ISHARES EMSC MAURITIUS CO ,MUMBAI vs. DEPUTY COMMISSIONER OF INCOME TAX (INTERNATIONAL TAXATION )-2(2)(2), MUMBAI

The learned assessing officer noted that assessee had set off the losses of no taxable gains which is chargeable to tax at the rate of 15% against the higher taxable gains which is chargeable to tax at 30% even though the assessee is having gains from the lower taxable gains. Considering the facts the assessee was issued a notice as to why the set off of lower tax gain should not be denied with higher taxable gains as the income tax rules provided separate columns for set of and The learned assessing officer did not agree with the same and 08. held that the claim of the assessee who is having capital gains which are taxable at the rate of 15% where assessee has opted to set-off of losses having lowered taxability with gains of higher taxability is not in order. Further the income tax rules which frames the columns and procedures for each income tax return has clearly defined separate columns for set of and carry forward of gains of having different tax. Therefore the claim of the assessee was rejected. Thus the assessing officer computed set-off of short-term capital loss is covered under section 111A of the income tax act against short-term capital gains chargeable to tax at the rate of 15% and further did not grant any set of on short-term capital gain which is chargeable to tax at the rate of 30% of ₹ 791,221/–. Thus the learned assessing officer assessed income of the assessee of ₹ 791,022 by taxing gross amount of short-term capital gains chargeable to tax at the rate of 30% without setting of the same against short-term capital loss of the current year attributable to transaction on which security transaction tax is paid and against brought forward short-term capital losses.

Accordingly draft assessment order was passed by the learned 09. assessing officer on 19/12/2022 determining the total income of the assessee at ₹ 1,85,28,212/–.

The assessee has stated that it is not pressing the ground of 011. challenging the assessment order being barred by limitation of time and other technical grounds. It only challenges that the learned that assessing officer has not allowed set-off of short- term capital loss whether covered by securities transaction tax or not against short-term capital gain which is not subject to security transaction tax and chargeable to tax as per provisions of section 115AD of the act at the rate of 30%. The claim of the assessee is that if assessee has earned short-term capital loss on which security transaction tax is paid, it shall be first set off against the net short-term capital gain without payment of securities transaction tax. If there is some balance left of The learned authorized representative also submitted that there 012. is an error in computing the income from capital gains. The correct income from capital gain is ₹ 859,680 in the computation seat however the learned assessing officer has computed it at ₹ 791,221/–. Assessee has filed an application under section 154 of the act which is still unattended and undisposed.

With respect to the levy of interest under section 234A of the 013. act it was submitted that the learned assessing officer has The learned departmental representative vehemently 014. supported the order of the learned assessing officer in stating that the income tax returns are framed as per the income tax act which does not allow the claim made by the assessee and therefore the lower authorities are correct in holding that it is not a similar competition because the tax rate in the short-term capital gain on by the assessee and the short-term capital loss account by the assessee are different.

The only dispute between the assessee and revenue is as 017. under:-

Sr No Assessee's version Revenue's Version 1 Short-term capital loss was Short-term capital loss set off against the net should be first set of short-term capital gain on against short-term capital 2 Balance short-term capital If short-term capital loss loss shall be first set of still remains it is to be against short-term capital carried forward and not gain on which securities that of against short-term transaction taxes paid capital gain on which no securities transaction tax is paid and consequently short-term capital gain on which no securities transaction tax is paid is to be taxed at the rate of 30% 3 If short-term capital gain One short-term capital on which securities gain on which no transaction tax is paid still securities transaction tax remains, such gains are set is paid is proposed to be of against available taxed at the rate of 30% brought forward short- the brought forward short- term capital loss term capital loss is allowed to be carried forward without utilizing such brought forward short-term capital loss was set off Thus it is clear that assessee has incurred short-term capital 019. losses of ₹ 49,454,381/– (which is subject to securities transaction tax) and also earned short-term capital gain of ₹ 791,221/– (which is not subject to securities transaction tax and taxable as per section 115AD at the rate of 30%). Thus, assessee submits that that short-term capital loss on which securities transaction taxes paid, can be set of against the It is not the case before us that either in the computation of 020. short-term capital gains or short-term capital loss there is any difference in the manner of computation. Therefore, short- term capital gain arising during the year and short-term capital loss arising during the year are computed in a similar manner as provided under section 48 to section 55 of the income tax act. Further as we have already stated that section 48 to section 55 of the income tax act does not lay down any rate of tax payable on short-term capital gain.

Therefore, we do not find any reason to deprive the assessee 021. from set-off of short-term capital losses suffered by the assessee for the same year against the short-term capital gains earned by the assessee. Such claim is in accordance with the provisions of section 70 (2) of the act.

We find that several judicial precedents relied upon by the 022. assessee also supports the case of the assessee. The honourable Calcutta High Court in Rungamatee Trexim ITA number 812 of 2008 dated 19 December 2008 held that there is no provision nor the act compels the assessee to 1st set of short-term capital gain which STT against short-term capital loss with STT and then allows set of against short-term capital gain without STT. Therefore, without multiplying judicial precedents, following the decision of the honourable Calcutta High Court, and several other judicial precedents of the Accordingly appeal of the assessee is partly allowed. 023.

