ISHARES MSCI ALL COUNTRY ASIA EX JAPAN ETF (AS A SUCCESSOR TO ISHARES ALL COUNTRY ASIA EX JAPAN MAURITIUS CO (LIQUIDATED)),MUMBAI vs. DCIT (INTERNATIONAL TAXATION)-2(2)(2), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL “I” BENCH, MUMBAI BEFORE SMT KAVITHA RAJAGOPAL, JM & MS PADMAVATHY S, AM I.T.A. No.4593/Mum/2023 (Assessment Year: 2021-22) ISHARES INDIA SC DCIT (International Tax)- 2(2)(2), 1606, 16th Floor, MAURITIUS COMPANY, C/o Ernest & Young LLP, 17th Floor, Air India Building, Vs. The Ruby, 29, Senapti Bapat Marg, Nariman Point, Dadar (West) Mumbai-400028. Mumbai-400021. PAN : AACCI7987F Appellant) : Respondent)

I.T.A. No.4595/Mum/2023 (Assessment Year: 2021-22) ISHARES INDIA INDEX DCIT (International Tax)- 2(2)(2), 1606, 16th Floor, MAURITIUS COMPANY, C/o Ernest & Young LLP, 17th Floor, Air India Building, Vs. The Ruby, 29, Senapti Bapat Marg, Nariman Point, Dadar (West) Mumbai-400028. Mumbai-400021. PAN : AACCI7988L Appellant) : Respondent)

I.T.A. No.4596/Mum/2023 (Assessment Year: 2021-22) iShares MSCI All Country Asia DCIT (International Tax)- 2(2)(2), 1606, 16th Floor, Ex Japan ETF [ as a successor to ISHARES ALL COUNTRY Air India Building, Vs. ASIA EX JAPAN MAURITIUS Nariman Point, Mumbai-400021. CO. (liquidated)] C/o Ernest & Young LLP, 17th

2 ITA Nos. 4593, 4595, 4596, 4597, 4598, 4600, 4601 & 4602/Mum/2023 ISHARES INDIA SC MAURITIUS COMPANY & ORS. Floor, The Ruby, 29, Senapti Bapat Marg, Dadar (West) Mumbai-400028. PAN : AACCI5903R Appellant) : Respondent) I.T.A. No.4597/Mum/2023 (Assessment Year: 2021-22) iShares MSCI EMERGING DCIT (International Tax)- 2(2)(2), 1606, 16th Floor, MARKETS ASIA ETF [ As a successor to ISHARES EM ASIA Air India Building, MAURITIUS CO. ( liquidated)] Nariman Point, IMI UCITS ETF, C/o Ernest & Vs. Mumbai-400021. Young LLP, 17th Floor, The Ruby, 29, Senapti Bapat Marg, Dadar (West) Mumbai-400028. PAN : AACCI7990N Appellant) : Respondent) I.T.A. No.4598/Mum/2023 (Assessment Year: 2021-22) ISHARES MSCI EMERGING DCIT (International Tax)- 2(2)(2), 1606, 16th Floor, MARKETS ETF [as a successor Air India Building, to ISHARES EMERGING MARKETS INDEX Nariman Point, MAURITIUS CO. (liquidated)] Mumbai-400021. Vs. ASIA UCITS ETF, C/o Ernest & Young LLP, 17th Floor, The Ruby, 29, Senapti Bapat Marg, Dadar (West) Mumbai-400028. PAN : AACCI5901P Appellant) : Respondent)

