MORGAN STANLEY MAURITIUS COMPANY LIMITED ,MUMBAI vs. DEPUTY COMMISSIONER OF INCOME TAX (INTERNATIONAL TAXATION)-CIRCLE 3(2)(2), MUMBAI

27. June issued by the Hon'ble Dispute Resolution Panel (DRP) dated

27. June issued by the Hon'ble Dispute Resolution Panel (DRP) dated

27. June 2023 is invalid and bad in law as the directions are signed only by one 2023 is invalid and bad in law as the directions are signed only by one 2023 is invalid and bad in law as the directions are signed only by one presiding Member of the Panel, without apprec presiding Member of the Panel, without appreciating that the Hon'ble iating that the Hon'ble DRP is a collegium of three Commissioners of Income Tax and therefore DRP is a collegium of three Commissioners of Income Tax and therefore DRP is a collegium of three Commissioners of Income Tax and therefore the directions issued by the Panel needs to be signed by all the the directions issued by the Panel needs to be signed by all the the directions issued by the Panel needs to be signed by all the members of the Panel members of the Panel Ground No. 3: Order is null and void as underlying DRP directions are Ground No. 3: Order is null and void as underlying DRP directions are Ground No. 3: Order is null and void as underlying DRP directions are bad in law On the facts and circumstances of the case and in law, the order On the facts and circumstances of the case and in law, the order On the facts and circumstances of the case and in law, the order passed under section 143(3) read with section 144C(13) of the Act is passed under section 143(3) read with section 144C(13) of the Act is passed under section 143(3) read with section 144C(13) of the Act is invalid since the same is pursuant to the Directions issued by the invalid since the same is pursuant to the Directions issued by the invalid since the same is pursuant to the Directions issued by the Hon'ble DRP which is signed only by one presiding which is signed only by one presiding member and not by member and not by all the members of the Panel, thereby rendering all the members of the Panel, thereby rendering the consequential final the consequential final order null and void. order null and void. Ground No. 4: Order is time barred Ground No. 4: Order is time barred On the facts and circumstances of the case and in law, the Order dated On the facts and circumstances of the case and in law, the Order dated On the facts and circumstances of the case and in law, the Order dated

21. July 2023, passed by the Learned AO

21. July 2023, passed by the Learned AO under section 143(3) read under section 143(3) read with section 144C(13) of the Act, is without jurisdiction and bad in law with section 144C(13) of the Act, is without jurisdiction and bad in law with section 144C(13) of the Act, is without jurisdiction and bad in law inasmuch as the same has been passed beyond the time limit inasmuch as the same has been passed beyond the time limit inasmuch as the same has been passed beyond the time limit prescribed in Section 153 of the Act. prescribed in Section 153 of the Act. The learned AO erred in not passing the order within the ti The learned AO erred in not passing the order within the ti The learned AO erred in not passing the order within the time limit prescribed under section 153 of the Act which is prescribed under section 153 of the Act which is the outer time the outer time limit for passing the order and hence, the order dated passing the order and hence, the order dated 21 July 2023 which is 21 July 2023 which is passed after 30 September 2022 (time limit as per Section 153 of the passed after 30 September 2022 (time limit as per Section 153 of the passed after 30 September 2022 (time limit as per Section 153 of the Act) is time barred and liable to be Act) is time barred and liable to be quashed. Ground No. 5: Denial of brought forward losses to be carried forward to Ground No. 5: Denial of brought forward losses to be carried forward to Ground No. 5: Denial of brought forward losses to be carried forward to subsequent years subsequent years On the facts and circumstances of the case and in law, pursuant to the On the facts and circumstances of the case and in law, pursuant to the On the facts and circumstances of the case and in law, pursuant to the directions of the DRP, the learned AO has erred in denying the directions of the DRP, the learned AO has erred in denying the directions of the DRP, the learned AO has erred in denying the Appellant's right to Appellant's right to carry forward short term capital loss (STCL) of INR carry forward short term capital loss (STCL) of INR 8,583,167,968 brought forward from earlier years (i.e. INR 892,680,120 8,583,167,968 brought forward from earlier years (i.e. INR 892,680,120 8,583,167,968 brought forward from earlier years (i.e. INR 892,680,120 from AY 2013 from AY 2013-14 and INR 7,690,487,848 from AY 2016 7,690,487,848 from AY 2016-17) to subsequent years, on the ground that the capital gains earned by the subsequent years, on the ground that the capital gains earned by the subsequent years, on the ground that the capital gains earned by the Appellant (prior to 1 April 2017) were exempt from tax under the Double ant (prior to 1 April 2017) were exempt from tax under the Double ant (prior to 1 April 2017) were exempt from tax under the Double Taxation avoidance agreement entered into between the Government of Taxation avoidance agreement entered into between the Government of Taxation avoidance agreement entered into between the Government of Republic of India and the Government of Mauritius (IM treaty). Republic of India and the Government of Mauritius (IM treaty). Republic of India and the Government of Mauritius (IM treaty). In the course of passing the final assessment order, the le In the course of passing the final assessment order, the learned AO has arned AO has ignored: o the provisions of section 90(2) of the Act which provides that the provisions of section 90(2) of the Act which provides that the provisions of section 90(2) of the Act which provides that where the Central Government has entered into an agreement where the Central Government has entered into an agreement where the Central Government has entered into an agreement with the Government of any country outside India for granting with the Government of any country outside India for granting with the Government of any country outside India for granting relief of tax, or as the case may be, avoidance of relief of tax, or as the case may be, avoidance of relief of tax, or as the case may be, avoidance of double taxation, then, in relation to an assessee to whom such taxation, then, in relation to an assessee to whom such taxation, then, in relation to an assessee to whom such agreement applies, the provisions of the Act shall apply to the agreement applies, the provisions of the Act shall apply to the agreement applies, the provisions of the Act shall apply to the extent, they are more beneficial to that Assessee; and extent, they are more beneficial to that Assessee; and extent, they are more beneficial to that Assessee; and o the fact that every assessment year is a separate unit and it is the fact that every assessment year is a separate unit and it is the fact that every assessment year is a separate unit and it is upto the upto the discretion of the Assessee to determine whether the discretion of the Assessee to determine whether the provisions of the Act are more beneficial or the provisions of the provisions of the Act are more beneficial or the provisions of the provisions of the Act are more beneficial or the provisions of the treaty. Ground No. 6: Initiation of penalty proceedings under section 270A of Ground No. 6: Initiation of penalty proceedings under section 270A of Ground No. 6: Initiation of penalty proceedings under section 270A of the Act On the facts and circumstances of the case, the le On the facts and circumstances of the case, the learned AO erred in arned AO erred in initiating penalty proceedings under section 270A of the Act for under initiating penalty proceedings under section 270A of the Act for under initiating penalty proceedings under section 270A of the Act for under- reporting of income. reporting of income. The Appellant craves leave to add, alter, vary, omit, substitute, amend The Appellant craves leave to add, alter, vary, omit, substitute, amend The Appellant craves leave to add, alter, vary, omit, substitute, amend or withdraw any or all of the above grounds of appeal and to submit or withdraw any or all of the above grounds of appeal and to submit or withdraw any or all of the above grounds of appeal and to submit such statements, documents and papers as may be considered tatements, documents and papers as may be considered tatements, documents and papers as may be considered necessary either at or before the hearing of this appeal so as to enable necessary either at or before the hearing of this appeal so as to enable necessary either at or before the hearing of this appeal so as to enable the Hon'ble Income the Hon'ble Income -tax Appellate Tribunal to decide this appeal tax Appellate Tribunal to decide this appeal according to law. according to law.