Fact shows that assessee has earned the income under the head 025. capital gains for the current year of short-term capital loss of ₹ 1,189,960/– and has also earned short-term capital gain of ₹ 5,474,831/–. The short-term capital gain comprises of the short-term capital gain as computed under section 111A of the act of ₹ 1,738,051/– and the balance of ₹ 3,736,780 was other short-term capital gain. It has also short-term capital loss brought forward from earlier years of ₹ 56,764,317/–. The assessee has made into had adjustment of short-term capital loss with the short-term capital gain and also set of brought forward short-term capital losses to the extent of ₹ 4,284,871/–. The claim of the assessee is that assessee has The learned assessing officer held that assessee is not entitled 026. to claim set-off of brought forward short-term capital losses against the short-term capital gain of ₹ 3,736,780/– as it is subject to tax at the rate of 30% whereas the current year's short-term capital loss and brought forward short-term capital loss are chargeable to tax at the rate of 15%.

As we have held in ITA number 4564/M/2023 that provisions 027. of section 70 does not lay down the order of set of of short- term capital losses as well does not make any distinction about the rate of tax pertaining to such short-term capital losses, the issue in this appeal is squarely covered by the decision in ITA number 4564/M/2023. Accordingly ground number 4 – 8 of the appeal of the assessee is allowed and AO is directed to Ground number 1 is general in nature, ground number 2 and 3 028. are not pressed, ground number 14 is premature and therefore these grounds are dismissed.

Ground number 9 – 13 a read with respect to the 029. computational error, which becomes now merely academic in view of our decision in ground number 4 – 8 of the appeal of the assessee.

In the result ITA number 4568/M/2023 is partly allowed. 030.

The only issue in this appeal is that assessee has earned short- 032. term capital gain of ₹ 27,576,830/– which is not subject to STT and is chargeable to tax at the rate of 30% against which assessee is not allowed set-off of losses of short-term capital Both the parties confirmed that this issue is identical to ITA 033. number 4568/M/2023 wherein as per ground number 4 – 8 identical issue is involved. The parties also confirmed that their argument and submissions are also identical.

Ground number 1 is general, 2 is not pressed, 3 is also not 035. pressed, ground number 15 is consequential and ground number 16 is premature and therefore all these grounds are dismissed.

Ground number 14 of the appeal is against the levy of interest 036. under section 234A of the act. The claim of the assessee is that the due date for filing of the return of income for that year was 15/3/2022 and assessee has filed its return of income on 11/3/2022 and therefore there cannot be any reason to charge interest under section 234A of the act. The learned assessing Ground number 9 – 13 are the errors in the computation sheet, 037. which becomes redundant in view of our decision in ground number 4 – 8 of the appeal and therefore same are dismissed.

The computation of total income shows that assessee has 040. earned short-term capital gain under section 11A of the act of ₹ 66,046,350 which is chargeable to tax at the rate of 15%. Assessee has also short-term capital gain which is chargeable to tax at the rate of 30% of ₹ 3,405,574/–. Thus the assessee has earned total short-term capital gain of ₹ 69,451,924/–. The The claim of the learned assessing officer is that assessee 041. should pay tax on short-term capital gain of ₹ 3,405,574 at the rate of 30% and on the balance short-term capital gain of ₹ 36,203,796/- [ Rs 66046350/- (-) 29842554/- ] at the rate of 15%.

The learned assessing officer is of the view that on the capital 042. gain of ₹ 3,405,574/– assessee should pay tax at the rate of 30% and cannot be set off against the current short-term capital losses as well as brought forward short-term capital losses because they fall into 15% tax bracket. The action of the learned assessing officer is upheld by the learned dispute resolution panel.

In ITA number 4567/M/2023 and 4568/M/2023 four 043. assessment year 2021 – 22 relying upon the several judicial precedent we have held that there is no order of precedence of set-off of short-term capital losses qualified by the tax rate. Therefore, we direct the learned assessing officer to grant set- off of capital gain of ₹ 3,405,574 and by the assessee against the short-term capital loss on by the assessee during the year irrespective of its tax rate. This is raised according to ground number 3 – 6 of the appeal. Therefore, same are allowed.

In the result ITA number 4569/M/2023 is partly allowed. 045.

The fact shows that during the year the assessee has on short- 047. term capital gain under section 111A of the act of ₹ 8,771,564/– and other short-term capital gain of ₹ 14,499,155/– totaling to ₹ 23,270,719/–. The assessee has also short-term capital loss for the current year of ₹ 13,466,801/– therefore the net short-term capital gain earned by the assessee for the year was ₹ 9,803,918/–. The assessee has brought forward short-term capital loss of ₹ 287,302,516/– out of The learned assessing officer held that short-term capital gain 048. earned by the assessee of ₹ 1,44,99,155/– is subject to tax and the rate of 30% and such short-term capital gain cannot be adjusted against the current short-term capital loss of brought forward short-term capital loss of the assessee. This is confirmed by the learned dispute resolution panel also.

Therefore the only grievance of the assessee is that short-term 049. capital gain of rupees one core 44,99,155 which is not subject to securities transaction tax and is chargeable to tax at the rate of 30% should be set off against the short-term capital loss on by the assessee during the year which is subject to securities transaction tax and further against brought forward short-term capital loss.

Both the parties confirmed that this is identical to the appeal 050. in ITA number 4567/4568/4569/M/2023 dealt with in this order. Their arguments are also similar.

We have carefully considered the rival contention and perused 051. the orders of the learned AO as well as the direction of the learned dispute resolution panel. We find that the only issue involved in this appeal is whether the short-term capital gain earned by the assessee during the year can be set off against the other short-term capital loss for the current year as well as

Ground number 16 is with respect to the levy of interest under 053. section 234A of the act, assessee claims that the due date for filing of return of income is 15/3/2022 and assessee has filed its return of income on 12/3/2022/– and therefore the interest under section 234A cannot be charged. The learned assessing officer is directed to verify and decide the issue in accordance with the law.

In the result appeal of the assessee is partly allowed. 054.

Order pronounced in the open court on 31.05.2024.