3 ITA Nos. 4593, 4595, 4596, 4597, 4598, 4600, 4601 & 4602/Mum/2023 ISHARES INDIA SC MAURITIUS COMPANY & ORS. I.T.A. No.4600/Mum/2023 (Assessment Year: 2021-22) ISHARES EMERGING DCIT (International Tax)- 2(2)(2), 1606, 16th Floor, MARKETS MINIMUM VOLATILITY MAURITIUS Air India Building, CO., C/o Ernest & Young LLP, 17th Nariman Point, Vs. Floor, The Ruby, 29, Senapti Bapat Mumbai-400021. Marg, Dadar (West) Mumbai- 400028. PAN : AACCI6049Q Appellant) : Respondent) I.T.A. No.4601/Mum/2023 (Assessment Year: 2021-22) ISHARES CORE EMERGING DCIT (International Tax)- 2(2)(2), 1606, 16th Floor, MAURITIUS CO., C/o Ernest & Young LLP, 17th Floor, The Ruby, Air India Building, Vs. 29, Senapti Bapat Marg, Dadar Nariman Point, (West) Mumbai-400028. Mumbai-400021. PAN : AADCI1923N Appellant) : Respondent) I.T.A. No.4602/Mum/2023 (Assessment Year: 2021-22) ISHARES 50 ETF [ as a DCIT (International Tax)- 2(2)(2), 1606, 16th Floor, successor to ISHARES INDIA MAURITIUS CO.(liquidated), Air India Building, C/o Ernest & Young LLP, 17th Nariman Point, Vs. Floor, The Ruby, 29, Senapti Bapat Mumbai-400021. Marg, Dadar (West) Mumbai-400028. PAN : AABTI4909C Appellant) : Respondent)

4 ITA Nos. 4593, 4595, 4596, 4597, 4598, 4600, 4601 & 4602/Mum/2023 ISHARES INDIA SC MAURITIUS COMPANY & ORS. Appellant/Assessee by : Shri Pranay Gandhi, CA : Shri Anil Sant, Addl. CIT-DR Revenue/Respondent by : 28.05.2024 Date of Hearing Date of Pronouncement : 06.06.2024 O R D E R Per Bench: These appeals by the different assessees are against the common final orders of assessment passed under section 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 (the Act) by the Assistant Commissioner of Income Tax (International Tax) Circle-2(2)(2), Mumbai [for short 'the AO] all dated 14.10.2023 for the AY 2021- 22. The issues contended by the assessees in all these appeals are common and therefore these appeals were heard together and disposed of through this common order. The issues contended and the grounds raised by all the assessees are tabulated below –

5 ITA Nos. 4593, 4595, 4596, 4597, 4598, 4600, 4601 & 4602/Mum/2023 ISHARES INDIA SC MAURITIUS COMPANY & ORS.

Set off of current year Short Term Capital Loss

Particulars 15% 30% Total Short-term capital gains 34,87,68,174 62,83,312 35,50,51,487 Short-term capital loss (37,37,11,044)

6 ITA Nos. 4593, 4595, 4596, 4597, 4598, 4600, 4601 & 4602/Mum/2023 ISHARES INDIA SC MAURITIUS COMPANY & ORS. Short-term capital losses other than (62,83,312) those covered under section 111A of the Income Tax Act, 1961 Short-term capital losses covered (34,87,68,174) under section 111A of the Income Tax Act, 1961 Net Short-term capital gains Nil Nil (1,86,59,557)

Particulars 15% 30% Short-term capital gains 34,87,68,174 62,83,312 Short-term capital losses other than those covered Nil under section 111A of the Income Tax Act, 1961 Short-term capital losses covered under section (37,37,11,044) 111A of the Income Tax Act, 1961 Net Short-term capital gains (2,49,42,869) 62,83,312

7 ITA Nos. 4593, 4595, 4596, 4597, 4598, 4600, 4601 & 4602/Mum/2023 ISHARES INDIA SC MAURITIUS COMPANY & ORS. not mean that the income should be taxed at the same rates only are allowed to be set off. The ld. AR argued that the assessee has the prerogative to set off the loss and the gain in such a way within the framework of law to reduce the tax liability. The ld. AR placed reliance on the decision of the Hon'ble Calcutta High Court in the case of Rungamatee Trexim Pvt. Ltd. [2008] (ITA No. 812 of 2008 dated 19.12.2008) to submit that the similar issue has been considered by the Hon'ble High Court and the issue is decided in favour of the assessee. The ld. AR also drew our attention to the decision of the co-ordinate bench in the case of J.S. Capital LLC Vs. ACIT (Int. Taxation) (2024) 160 taxmann.com 286 where a similar view has been held by the co-ordinate bench. The ld. AR also submitted a case law compilation containing the various other decisions of the co-ordinate bench and also the decisions of Bangalore and Calcutta Benches of the Tribunal in which the issue is decided in favour of the assessee.