The detail of short term and lon The detail of short term and long term capital gain/loss suffered g term capital gain/loss suffered by the assessee in the relevant year has been reproduced by the the assessee in the relevant year has been reproduced by the the assessee in the relevant year has been reproduced by the Assessing Officer in para 3 of the impugned assessment order. For Assessing Officer in para 3 of the impugned assessment order. For Assessing Officer in para 3 of the impugned assessment order. For ready reference, same is extracted as under: same is extracted as under:

Particulars [Amount In INR) Net Gain/ Gain exempt (loss) Taxable gains/ Taxable gains/ (loss) ignored under the capital gains/ (loss) capital gains/ (loss) Treaty/ Act A] Short term Equity shares (9,753,534) - (9,753,534) (9,753,534) (covered under Total (A) (9.753,534) - (9,753,334) (9,753,334)

B] Long term capital gains' (loss) B] Long term capital gains' (loss) On derivatives (63,840) (63,840) On Mutual Funds (452,624) (452,624) covered under seclion 112A] Equity shares 695,755,142 683,968,998 1,932,611 [1] 1,932,611 covered under section 112AJ Total (B) 695,236,678 663,452,534 1,932,611 1,932,611

[1]"After set-off of short- -term losses of IN 9,753,534 and exemption of INR 100,000 term losses of IN 9,753,534 and exemption of INR 100,000 under section 112A of the Act. under section 112A of the Act.” 2.1 In the opinion of the Assessing Officer n the opinion of the Assessing Officer, the assessee was not the assessee was not entitled for carry forward entitled for carry forward of brought forward losses to subsequent ard losses to subsequent years, for the reason that or the reason that assessee can’t be allowed for assessee can’t be allowed for selective approach of taking either approach of taking either ‘treaty benefit’ or ‘benefit or ‘benefit under the Act’ Before the Assessing Officer t Before the Assessing Officer the assessee submitted that section he assessee submitted that section 90(2) of the Act allows the assessee to apply the provisions of the 90(2) of the Act allows the assessee to apply the provisions of the 90(2) of the Act allows the assessee to apply the provisions of the Act to the extent more beneficial to the assessee. The Ld. Authorized Act to the extent more beneficial to the assessee. The Ld. Authorized Act to the extent more beneficial to the assessee. The Ld. Authorized Representative (AR) of the assessee further placed reliance on the Representative (AR) of the assessee further placed reliance on the Representative (AR) of the assessee further placed reliance on the decision of the Co-ordinate Bench of the Tribunal in the case of ordinate Bench of the Tribunal in the case of (i) ordinate Bench of the Tribunal in the case of Goldman Goldman Goldman Sachs Sachs Sachs Investments Investments Investments (Mauritius) (Mauritius) (Mauritius) Ltd. Ltd. Ltd. v. v. v. Deputy Deputy Deputy Commissioner of Income Tax, (International Taxation)-2(3)(2) [2021] Commissioner of Income Tax, (International Taxation) Commissioner of Income Tax, (International Taxation) 187 ITD 184 (Mumbai 187 ITD 184 (Mumbai - Trib.), (ii) Deputy Commissioner of Income Deputy Commissioner of Income- tax (International (International (International Taxation) Taxation) Taxation) v. v. v. Swiss Swiss Swiss Finance Finance Finance Corporation (Mauritius) Ltd. [2023] 146 taxmann.com 203 (Mumbai [2023] 146 taxmann.com 203 (Mumbai [2023] 146 taxmann.com 203 (Mumbai – Trib.), (iii) DCIT (IT) -1 (2)(2), Mumbai v. M/s. Bluebay 1 (2)(2), Mumbai v. M/s. Bluebay Mauritius Investment Mauritius Investment Ltd and ITA and ITA No. 1369/Mum/2021 No. 1369/Mum/2021 (Mumbai - Trib.), (iv) (iv) ACIT-3(1)(1), Mumbai v. M/s J. P. Morgan 3(1)(1), Mumbai v. M/s J. P. Morgan India India Investment Investment Company Company Mauritius Mauritius Limited Limited ITA No. 2382/Mum/2021 (Mumbai 2382/Mum/2021 (Mumbai - Trib.) and (v) Flagship Indian Flagship Indian Investment Co. (Mauritius) Investment Co. (Mauritius) Ltd. v. Assistant Director of Income Ltd. v. Assistant Director of Income-tax (Inti. Taxation)-3(2) [2010] 38 SOT 426 (Mumbai T 426 (Mumbai - Trib.). The assessee also referred to the CBDT Circular No. 22 of 1944 dated assessee also referred to the CBDT Circular No. 22 of 1944 dated assessee also referred to the CBDT Circular No. 22 of 1944 dated 29.07.1944 and submitted that the loss included in the total 29.07.1944 and submitted that the loss included in the total 29.07.1944 and submitted that the loss included in the total income has to be carried forward and cannot be set off against income has to be carried forward and cannot be set off against income has to be carried forward and cannot be set off against income which does not form part of the income which does not form part of the total income. It was further total income. It was further submitted that each assessment year being an independent year submitted that each assessment year being an independent year submitted that each assessment year being an independent year the, assessee could invoke the India Mauritius treaty , assessee could invoke the India Mauritius treaty , assessee could invoke the India Mauritius treaty for claiming exemption article 14(4) and continue to carry forward 14(4) and continue to carry forward its losses 14(4) and continue to carry forward without setting off losses agains without setting off losses against the income which is not t the income which is not chargeable to tax under the India Mauritius treaty. However, the chargeable to tax under the India Mauritius treaty. However, the chargeable to tax under the India Mauritius treaty. However, the Ld. Assessing Officer rejected the contention of the assessee in his Ld. Assessing Officer rejected the contention of the assessee in his Ld. Assessing Officer rejected the contention of the assessee in his draft assessment order passed on 21.09.2022. The relevant draft assessment order passed on 21.09.2022. The relevant draft assessment order passed on 21.09.2022. The relevant observations of the Assessing Officer observations of the Assessing Officer are reproduced as under: are reproduced as under:

