DDIT(iT) 1(2), MUMBAI V. DWS INDIA EQUITY LTD, MUMBAI

ITA 5055/MUM/2010

• Counselvise Citation: 505519914 RSA 2010
• Duration Of Justice: 1 year(s) 9 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-04-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 18-01-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 17-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RUPINDER BRAR
• Assessee Lawyers: M P LOHIA
• Section: 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D, MUMBAI BEFORE SHRI B.R. MITTAL, J.M. AND SHRI RAJENDRA SI NGH, A.M. ITA NO. : 5055/MUM/2010 ASSESSMENT YEAR : 2007-08 DY. DIT (IT)-1(2) ROOM NO.119, SCINDIA HOUSE 1 ST FLOOR, BALLARD ESTATE N.M. ROAD MUMBAI-400 038. M/S. DWS INDIA EQUITY FUND C/O., S.R. BATLIBOI AND CO. 6 TH EXPRESS TOWERS, NARIMAN POINT, MUMBAI-400 021. PAN NO: AAATD 7625 E (APPELLANT) VS. (RESPONDENT) APPELLANT BY : MS. RUPINDER BRAR RESPONDENT BY : SHRI M.P. LOHIA DATE OF HEARING : 28.3.2012 DATE OF PRONOUNCEMENT : 11.4.2012 O R D E R PER RAJENDRA SINGH, (AM): THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDE R DATED 5.3.2010 OF ASSESSMENT YEAR 2007-08. THE ONLY DISPUTE RAISED IN THIS APPEAL IS REGARDING SET OFF OF SHORT TERM CAPITAL LOSS FR OM TRANSACTION ON WHICH SECURITY TRANSACTION TAX (STT) HAD BEEN PAID A GAINST SHORT TERM CAPITAL GAIN ARISING FROM NON STT TRANSACTIONS. 2. THE AO NOTED THAT THE ASSESSEE WHO IS A FOREIGN INSTI TUTIONAL INVESTOR (FII) HAD DECLARED SHORT TERM CAPITAL GAIN OF RS.40,25,93,717/- FROM OFF MARKET TRANSACTIONS IN SHARES ON WHICH NO ITA NO. 5055/M/10 A.Y.07-08 2 SECURITIES TRANSACTION TAX (STT) WAS REQUIRED TO BE PAI D. SUCH SHORT TERM CAPITAL GAIN WAS LIABLE FOR TAX @ 30% UNDER SECTI ON 115AD. HOWEVER, IN VIEW OF PROVISO TO SECTION 115AD SHORT TERM CAPITAL GAIN ARISING FROM SHARE TRANSACTIONS, THROUGH STOCK EXCHANGE ON WHICH STT WAS PAYABLE IS LIABLE FOR TAX @ 10%. THE ASSESSEE INCURRE D SHORT TERM CAPITAL LOSS OF RS.12,64,51,006/- FROM TRANSACTION, ON WH ICH STT WAS PAYABLE. THE ASSESSEE HAD ALSO INCURRED LOSS OF RS.17,55,3 35/- FROM NON STT TRANSACTIONS. THE ASSESSEE HAD SET OFF SHORT TERM CA PITAL LOSS AGAINST SHORT TERM CAPITAL GAIN AND TAX WAS PAID ON NE T SHORT TERM CAPITAL GAIN. THE AO REFERRED TO PROVISIONS OF SECTION 70(2) REGARDING SET OFF OF SHORT TERM CAPITAL LOSSES IN WHICH IT WAS PROVID ED THAT LOSS HAD TO BE SET OFF AGAINST GAIN ARISING FROM SHARE TRA NSACTIONS UNDER SIMILAR COMPUTATION. THEREFORE, THE AO HELD THAT SHORT TERM CAPITAL LOSS FROM STT PAID TRANSACTIONS COULD NOT BE SET OFF AGAIN ST SHORT TERM CAPITAL GAIN FROM NON STT TRANSACTIONS. HE, THEREFORE, SET OFF ONLY LOSS OF RS.17,55,335/- AGAINST SHORT TERM CAPITAL GAIN OF RS.40,25,93,717/- AND TAX WAS LEVIED AT NET SHORT TERM CAPITAL GAIN OF R S.40,08,38,382/-. 