“In Ground Nos.5 and 6 the assessee has objected to the mode of set off adopted by the Assessing Officer in assessing income from short term capital cases. During the year under consideration the assessee earned short term capital gain of Rs.7,29,584/- in transaction in shares where security transaction tax was not

8 ITA Nos. 4593, 4595, 4596, 4597, 4598, 4600, 4601 & 4602/Mum/2023 ISHARES INDIA SC MAURITIUS COMPANY & ORS. paid and income was subject to tax at normal rate. The assessee also earned short term capital gain of Rs.2,27,564/- in transaction in shares where security transaction tax was paid and income was eligible for concessional rate of tax under section 111A. The assensee also suffered short term capital loss of Rs.7.17,660/- in transactions in shares involving payment of security transaction tax. In the impugned order the A.0. computed the capital gain in the following manner without discussing any reasons for adopting such mode of computation. Calculation of income/loss from capital gain Short term capital loss with STT (-) 7,17.660/- Short term capital gain with STT 2,27,564/- Net Short Term capital loss with STT (-) 4,90,096/- Short term capital gain without STT 7,29,584/- Net Short term capital gain 2,39,488/- Less Brokerage 5,914/- Taxable short term capital gain of normal rate 2,33,574/- Long term capital gain at 10% rate (as per computation) 1,49,431/- I have perused the assessment order and have considered submissions of the A/R. In the impugned order the A.O has not given any reasons for fleet sitting off short term capital gain with STT against short term capital STT and then allow ofset off of remaining loan of Rs.4,90,096/- against short term capital gain without STT. The mode ofset off adopted by the A.O. shown that be accepted in principle that short term capital loss with STT can be legally set off against short term capital gain without STT. According to the assessee, the chronology for the set off by the A.O. was contrary to chronology adopted by the assessee, only because the assessee's mode resulted in concessional rate of the tax being applied to higher amount of short term capital gain which resulted more tax benefit to an assessee. On perusal of the provision of section 70, I find that there is no prohibition nor the Act compels the assessee to first set off short term capital gain with STT against short term capital loss with STT and then allows set off against short term capital gain without STT. In absence of any specific mode of set off provided in the Act and in absence of any prohibition and in absence of any specific chronology for set off prescribed in the Act, the assessee wan entitled to exercise his option with regard to the chronology of set off which was most beneficial to the assessee. It is settled proposition of law that when a provision of the Act gives option to the assessee, such option should be exercised which will favour the assessee and not the revenue. The A/R for the assessee was

9 ITA Nos. 4593, 4595, 4596, 4597, 4598, 4600, 4601 & 4602/Mum/2023 ISHARES INDIA SC MAURITIUS COMPANY & ORS. well justified in relying on the decision of the Calcutta High Court and the Circular of the Board dated 7.7.1955 since the principles laid down therein appeared to be fully applicable.” The Commissioner of Income Tax (Appeals) therefore cane to the conclusion in favour of the assessee. He further came to the conclusion that the disallowance has been made on presumption. In these circumstances, the order passed by the Commissioner of Income Tax and subsequent thereto, the Commissioner of Income Tax (Appeals) had already considered the case of the department and upheld the order passed by it. We have carefully considered the said question and in our considered opinion, there i no illegality or irregularity in respect of the order so passed by the learned Tribunal. We, accordingly, find that there is no reason to interfere with the order so passed by the learned Tribunal and further the order so passed by the learned Tribunal does not suffer from any illegality or irregularity and we find that no substantial question of law is involved in this appeal. Hence, we dismiss the appeal.” 9. We further noticed that the co-ordinate bench in the case of J S Capital LLC (supra) has taken a similar view where it has been held that