“5. The above contention of the assessee is considered but not The above contention of the assessee is considered but not The above contention of the assessee is considered but not found acceptable for the following reasons: found acceptable for the following reasons: (i) As per the Article 13 of DTAA between India &Mauritius, gains (i) As per the Article 13 of DTAA between India &Mauritius, gains (i) As per the Article 13 of DTAA between India &Mauritius, gains derived by resident of a Contracting State from the aliena derived by resident of a Contracting State from the aliena derived by resident of a Contracting State from the alienation of any property in securities acquired prior to 1 April 2017 shall be taxable property in securities acquired prior to 1 April 2017 shall be taxable property in securities acquired prior to 1 April 2017 shall be taxable only in that state. Thus, any capital gain from trading in securities in only in that state. Thus, any capital gain from trading in securities in only in that state. Thus, any capital gain from trading in securities in India by a tax resident of Mauritius is taxable only in Mauritius and is India by a tax resident of Mauritius is taxable only in Mauritius and is India by a tax resident of Mauritius is taxable only in Mauritius and is excluded from taxable incom excluded from taxable income in India. The claim made by the assessee is that nature of capital gain arises in The claim made by the assessee is that nature of capital gain arises in The claim made by the assessee is that nature of capital gain arises in India is exempt from tax in India. The gains include loss. Therefore, if a India is exempt from tax in India. The gains include loss. Therefore, if a India is exempt from tax in India. The gains include loss. Therefore, if a gain is exempt from taxation, loss would also be exempt. It is also trite gain is exempt from taxation, loss would also be exempt. It is also trite gain is exempt from taxation, loss would also be exempt. It is also trite law that loss from an law that loss from an exempt source can neither be allowed to be set off exempt source can neither be allowed to be set off nor can be allowed to be carried forward and absorbed against income nor can be allowed to be carried forward and absorbed against income nor can be allowed to be carried forward and absorbed against income from taxable sources in subsequent years. Though assessee has relied from taxable sources in subsequent years. Though assessee has relied from taxable sources in subsequent years. Though assessee has relied on the judgement of Hon'ble Mumbai ITAT in the case of Goldman Sach on the judgement of Hon'ble Mumbai ITAT in the case of Goldman Sach on the judgement of Hon'ble Mumbai ITAT in the case of Goldman Sachs Investments (Mauritius) Limited (supra), the same is not tenable as Investments (Mauritius) Limited (supra), the same is not tenable as Investments (Mauritius) Limited (supra), the same is not tenable as department has filed an appeal against the said judgement before the department has filed an appeal against the said judgement before the department has filed an appeal against the said judgement before the Hon'ble Bombay HC. Hon'ble Bombay HC. (ii) The assessee had claimed the benefit of sub ) The assessee had claimed the benefit of sub-section (1) of Sec. 74 of section (1) of Sec. 74 of the Act for carrying fo the Act for carrying forward the capital losses pertaining to the same rward the capital losses pertaining to the same type and nature of income for set type and nature of income for set-off against future capital gains in off against future capital gains in subsequent assessment years. As there cannot be any taxable income subsequent assessment years. As there cannot be any taxable income subsequent assessment years. As there cannot be any taxable income from these sources, the only plausible reason for carry from these sources, the only plausible reason for carry-forward of loss forward of loss will be for it to be set will be for it to be set-off against taxable income arising on equity off against taxable income arising on equity purchases made after 1/04/2017. This will lead to a situation where purchases made after 1/04/2017. This will lead to a situation where purchases made after 1/04/2017. This will lead to a situation where gains/profit for equity purchases before 01/04/2017cannot be taxed gains/profit for equity purchases before 01/04/2017cannot be taxed gains/profit for equity purchases before 01/04/2017cannot be taxed nor be set-off against losses while losses will be off against losses while losses will be set-off against taxable off against taxable income. Considering the difference in the taxability of the capital gains income. Considering the difference in the taxability of the capital gains income. Considering the difference in the taxability of the capital gains income for shares purchased prior to and after 01.04.2017, the carry income for shares purchased prior to and after 01.04.2017, the carry income for shares purchased prior to and after 01.04.2017, the carry- forward and set forward and set-off loses is not tenable. It cannot be said that two off loses is not tenable. It cannot be said that two reasonable interpre reasonable interpretations are possible and the one in favour of tations are possible and the one in favour of assessee has to be adopted, therefore the reliance of assessee on the assessee has to be adopted, therefore the reliance of assessee on the assessee has to be adopted, therefore the reliance of assessee on the judgement of Hon'ble SC in the case of CIT v Vegetable Products Ltd judgement of Hon'ble SC in the case of CIT v Vegetable Products Ltd judgement of Hon'ble SC in the case of CIT v Vegetable Products Ltd [1973] 88 ITR 192 (SC) is misplaced. [1973] 88 ITR 192 (SC) is misplaced. (iii) Assessee being resident of Ma (iii) Assessee being resident of Mauritius, Sec. 45 by virtue of the India uritius, Sec. 45 by virtue of the India- Mauritius tax treaty was made inapplicable in respect of "capital gains" Mauritius tax treaty was made inapplicable in respect of "capital gains" Mauritius tax treaty was made inapplicable in respect of "capital gains" and therefore the "capital losses" will also not form part of the "total and therefore the "capital losses" will also not form part of the "total and therefore the "capital losses" will also not form part of the "total income" of the assessee. Applicability of section 74(1)will require (i income" of the assessee. Applicability of section 74(1)will require (i income" of the assessee. Applicability of section 74(1)will require (i). a loss which arises as the net result of computation under the head loss which arises as the net result of computation under the head loss which arises as the net result of computation under the head "Capital Gains"; and (ii). to "income" which falls within the definition of "Capital Gains"; and (ii). to "income" which falls within the definition of "Capital Gains"; and (ii). to "income" which falls within the definition of "total income". However, as these conditions are not satisfied the "total income". However, as these conditions are not satisfied the "total income". However, as these conditions are not satisfied the provisions of Sec. 74 are not applicable i provisions of Sec. 74 are not applicable in the present case. The reliance n the present case. The reliance placed by the assessee on Circular No. 22 of 1944, dated 29 placed by the assessee on Circular No. 22 of 1944, dated 29 placed by the assessee on Circular No. 22 of 1944, dated 29-7-1944, para-2 is also incorrect. The said circular reads as below: 2 is also incorrect. The said circular reads as below: Non-resident's Indian loss to be carried forward and not set off against resident's Indian loss to be carried forward and not set off against resident's Indian loss to be carried forward and not set off against foreign income. income.-'Total income' is defined as the total amount of income, income' is defined as the total amount of income, profits and gains referred to in the sub profits and gains referred to in the sub-section(1) of section 4* computed section(1) of section 4* computed in the manner laid down in the Act. In the case of a non in the manner laid down in the Act. In the case of a non-resident, his resident, his foreign income is not included in his 'total income' which foreign income is not included in his 'total income' which foreign income is not included in his 'total income' which is to be computed subject to the provisions of section 24*. If the 'total income' is computed subject to the provisions of section 24*. If the 'total income' is computed subject to the provisions of section 24*. If the 'total income' is a loss, it has to be carried forward subject to the provisions of section a loss, it has to be carried forward subject to the provisions of section a loss, it has to be carried forward subject to the provisions of section 24(2)* and cannot be set off against any income which does not form 24(2)* and cannot be set off against any income which does not form 24(2)* and cannot be set off against any income which does not form part of the 'total part of the 'total - income'. Otherwise, a non-resident would not get any resident would not get any relief in Indian taxation on account of the loss incurred relief in Indian taxation on account of the loss incurred by him in India." by him in India." (* of the 1922 Act.)* (* of the 1922 Act.)* It therefore only states that non It therefore only states that non-taxable 'foreign income' which is not taxable 'foreign income' which is not included in total included in total-income should not be used for set-off of loses. In the off of loses. In the present case there is only one source of income which is investments in present case there is only one source of income which is investments in present case there is only one source of income which is investments in equities and assessee is selectively opting for the operation of IT Act equities and assessee is selectively opting for the operation of IT Act equities and assessee is selectively opting for the operation of IT Act and Treaty for the income arising from the same source. and Treaty for the income arising from the same source. (iv) The contention of t (iv) The contention of the assessee that each assessment year is an he assessee that each assessment year is an independent assessment year and hence it can claim benefit of IM independent assessment year and hence it can claim benefit of IM independent assessment year and hence it can claim benefit of IM treaty for the current year while carrying forward the losses from earlier treaty for the current year while carrying forward the losses from earlier treaty for the current year while carrying forward the losses from earlier years as per IT Act is not tenable. As discussed in the preceding years as per IT Act is not tenable. As discussed in the preceding years as per IT Act is not tenable. As discussed in the preceding paragraph, section 74(1) will not be applicable to the assessee as the aph, section 74(1) will not be applicable to the assessee as the aph, section 74(1) will not be applicable to the assessee as the during A. Y. 2020 during A. Y. 2020-21 assessee has claimed capital gains income to be 21 assessee has claimed capital gains income to be exempt as per IM Treat. This will imply that losses being brought exempt as per IM Treat. This will imply that losses being brought exempt as per IM Treat. This will imply that losses being brought forward cannot be said to be part of the total forward cannot be said to be part of the total-income anymore. ymore.”

