Agrawal) Judicial Member Accountant Member Dated: 17 February, 2026 Ankit, Sr.P.S. Copy to : 1. The Appellant 2. The Respondent 3. DR, ITAT, Mumbai 4. Guard File 5. CIT BY ORDER,
(Dy./Asstt.Registrar) ITAT, Mumbai