3. THE ASSESSEE DISPUTED THE DECISION OF AO AND SUBMITTED B EFORE CIT(A) THAT THE SET OFF OF SHORT TERM CAPITAL LOSS AGAIN ST SHORT TERM CAPITAL GAIN UNDER SECTION 70(2) WAS WITHOUT ANY RESTRICT ION. IT WAS POINTED OUT THAT SECTION 70 GOVERNED SET OFF OF LOSS FR OM ONE SOURCE AGAINST INCOME FROM OTHER SOURCES UNDER THE SAME HEAD. IT WAS FURTHER SUBMITTED THAT THE SPECIAL BENCH OF THE TRIBUN AL IN THE CASE JCIT VS. MONTGOMERY EMERGING MARKET FUNDS (100 ITD 21 7) HAS HELD THAT EVERY TRANSACTION RELATING TO SALE OF ASSET UNDER T HE HEAD CAPITAL GAIN HAS TO BE TREATED AS SEPARATE SOURCE OF INCOME AND ASSESSEE CAN SET OFF LOSS FROM ONE SOURCE FROM INCOME AGAINST INCOME F ROM OTHER SOURCE IN THE MANNER IN WHICH IT IS BENEFICIAL TO IT. T HE ASSESSEE ALSO ITA NO. 5055/M/10 A.Y.07-08 3 REFERRED TO THE DECISION OF MUMBAI BENCH OF THE TRIBUN AL IN THE CASE OF FIRST STATE INVESTMENTS (HONG KONG) LTD. VS. ADIT (33 SO T 26) IN WHICH IT WAS HELD THAT IF HIGHER BENEFIT RESULTED FROM THE EXERCISE OF THE ABOVE OPTION IN A PARTICULAR WAY VIS A VIS LOWER BENEFIT RESULTING IN OTHER WAY THEN HIGHER BENEFIT AVAILABLE AS PER LAW SH OULD NOT BE DENIED TO THE ASSESSEE. CIT(A) WAS SATISFIED BY THE EXPLA NATION GIVEN. IT WAS OBSERVED BY HIM THAT AS HELD BY THE TRIBUNAL IN THE CASE OF FIRST STATE INVESTMENTS (HONG KONG) LTD. VS. ADIT(SUPRA), THE MATTER OF COMPUTATION OF INCOME IS A SUBJECT WHICH COMES ANTERIOR TO THE APPLICATION OF RATE OF TAX. THE PROVISIONS RELATING TO APPLICATION OF RATE OF TAX AS CONTAINED IN SECTION 111A TO 115AD COMES INTO FORCE ONLY AFTER COMPUTATION OF INCOME. CIT(A) ALSO REFERRED TO THE DECISION OF THE TRIBUNAL IN THE CASE OF FIDELITY INVESTMENT TRUST F IDELITY OVERSEAS FUND VS. ADIT (INTL. TAXN.) (2009 TIOL-595-ITAT- MUM ) IN WHICH THE TRIBUNAL PLACING RELIANCE ON THE DECISION IN THE CA SE OF FIRST STATE INVESTMENTS (HONG KONG) LTD. (SUPRA), HAD HELD THAT T HE ASSESSEE HAD THE OPTION TO SET OFF THE SHORT TERM CAPITAL LOSS AG AINST SHORT TERM CAPITAL GAIN AS PER PROVISIONS OF SECTION 70(3) R.W.S. 11 1A AND 115AD. CIT(A), THEREFORE, HELD THAT THE ASSESSEE WAS ENTITLED TO SET OFF SHORT TERM CAPITAL LOSS (STT PAID) AGAINST SHORT TERM CAPITAL GAIN (NON STT PAID). AGGRIEVED BY THE SAID DECISION, REVENUE IS IN AP PEAL BEFORE THE TRIBUNAL. 