Sr. No. AY Short Term Capital Loss Treatment of loss Treatment of loss (in INR)

5.1 The ground No. 5 of the appeal concern to denial of brought The ground No. 5 of the appeal concern to denial of brought The ground No. 5 of the appeal concern to denial of brought forward losses to be carried forward to the subsequent years. forward losses to be carried forward to the subsequent years. forward losses to be carried forward to the subsequent years.

5.2 Before us, the Ld. counsel for the assessee submitted that Before us, the Ld. counsel for the assessee submitted that Before us, the Ld. counsel for the assessee submitted that the Ld. Assessing Officer has ignored the basic principle of section 90(2) Ld. Assessing Officer has ignored the basic principle of section 90(2) Ld. Assessing Officer has ignored the basic principle of section 90(2) of the Act which provides option to the assessee for choosing of the Act which provides option to the assessee for choosing of the Act which provides option to the assessee for choosing provisions out of Income provisions out of Income-tax Act or treaty, which is which is more beneficial to the assessee. According to the Ld. counsel to the assessee. According to the Ld. counsel brought forward short ght forward short term capital losses pertains to earlier year and in those years the term capital losses pertains to earlier year and in those years the term capital losses pertains to earlier year and in those years the assessee opted for application of the provisions of the Income-tax assessee opted for application of the provisions of the Income assessee opted for application of the provisions of the Income Act and under those provisions only short term capital loss has Act and under those provisions only short term capital loss has Act and under those provisions only short term capital loss has been brought forward to the year under been brought forward to the year under consideration for further consideration for further carry forward to the subsequent years. As far as the capital gain carry forward to the subsequent years. As far as the capital gain carry forward to the subsequent years. As far as the capital gain arising in the year under consideration arising in the year under consideration, has been claim has been claimed as exempt in view of Article 13(4) of the India Mauritius DTAA. The exempt in view of Article 13(4) of the India Mauritius DTAA. The exempt in view of Article 13(4) of the India Mauritius DTAA. The Assessing Officer has disputed only ca Assessing Officer has disputed only carry forward of the short term rry forward of the short term capital losses. The Ld. counsel relied on the decision of the Co- capital losses. The Ld. counsel relied on the decision of the Co capital losses. The Ld. counsel relied on the decision of the Co ordinate Bench of the Tribunal in the case of Flagship Indian ordinate Bench of the Tribunal in the case of Flagship Indian ordinate Bench of the Tribunal in the case of Flagship Indian Investment CO (Mauritius) Ltd. (supra) wherein also the capital Investment CO (Mauritius) Ltd. (supra) wherein also the capital Investment CO (Mauritius) Ltd. (supra) wherein also the capital losses pertaining to assessment yea losses pertaining to assessment year 2002-03 were were claimed to be carried forward for subsequent assessment years. Further, the Ld. carried forward for subsequent assessment years. Further, the Ld. carried forward for subsequent assessment years. Further, the Ld. counsel relied on the decision of Credit Suisse (Singapore) Ltd. v. counsel relied on the decision of Credit Suisse (Singapore) Ltd. v. counsel relied on the decision of Credit Suisse (Singapore) Ltd. v. CIT (International Taxation) in and 1108/Mum/2022 CIT (International Taxation) in and 1108/Mum/2022 CIT (International Taxation) in ITA No. 1107 and 1108/Mum/2022 wherein the Tribunal accepted the theory of the segregation capital wherein the Tribunal accepted the theory of the segr wherein the Tribunal accepted the theory of the segr gain and capital losses for drawing benefit of DTAA/Act to the gain and capital losses for drawing benefit of DTAA/Act to the gain and capital losses for drawing benefit of DTAA/Act to the extent they were more beneficial to the assessee. The Ld. counsel extent they were more beneficial to the assessee. The Ld. counsel extent they were more beneficial to the assessee. The Ld. counsel also relied on the decision of the Co also relied on the decision of the Co-ordinate Bench of the Tribunal ordinate Bench of the Tribunal in the case of Indium IV (Mauritius) Holdi in the case of Indium IV (Mauritius) Holdings Ltd. v. DCIT ngs Ltd. v. DCIT (International Taxation) [2023] 155 taxmann.com 336 (Mumbai- (International Taxation) [2023] 155 taxmann.com 336 (Mumbai (International Taxation) [2023] 155 taxmann.com 336 (Mumbai Trib.) wherein also the Assessing Officer was directed to allow wherein also the Assessing Officer was directed to allow wherein also the Assessing Officer was directed to allow assessee’s claim of carry forward of the capital gain. assessee’s claim of carry forward of the capital gain. assessee’s claim of carry forward of the capital gain.