"7. Heard both the sides and perused the material on record.During the year under consideration the assessee has claimed STCG on sale of derivatives taxable @ 30% and during the year under consideration the assessee has also claimed STCL taxable @15% and the same was set off against the STCG which was taxable @ 30% as referred above. In addition to the above the assessee has also claimed brought forward STCL taxable @ 15% to set off against the balance STCG earned on sale of derivatives. The AO after referring provisions of section 70(2) arrived at the conclusion that STCG on derivatives taxable at the rate of 30% and STCL taxable at the rate of 15% were not falling under the similar computation. Therefore the claim of set off was disallowed. The assessee claimed that mere difference in rate of taxation cannot be taken as the reason for disallowance of set off as both the STCG under the category of similar computation. In this regard, we have perused the various judicial pronouncements referred by the Ld. Counsel as mentioned above. We find that in the decision of GSB Capital Markets Ltd. (supra) the co-ordinate Bench of the Tribunal, Mumbai held that loss arisen from transfer of short term capital assets which are brought forward from earlier years can be set off against the capital gain assessable for subsequent assessment year in respect of any other capital asset which could be either LTCG or STCG.

10 ITA Nos. 4593, 4595, 4596, 4597, 4598, 4600, 4601 & 4602/Mum/2023 ISHARES INDIA SC MAURITIUS COMPANY & ORS. Further, we have perused the decision of ITAT, Mumbai in the case of Legg Mason Asia (Ex Japan) Analyst Fund (supra) wherein it is held that loss arisen on short term capital asset is to be set off against income arising from such assets for same year, irrespective of whether transactions are categorized as off market transactions or on market transactions. 8. We have also gone through the decision of ITAT, Mumbai in the case of VEMF-A, LP (supra) wherein on identical issue and similar fact the ITAT has decided the issue in favour of the assessee. The relevant extract of the decision is reproduced as under: "7. We have heard the rival submissions and perused the relevant material on record. We begin with the decisions cited before us. In First State Investments (Honkong) Ltd. (supra), the assessee earned STCG on sale of shares in the A.Y. 2005-06. It bifurcated such STCG into two periods de upto 30-9-2004 (in which tax was chargeable @ 30% and transactions were not chargeable to STT) and period post 30-9-2004 (in which case the reduced rate of 10% was applicable on STCG where transactions were chargeable to STT in view of section 115A). As against this, the assessee had also suffered STCL of Rs. 8.14 lacs upto 30-9-2004 and Rs. 169.23 lacs in post 30-9-2004 period. The assessee claimed that STCL in later period be allowed to be set off against STCG of former period to the extent of excess of STCG over STCL upto cut off date re. 30-9-2004. However, revenue authorities held that STCL suffered by the assessee in the period before cut off date should be set off against STCG of that period and remaining amount be taxed @30%. The Tribunal held that (1) in view of provision of section 70(2), the assessee had a choice in taking decision about setting off of STCL from one transaction against any other STCG, whether within or outside the cut off date re 30-9- 2004 and (i) the assessee was justified in setting off STCL of later period against STCG of former period to the extent of excess STCG over STCL upto cut off date de 30-9- 2004. The above order has been followed by the Co-ordinate Bench in Fidelity Investment Trust Fidelity Overseas Fund (supra) and DWS India Equity Ltd. (supra). The decision in DWS India Equity Ltd. has been followed in Capital International Emerging Markets Fund (supra). In Rungamatee Trexim (P) Ltd. (supra), Hon'ble Calcutta High Court held as under: "On perusal of the provision of section 70, I find that there is no prohibition nor the Act compels the assessee to first set off short term capital gain with