4. BEFORE US, THE LD. AR SUBMITTED THAT THE ISSUE WAS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL I N THE CASE OF FIRST STATE INVESTMENTS (HONG KONG) LTD. VS. ADIT AND O THER TRIBUNAL DECISIONS RELIED UPON BY CIT(A). THE LD. DR ON THE OT HER HAND PLACED RELIANCE ON THE ORDER OF AO. ITA NO. 5055/M/10 A.Y.07-08 4 5. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING SET OFF O F SHORT TERM CAPITAL LOSS ARISING FROM STT PAID SHARE TRANSACTIONS AGAI NST SHORT TERM CAPITAL GAIN ARISING FROM NON STT TRANSACTIONS. THE AS SESSEE HAD EARNED SHORT TERM CAPITAL GAIN OF RS.40,25,93,717/- FR OM NON STT TRANSACTIONS AND IT HAD INCURRED SHORT TERM CAPITAL LOSS O F RS.1,26,45,10,006/- FROM STT PAID TRANSACTIONS. THE ISS UE IS WHETHER SHORT TERM CAPITAL LOSS CAN BE SET OFF AGAINST SHORT TERM CAPITAL GAIN MENTIONED ABOVE. UNDER THE PROVISIONS OF SECTION 70(2 ), SHORT TERM CAPITAL LOSS ARISING FROM ANY ASSET CAN BE SET OFF AGAINST SH ORT TERM CAPITAL GAIN ARISING FROM ANY OTHER ASSET UNDER A SIMIL AR COMPUTATION MADE. THE AO HELD THAT SINCE GAIN WAS FROM SHARES ON WHI CH NO STT WAS PAID AND LOSS FROM STT PAID TRANSACTIONS, THESE FELL IN DIFFERENT CATEGORIES AND COULD NOT BE SET OFF AGAINST EACH OTHER. W E FIND THAT THIS ASPECT HAS ALREADY BEEN EXAMINED BY THE MUMBAI BE NCH OF THE TRIBUNAL IN THE CASE OF FIRST STATE INVESTMENTS (HONG KON G) LTD. VS. ADIT(SUPRA), IN WHICH IT HAS BEEN HELD THAT THE PHRASE UNDER SIMILAR COMPUTATION MADE REFERS TO COMPUTATION OF INCOME, THE PROVISIONS FOR WHICH ARE CONTAINED UNDER SECTIONS 45 TO 55A OF THE ACT. THE TRIBUNAL ALSO HELD THAT THE MATTER OF COMPUTATION OF INCOME WAS A SUBJECT WHICH CAME ANTERIOR TO THE APPLICATION OF RATE OF TAX WHICH ARE CONTAINED IN SECTION 110 TO 115BBC. THEREFORE, MERELY BECAUSE THE TWO SET OF TRANSACTIONS ARE LIABLE FOR DIFFERENT RATE OF TAX, IT CAN NOT BE SAID THAT INCOME FROM THESE TRANSACTIONS DOES NOT ARISE FR OM SIMILAR COMPUTATION MADE AS COMPUTATION IN BOTH THE CASES HAS TO B E MADE IN SIMILAR MANNER UNDER THE SAME PROVISIONS. THE TRIBUNAL THEREFORE, HELD THAT SHORT TERM CAPITAL LOSS ARISING FROM STT PAID TRANSACTIONS CAN BE SET OFF AGAINST SHORT TERM CAPITAL GAIN ARISING FROM NON STT TRANSACTIONS. THE CASE OF THE ASSESSEE IS IDENTICAL. THEREFOR E, ITA NO. 5055/M/10 A.Y.07-08 5 RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL, WE SEE NO INFIRMITY IN THE ORDER OF CIT(A) AND THE SAME IS, THEREFORE, UP HELD. 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11.4.2012. SD/- SD/- ( B.R. MITTAL ) JUDICIAL MEMBER (RAJENDRA SINGH) ACCOUNTANT MEMBER MUMBAI, DATED: 11.4.2012. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.