5.3 On the contrary, the Ld. Departmental Representative (D On the contrary, the Ld. Departmental Representative (D On the contrary, the Ld. Departmental Representative (DR) relied on the decision of the Hon’ble Supreme Court in the case of relied on the decision of the Hon’ble Supreme Court in the case of relied on the decision of the Hon’ble Supreme Court in the case of CIT v. Harprasad & Co. (P.) Ltd. [1975] 99 ITR 118 (Supreme Court) CIT v. Harprasad & Co. (P.) Ltd. [1975] 99 ITR 118 (Supreme Court) CIT v. Harprasad & Co. (P.) Ltd. [1975] 99 ITR 118 (Supreme Court) and submitted that exempt source o and submitted that exempt source of loss does not enter f loss does not enter into return of income and therefore, the capital loss which was of income and therefore, the capital loss which was exempted under exempted under the treaty provisions was not entitled or eligible for to be carried the treaty provisions was not entitled or eligible for to be carried the treaty provisions was not entitled or eligible for to be carried forward to the subsequent years for setting off against capital gain forward to the subsequent years for setting off against capital gain forward to the subsequent years for setting off against capital gain of the subsequent years. The Ld. DR also relied on the decision of of the subsequent years. The Ld. DR also relied on the decision of of the subsequent years. The Ld. DR also relied on the decision of the Hon’ble Supreme Court in the ca the Hon’ble Supreme Court in the case of CIT v. J.H. Gotla [1985] se of CIT v. J.H. Gotla [1985] 156 ITR 323 (SC) wherein it is held that while computing the 156 ITR 323 (SC) wherein it is held that while computing the 156 ITR 323 (SC) wherein it is held that while computing the assessee’s income the minor children which is liable to be added assessee’s income the minor children which is liable to be added assessee’s income the minor children which is liable to be added u/s 16(3) (of the 1922 Act) would include profit and loss from the u/s 16(3) (of the 1922 Act) would include profit and loss from the u/s 16(3) (of the 1922 Act) would include profit and loss from the business of the assessee’s spous business of the assessee’s spouse and minor children and e and minor children and accordingly upheld brought forward of business loss of such accordingly upheld brought forward of business loss of such accordingly upheld brought forward of business loss of such business. The Ld. DR also relied on the decision of the Hon’ble business. The Ld. DR also relied on the decision of the Hon’ble business. The Ld. DR also relied on the decision of the Hon’ble Calcutta High Court in the case of Royal Calcutta Turf Club to CIT Calcutta High Court in the case of Royal Calcutta Turf Club to CIT Calcutta High Court in the case of Royal Calcutta Turf Club to CIT [1983] 12 Taxman 133 wherein [1983] 12 Taxman 133 wherein Hon’ble Court has obs rt has observed that where the Act may in where the Act may inapplicable to the income from certain source applicable to the income from certain source under the scheme of the Act under the scheme of the Act, the profit and loss resulting from such the profit and loss resulting from such a source will not enter into the computation at all. The Ld. DR also a source will not enter into the computation at all. The Ld. DR also a source will not enter into the computation at all. The Ld. DR also relied on the decision of the Co relied on the decision of the Co-ordinate Bench of the Tribunal in ordinate Bench of the Tribunal in the case of Dy. CIT (International Taxation) v. Asia Pacific the case of Dy. CIT (International Taxation) v. Asia Pacific the case of Dy. CIT (International Taxation) v. Asia Pacific Performance SICAV [2015] 55 taxmann.com 333 (Mum) wherein it Performance SICAV [2015] 55 taxmann.com 333 (Mum) wherein it Performance SICAV [2015] 55 taxmann.com 333 (Mum) wherein it is held that loss on transaction (of transfer) of long term capital is held that loss on transaction (of transfer) of long term capital is held that loss on transaction (of transfer) of long term capital assets specified u/s 10(38) on assets specified u/s 10(38) on which securities transaction tax is which securities transaction tax is paid shall be adjusted against adjusted against capital gain on which security capital gain on which security transaction is paid. In view of the decisions relied upon the Ld. DR transaction is paid. In view of the decisions relied upon the Ld. DR transaction is paid. In view of the decisions relied upon the Ld. DR submitted that before giving in effect to the provisions of relevant submitted that before giving in effect to the provisions of relevant submitted that before giving in effect to the provisions of relevant DTAA as per section DTAA as per section 90(2) of the Act, the taxable income of any the taxable income of any assessee has to be calculated as per various provisions of the assessee has to be calculated as per various provisions of the assessee has to be calculated as per various provisions of the Income-tax Act including the provisions related to carry forward tax Act including the provisions related to carry forward tax Act including the provisions related to carry forward and set off of losses. As per sub and set off of losses. As per sub-clause (a) & (b) of section 74(1) of clause (a) & (b) of section 74(1) of the Act, brought forward losses under the head ‘capital gain’ have to ght forward losses under the head ‘capital gain’ have to ght forward losses under the head ‘capital gain’ have to be set off against the income if any, under the head ‘capital gains’ be set off against the income if any, under the head ‘capital gains’ be set off against the income if any, under the head ‘capital gains’ assessable for the current year against the brought forward losses assessable for the current year against the brought forward losses assessable for the current year against the brought forward losses on account of capital gains. on account of capital gains.