11 ITA Nos. 4593, 4595, 4596, 4597, 4598, 4600, 4601 & 4602/Mum/2023 ISHARES INDIA SC MAURITIUS COMPANY & ORS. STT against short term. capital loss with STT and then allows set off against short term capital gain without STT. In absence of any specific mode of set off provided in the Act and in absence of any prohibition and in absence of any specific chronology for set off prescribed in the Act, the assessee was entitled to exercise his option with regard to the chronology of set off which was most beneficial to the assessee. It is settled proposition of law that when a provision of the Act gives option to the assessee, such option should be exercised which will favour the assessee and not the revenue. 8. To sum up, under the provisions of section 70(2), STCL arising from any asset can be set off against STCG arising from any other asset under a similar computation made. Merely because the two set of transactions are liable for different rate of tax, it cannot be said that income from these transactions does not arise from similar computation made as computation in both the cases has to be made in similar manner under the same provisions. Therefore, STCL arising from STT paid transactions can be set off against STCG arising from non-STT transactions." 9. It is clearly held in the finding of the co-ordinate Bench of the Tribunal as referred above that under the provisions of section 70(2), STCL arising from any asset can be set off against STCG arising from any other asset under a similar computation made irrespective of different rate of tax. Therefore, the issue in appeal in the case of the assessee is squarely covered by the decision of the ITAT as referred above. Therefore following the decision of ITAT (supra), we allow the appeal of the assessee. 10. In the result, the appeal of the assessee is allowed.” 10. We also noticed that the similar view has been expressed in various other decisions of the co-ordinate bench, copies of which are submitted by the ld. AR in the legal Paper Book. The facts in assessee's case being similar, respectfully following the decision of the co-ordinate bench we hold that the AO is not correct in denying the set off of STCL against the STCG to the assessee for the reason that they are taxed at different rates. Accordingly the order of the AO is set-aside and the ground raised by the assessee in this regard is allowed.

12 ITA Nos. 4593, 4595, 4596, 4597, 4598, 4600, 4601 & 4602/Mum/2023 ISHARES INDIA SC MAURITIUS COMPANY & ORS. 11. The facts in other assessees' pertaining to this issue in ITA.No.4595, 4596, 4597, 4598, 4600, 4601 & 4602 /Mum/2023, are identical and therefore our decision in ITA.No.4593/Mum/2023 is mutatis mutandis applicable to these assessees' case also. According we hold that in ITA.No.4595, 4596, 4597, 4598, 4600, 4601 & 4602 /Mum/2023 also the AO is not correct in denying the set off of current year STCL against the STCG to the assessees and therefore the addition made in these cases are deleted.

Set off of brought forward Short Term Capital Loss

13 ITA Nos. 4593, 4595, 4596, 4597, 4598, 4600, 4601 & 4602/Mum/2023 ISHARES INDIA SC MAURITIUS COMPANY & ORS. while considering the brought forward loss the set off of STCL cannot be denied for the reason that the STCG is taxed at different rates. Therefore the principle laid down in our decision with regard to setoff of current year STCL should be applicable to brought forward STCL also. Accordingly we direct the AO to consider the brought forward loss claimed by the assessees in ITA.No.4595, 4596 & 4602/Mum/2023 and allow the setoff as per the directions given in this order.

Arithmetic errors in the computation sheet

14 ITA Nos. 4593, 4595, 4596, 4597, 4598, 4600, 4601 & 4602/Mum/2023 ISHARES INDIA SC MAURITIUS COMPANY & ORS. Levy of interest under section 234A

Levy of interest under section 234B and 234C & Initiation of penalty proceedings under section 270A of the Act

15 ITA Nos. 4593, 4595, 4596, 4597, 4598, 4600, 4601 & 4602/Mum/2023 ISHARES INDIA SC MAURITIUS COMPANY & ORS. 20. In the result, the appeals of the assessees in ITA.No.4593/Mum/2023, ITA.No.4595/Mum/2023, ITA.No.4596/Mum/2023, ITA.No.4597/Mum/2023, ITA.No.4598/Mum/2023, ITA.No.4600/Mum/2023, ITA.No.4601/Mum/2023, and ITA.No.4602/Mum/2023 are partly allowed.

Order pronounced in the open court on 06-06-2024.

Sd/- Sd/- (KAVITHA RAJAGOPAL) (PADMAVATHY S) Judicial Member Accountant Member *SK, Sr. PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. DR, ITAT, Mumbai 4. Guard File 5. CIT BY ORDER,

(Dy./Asstt. Registrar) ITAT, Mumbai