“13. First of all, it is well settled principle that the tax treaties 13. First of all, it is well settled principle that the tax treaties 13. First of all, it is well settled principle that the tax treaties allocate taxing rights to the treaty partner in the following three allocate taxing rights to the treaty partner in the following three allocate taxing rights to the treaty partner in the following three manners:- (a) Rights are allocated (only) to the (a) Rights are allocated (only) to the source country in respect of source country in respect of certain income (e.g. income from immovable property is taxed in certain income (e.g. income from immovable property is taxed in certain income (e.g. income from immovable property is taxed in the country where the property is located. In this case the country where the property is located. In this case the computation of computation of income in the country of residence is of no income in the country of residence is of no consequence as the taxing consequence as the taxing rights are given s rights are given solely to the country of source. The country of source. The country of residence gives up the right to tax the residence gives up the right to tax the income or alternatively gives income or alternatively gives full credit of the tax paid in the full credit of the tax paid in the country of source. (b) Income is taxed in the country of source and also the country (b) Income is taxed in the country of source and also the country (b) Income is taxed in the country of source and also the country of residence but as residence but as the income is taxed in the country of residence, the residence, the country of source limits its right to tax the income. country of source limits its right to tax the income. In this case, the In this case, the computation income is also provided in the computation income is also provided in the treaty (e.g. Royalties/FTS treaty (e.g. Royalties/FTS are taxed on gross basis in the country are taxed on gross basis in the country of source but at a lower rate). ower rate). (c) Income is taxed only in the country of the taxpayer's residence. (c) Income is taxed only in the country of the taxpayer's residence. (c) Income is taxed only in the country of the taxpayer's residence. In this case, the country of source gives up its taxing rights of this case, the country of source gives up its taxing rights of this case, the country of source gives up its taxing rights of such income entirely and therefore the computation of income in income entirely and therefore the computation of income in income entirely and therefore the computation of income in the country of source is immaterial, [e.g. Bu country of source is immaterial, [e.g. Business income in the siness income in the absence of the Permanent Establishment (PE) when a foreign of the Permanent Establishment (PE) when a foreign enterprise does enterprise does not have a PE in India, there is no computation not have a PE in India, there is no computation done when the done when the income is reported in India]. income is reported in India].” 6.1 Further, the Co Further, the Co-ordinate Bench of the Tribunal in the case of ordinate Bench of the Tribunal in the case of Credit Suisse (Singapore) Co. (Mauritius) Ltd. (supra) upheld the redit Suisse (Singapore) Co. (Mauritius) Ltd. (supra) upheld the redit Suisse (Singapore) Co. (Mauritius) Ltd. (supra) upheld the theory of the segregation of capital gain for drawing DTAA to the theory of the segregation of capital gain for drawing DTAA to the theory of the segregation of capital gain for drawing DTAA to the extent of more beneficial to the assessee. The relevant finding of the extent of more beneficial to the assessee. The relevant finding of the extent of more beneficial to the assessee. The relevant finding of the Tribunal is reproduced as under: Tribunal is reproduced as under:

“8. In the case of Fl 8. In the case of Flagship Indian Investment Co (Mauritius) agship Indian Investment Co (Mauritius) Ltd.(supra), the assessee had claimed benefit of Article Ltd.(supra), the assessee had claimed benefit of Article -13 of the 13 of the DTAA in respect of DTAA in respect of 'Capital Gains' and had sought to carry forward 'Capital Gains' and had sought to carry forward capital losses of the earlier years as the same could not be set off capital losses of the earlier years as the same could not be set off capital losses of the earlier years as the same could not be set off against capital gains for the relevant assessment year. The tal gains for the relevant assessment year. The tal gains for the relevant assessment year. The Assessing Officer and CIT(A) rejected assessee's claim of carry Assessing Officer and CIT(A) rejected assessee's claim of carry Assessing Officer and CIT(A) rejected assessee's claim of carry forward of capital losses on the pretext that since the assessee had forward of capital losses on the pretext that since the assessee had forward of capital losses on the pretext that since the assessee had claimed benefit of exemption under Article 13 of the DTAA on capital claimed benefit of exemption under Article 13 of the DTAA on capital claimed benefit of exemption under Article 13 of the DTAA on capital gains, capital losses are also exempt. When the issue reached before capital losses are also exempt. When the issue reached before capital losses are also exempt. When the issue reached before the Tribunal, the Coordinate Bench placing reliance on the decision the Tribunal, the Coordinate Bench placing reliance on the decision the Tribunal, the Coordinate Bench placing reliance on the decision in the case of CIT vs. in the case of CIT vs. Western India Oil Distributing Co. Ltd., 249 ITR Western India Oil Distributing Co. Ltd., 249 ITR 517 (SC) and CIT vs. Manmohan Das 59 ITR 699(SC) and 517 (SC) and CIT vs. Manmohan Das 59 ITR 699(SC) and also after also after considering CBDT Circular No.22 of 1944 dated 29/07/1944 held considering CBDT Circular No.22 of 1944 dated 29/07/1944 held considering CBDT Circular No.22 of 1944 dated 29/07/1944 held that the assessee is justified in claiming carry forward of brought that the assessee is justified in claiming carry forward of brought that the assessee is justified in claiming carry forward of brought forward losses of the earlier years to the subsequent years and at forward losses of the earlier years to the subsequent years and at forward losses of the earlier years to the subsequent years and at the same time upheld assessee's claim of capital the same time upheld assessee's claim of capital gains as exempt gains as exempt under the provisions of Article under the provisions of Article -13 of the DTAA. Thus, the Tribunal 13 of the DTAA. Thus, the Tribunal accepted the theory of segregation of capital gains and capital losses accepted the theory of segregation of capital gains and capital losses accepted the theory of segregation of capital gains and capital losses for drawing benefits of DTAA/the for drawing benefits of DTAA/the Act to the extent they are more Act to the extent they are more beneficial to the assessee. beneficial to the assessee.

of the present assessee befor of the present assessee before us, as the short term and long e us, as the short term and long term capital gains earned by the assessee from transfer of term capital gains earned by the assessee from transfer of term capital gains earned by the assessee from transfer of securities during the year in question are admittedly exempt securities during the year in question are admittedly exempt securities during the year in question are admittedly exempt from tax under Article 13 of the India from tax under Article 13 of the India-Mauritius tax treaty, Mauritius tax treaty, therefore, the brought forward STCL of the therefore, the brought forward STCL of the previous years previous years was rightly carried fonvard by the assessee to the was rightly carried fonvard by the assessee to the was rightly carried fonvard by the assessee to the subsequent years........ subsequent years........ The Tribunal further held: The Tribunal further held: ............ Now coming to the claim of the revenue that as Sec. ............ Now coming to the claim of the revenue that as Sec. ............ Now coming to the claim of the revenue that as Sec. 45 of the Act, by virtue of India 45 of the Act, by virtue of India-Mauritius tax treaty was Mauritius tax treaty was rendered unwo rendered unworkable in respect of "capital gains" derived by rkable in respect of "capital gains" derived by the assessee from transfer of securities in India, therefore, the assessee from transfer of securities in India, therefore, the assessee from transfer of securities in India, therefore, the "capital losses" would also not form part of the assessee's the "capital losses" would also not form part of the assessee's the "capital losses" would also not form part of the assessee's "total income", and thus, could not be computed under the "total income", and thus, could not be computed under the "total income", and thus, could not be computed under the Act. we are afraid does Act. we are afraid does not find favour with us. Apropos the not find favour with us. Apropos the aforesaid observation of the A.O, we are of the considered aforesaid observation of the A.O, we are of the considered aforesaid observation of the A.O, we are of the considered view that the same had been arrived at by loosing sight of view that the same had been arrived at by loosing sight of view that the same had been arrived at by loosing sight of the fact that the "capital losses" in question had been brought the fact that the "capital losses" in question had been brought the fact that the "capital losses" in question had been brought forward from the earlier years and ha forward from the earlier years and had been determined and d been determined and allowed to be carried forward by the A. while framing the allowed to be carried forward by the A. while framing the allowed to be carried forward by the A. while framing the assessment for A.Y 2012 assessment for A.Y 2012-13, vide his order passed u/s 13, vide his order passed u/s 143(3), date 19 143(3), date 19-3-2015 and had not arisen during the year 2015 and had not arisen during the year under consideration i.e A.Y 2013 under consideration i.e A.Y 2013-14. Accordingly, the claim of 14. Accordingly, the claim of the A.O that the "capital losses" b/forward from the earlier he A.O that the "capital losses" b/forward from the earlier he A.O that the "capital losses" b/forward from the earlier years, pertaining to a source of income that was exempt from years, pertaining to a source of income that was exempt from years, pertaining to a source of income that was exempt from tax was thus not to be carried forward to the subsequent tax was thus not to be carried forward to the subsequent tax was thus not to be carried forward to the subsequent years, being devoid of any merit, is thus rejected. At this years, being devoid of any merit, is thus rejected. At this years, being devoid of any merit, is thus rejected. At this stage, we may here stage, we may herein observe that it is for the assessee to in observe that it is for the assessee to examine whether or not in the light of the applicable legal examine whether or not in the light of the applicable legal examine whether or not in the light of the applicable legal provisions and the precise factual position the provisions of provisions and the precise factual position the provisions of provisions and the precise factual position the provisions of the IT Act are beneficial to him or that of the applicable DTAA. the IT Act are beneficial to him or that of the applicable DTAA. the IT Act are beneficial to him or that of the applicable DTAA. In any case, the tax treaty In any case, the tax treaty cannot be thrust upon an cannot be thrust upon an assesses. In case the assessee during one year does not opt assesses. In case the assessee during one year does not opt assesses. In case the assessee during one year does not opt for the tax for the tax treaty, it would not be precluded from availing the treaty, it would not be precluded from availing the benefits of the said treaty in the subsequent years. Our benefits of the said treaty in the subsequent years. Our benefits of the said treaty in the subsequent years. Our aforesaid view is fortified by the order of the I aforesaid view is fortified by the order of the ITAT, Pune in TAT, Pune in Palm Computer Systems Ltd. (supra). We thus in terms of our Palm Computer Systems Ltd. (supra). We thus in terms of our Palm Computer Systems Ltd. (supra). We thus in terms of our aforesaid observations, not being able to persuade ourselves aforesaid observations, not being able to persuade ourselves aforesaid observations, not being able to persuade ourselves to subscribe to the view taken by the A.O/DRP, who as to subscribe to the view taken by the A.O/DRP, who as to subscribe to the view taken by the A.O/DRP, who as noticed by us hereinabove had sought adjustment of the noticed by us hereinabove had sought adjustment of the noticed by us hereinabove had sought adjustment of the b/forward STC b/forward STCL against the exempt short term and long term L against the exempt short term and long term capital gains earned by the assessee during the year in capital gains earned by the assessee during the year in capital gains earned by the assessee during the year in question, thus 'set aside' the order of the A.O in context of the question, thus 'set aside' the order of the A.O in context of the question, thus 'set aside' the order of the A.O in context of the issue under consideration. Accordingly, we direct the A.O to issue under consideration. Accordingly, we direct the A.O to issue under consideration. Accordingly, we direct the A.O to allow carry forward of the allow carry forward of the b/forward STCL of Rs. b/forward STCL of Rs. 3926,36,70,910/ 3926,36,70,910/- to the subsequent years." From the reading of above decisions, it is evident that there is no From the reading of above decisions, it is evident that there is no From the reading of above decisions, it is evident that there is no impedement in segregating capital losses and capital gains from impedement in segregating capital losses and capital gains from impedement in segregating capital losses and capital gains from different source of income under the head 'capital gains' f different source of income under the head 'capital gains' f different source of income under the head 'capital gains' for the purpose of claiming the benefit of DTAA/ provisions of the Act as the purpose of claiming the benefit of DTAA/ provisions of the Act as the purpose of claiming the benefit of DTAA/ provisions of the Act as the case may be, whichever is more beneficial to the assessee in terms case may be, whichever is more beneficial to the assessee in terms case may be, whichever is more beneficial to the assessee in terms of section 90(2) of the Act. of section 90(2) of the Act.” 6.2 Further, the identical issue of carry forward of the brought the identical issue of carry forward of the brought the identical issue of carry forward of the brought forward capital loss has been adjudicated by the Tribunal in the oss has been adjudicated by the Tribunal in the oss has been adjudicated by the Tribunal in the case of Indium IV (Mauritius) Holding Ltd. (supra), wherein the case of Indium IV (Mauritius) Holding Ltd. (supra) case of Indium IV (Mauritius) Holding Ltd. (supra) Tribunal held that income arising from the separate stream has to Tribunal held that income arising from the separate stream has to Tribunal held that income arising from the separate stream has to be treated separately and therefore, different treatment could be be treated separately and therefore, different treatment could be be treated separately and therefore, different treatment could be sought by the assessee for the long term capital gain arising in the e assessee for the long term capital gain arising in the e assessee for the long term capital gain arising in the year under consideration year under consideration and short term capital loss which has short term capital loss which has been brought forward from the earlier years. The relevant finding of been brought forward from the earlier years. The relevant finding of been brought forward from the earlier years. The relevant finding of the Tribunal is reproduced as under: the Tribunal is reproduced as under:

“22. Therefore, it is clear 22. Therefore, it is clear that source of income has a direct nexus that source of income has a direct nexus with the stream out of which the income springs to the assessee. The with the stream out of which the income springs to the assessee. The with the stream out of which the income springs to the assessee. The heads of income are provided to aggregate similar incomes derived heads of income are provided to aggregate similar incomes derived heads of income are provided to aggregate similar incomes derived from different sources for deduction and taxation purposes. In the from different sources for deduction and taxation purposes. In the from different sources for deduction and taxation purposes. In the head of income "Capital Gains", the short e "Capital Gains", the short-term and long-term assets term assets are different sources of income, but each transaction constituting the are different sources of income, but each transaction constituting the are different sources of income, but each transaction constituting the short- term and long term and long-term assets are different sources of income. term assets are different sources of income. Accordingly, gains/losses arising from different transactions ar Accordingly, gains/losses arising from different transactions ar Accordingly, gains/losses arising from different transactions are distinct transactions and a separate source of income; accordingly, distinct transactions and a separate source of income; accordingly, distinct transactions and a separate source of income; accordingly, STCG/STCL and LTCG/LTCL are distinct and separate streams of STCG/STCL and LTCG/LTCL are distinct and separate streams of STCG/STCL and LTCG/LTCL are distinct and separate streams of income arising to an assessee. Section 90(2) of the Act provides the income arising to an assessee. Section 90(2) of the Act provides the income arising to an assessee. Section 90(2) of the Act provides the provisions of the Act or the provisions of the Treaty, w provisions of the Act or the provisions of the Treaty, whichever are hichever are beneficial, shall apply to the assessee. As held by the Bangalore beneficial, shall apply to the assessee. As held by the Bangalore beneficial, shall apply to the assessee. As held by the Bangalore ITAT and affirmed by the Hon'ble Karnataka High Court in case of ITAT and affirmed by the Hon'ble Karnataka High Court in case of ITAT and affirmed by the Hon'ble Karnataka High Court in case of IBM World Trade Corpn. (supra), the provisions of section 90(2) of the IBM World Trade Corpn. (supra), the provisions of section 90(2) of the IBM World Trade Corpn. (supra), the provisions of section 90(2) of the Act will apply to each stream of income a Act will apply to each stream of income and not the head of income. nd not the head of income. Respectfully, following the decisions in case of IBM World Trade Respectfully, following the decisions in case of IBM World Trade Respectfully, following the decisions in case of IBM World Trade Corpn. (supra), Dimension Data Asia Pacific Pte. Ltd. (supra) and Corpn. (supra), Dimension Data Asia Pacific Pte. Ltd. (supra) and Corpn. (supra), Dimension Data Asia Pacific Pte. Ltd. (supra) and Montgomery Emerging Markets Fund (supra), the Assessee has Montgomery Emerging Markets Fund (supra), the Assessee has Montgomery Emerging Markets Fund (supra), the Assessee has claimed beneficial provisions of the In claimed beneficial provisions of the India - Mauritius DTAA in respect Mauritius DTAA in respect of STCG and allowed to carry forward the LTCL as per section 74 of of STCG and allowed to carry forward the LTCL as per section 74 of of STCG and allowed to carry forward the LTCL as per section 74 of the Act.” we are of the opinion that the 6.3 In view of above discussion In view of above discussion, we are of the opinion that the assessee is eligible for choosing the beneficial provision of the India assessee is eligible for choosing the beneficial provision of the India assessee is eligible for choosing the beneficial provision of the India Mauritius DTAA as far as long term capital gain earned during the TAA as far as long term capital gain earned during the TAA as far as long term capital gain earned during the year under consideration. As far as short term capital loss brought year under consideration. As far as short term capital loss brought year under consideration. As far as short term capital loss brought forward is concerned the assessee is eligible for choosing the forward is concerned the assessee is eligible for choosing the forward is concerned the assessee is eligible for choosing the beneficial provisions provided under the domestic law and carry beneficial provisions provided under the domestic law and carry beneficial provisions provided under the domestic law and carry forward the same without setting off against the long term capital d the same without setting off against the long term capital d the same without setting off against the long term capital gain for subsequent years. The ground No. 5 of the appeal of the gain for subsequent years. The ground No. 5 of the appeal of the gain for subsequent years. The ground No. 5 of the appeal of the assessee is accordingly allowed. assessee is accordingly allowed.

6.4 Since, we have already allowed the ground No. 5 of the appeal Since, we have already allowed the ground No. 5 of the appeal Since, we have already allowed the ground No. 5 of the appeal of the assessee the ground No of the assessee the ground Nos. 1 to 4 of the appeal are merely . 1 to 4 of the appeal are merely rendered academic and therefore same are left open to be any rendered academic and therefore same are left open to be any rendered academic and therefore same are left open to be any appropriate stage if so required. appropriate stage if so required.