DCIT(IT)-2(1)(2), MUMBAI V. M/S. DAL CHI LIFE INSURANCE COMPANY LTD., MUMBAI

ITA 590/MUM/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 1303 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2015-2016
• Appeal Filed On: 04-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Tax effect; Set aside; Capital Gains
• Section: 192; 13

Judgement Text

M / S DAI CHI LIFE INSURANCE COMPANY LTD . ITA NO . 590 / MUM / 2019 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI D BENCH, MUMBAI [ CORAM : PRAMOD KUMAR VP AND SAKTIJIT DEY JM ] ITA NO . 590 / MUM / 2019 ASSESSMENT YEAR : 2015 - 16 DEPUTY COMMISSIONER OF INCOME TAX ( IT ) - 2 ( 1 )( 2 ) ............. APPELLANT MUMBAI VS M / S DAI CHI LIFE INSURANCE COMPANY LTD . ....... RESPONDENT C / O BSR & CO LLP LODHA EXCELUS, 1 ST FLOOR, APOLLO MILLS COMPOUND, N . M JOSHI MARG, MAHALAXMI, MUMBAI 400011 [ PAN : AACCT6402G ] APPEARANCES BY JOTHILAKSHMI FOR THE APPELLANT GIRISH DAVE FOR THE RESPONDENT DATES OF HEARING OF THE APPEAL : MARCH 3 RD , 2020 DATE OF PRONOUNCING THIS ORDER : MAY 27 TH , 2020 O R D E R PER PRAMOD KUMAR, VP : [ 1 ] BY WAY OF THIS APPEAL, THE ASSESSING OFFICER HAS CHALLENGED CORRECTNESS OF THE LEARNED CIT ( A ) S ORDER DATED 26 TH NOVEMBER 2018, IN THE MATTER OF ASSESSMENT UNDER SECTION 143 ( 3 ) OF THE INCOME TAX ACT, 19 61, FOR THE ASSESSMENT YEAR 2015 - 16 . M / S DAI CHI LIFE INSURANCE COMPANY LTD . ITA NO . 590 / MUM / 2019 PAGE 2 OF 5 [ 2 ] G RIEVANCES RAISED BY THE APPELLANT ARE AS FOLLOWS : - GROUNDS OF APPEAL TAX EFFECT RELATING TO EACH GROUND OF APPEAL 1 . WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD . CIT ( A ) HAS ERRED IN DELETING THE COMPUTATION FOLLOWED BY THE AO RS . 93,63,297 / - 2 . THE APPELLANT PRAYS THAT THE ORDER OF THE LD . CIT ( A ) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED . 3 . THE APPELLANT CRAVES LEAVE TO AMEND OR LATER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY . TOTAL TAX EFFECT RS . 93,63,297 / - [ 3 ] TO ADJUDICATE ON THIS APPEAL, ONLY A FEW MATERIAL FACTS NEED TO BE TAKEN NOTE OF . THE ASSESSEE IS A COMPANY INCORPORATED, AND FISCALLY DOMICILED, IN JAPAN, AND IT MAKES INVESTMENTS IN INDIAN CAPITAL MARKETS THROUGH PORTFOLIO INVESTMENT SCHEME . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS COMPUTED NET SHORT TERM CAPITAL GAINS ( STT ) AFTER SETTING OFF OF LOSES INCURRED IN EARLIER YEARS . T HE ASSESSING OFFICER NOTICED ASSESSEE S RELIANCE ON DECISIONS OF THIS TRIBUNAL BUT REQUESTED THE SAME ON THE GROUND THAT THESE DECISIONS WERE ON THE PROVISIONS OF SECTION 70 OF THE INCOME TAX ACT 1961 WHEREAS, IN THIS CASE, THE ISSUE IS REGARDING SET OFF OF EARLIER YEAR S LOSSES UNDER SECTION 74 OF THE INCOME TAX ACT . HE M / S DAI CHI LIFE INSURANCE COMPANY LTD . ITA NO . 590 / MUM / 2019 PAGE 3 OF 5 THUS PROCEEDED TO APPLY SECTION 70 ( 2 ) ON SHORT TERM CAPITAL GAIN ( NON STT ) AND THEN AGGREGATED WITH SHORT TERM CAPITAL GAIN ( STT PAID ) WITH SHORT TERM CAPITAL LOSS ( STT PAID ) BROUGHT TOWARD UNDER SECTION 74 . THE VARIATION IN APPROACH OF THE ASSESSING OFFICER IS CLEAR FROM THE COMPUTATIONS OF SHORT TERM CAPITAL GAIN BY THE ASSESSEE AND BY THE ASSESSING OFFICER, WHICH ARE REPRODUCED BELOW : - 7 . THE APPELLANT HAS COMPUTED THE SHORT TERM C APITAL GAINS IN THE FOLLOWING MANNER : PARTICULARS AMOUNT IN INR SHORT TERM CAPITAL GAINS ( NOT SUBJECT TO SECURITIES TRANSACTION TAX ( STT ) 12,99,20,542 LESS : SHORT TERM CAPITAL LOSS ( STT PAID ) ( 10,15,64,716 ) NET SHORT TERM CAPITAL GAINS ( NOT SUBJECT T O STT ) 2,83,55,826 ADD : SHORT TERM CAPITAL GAINS ( STT PAID ) 15,66,68,368 LESS : BROUGHT FORWARD SHORT TERM CAPITAL LOSSES ( STT PAID ) OF AY 2012 - 13 ( 2,40,11,628 ) LESS : BROUGHT FORWARD SHORT TERM CAPITAL LOSSES ( STT PAID ) OF AY 2014 - 15 ( 9,58,84,412 ) LESS : BROUGHT FORWARD SHORT TERM CAPITAL LOSSES ( STT PAID ) OF AY 2014 - 15 ( 6,175 ) NET SHORT TERM CAPITAL GAINS ( STT PAID ) TAXABLE AT THE RATE 15 PERCENT PLUS SURCHARGE AND EDUCATION CESS 6,24,21,979 THE COMPUTATION OF STCG AS PER THE ASSESSING OFFICER IS TAB ULATED BELOW : PARTICULARS AMOUNT IN INR SHORT TERM CAPITAL GAINS ( NOT SUBJECT TO STT ) 12,99,20,542 M / S DAI CHI LIFE INSURANCE COMPANY LTD . ITA NO . 590 / MUM / 2019 PAGE 4 OF 5 SHORT TERM CAPITAL GAIN ( STT PAID ) 15,66,68,368 TOTAL SHORT TERM CAPITAL GAINS 28,65,88,910 LESS : CURRENT YEAR SHORT TERM CAPITAL LOSS ( 10,15,84,163 ) LESS : BROUGHT FORWARD SHORT TERM CAPITAL LOSSES ( STT PAID ) OF AY 2012 - 13 ( 2,40,11,628 ) LESS : BROUGHT FORWARD SHORT TERM CAPITAL LOSSES ( STT PAID ) OF AY 2014 - 15 ( 9,85,90 , 587 ) ADD : SHORT TERM CAPITAL LOSS IGNORED TO THE EXTENT DIVIDEND STRIPPING U / S 94 ( 7 ) OF THE ACT 19,447 NET SHORT TERM CAPITAL GAINS ( NON STT PAID ) TAXABLE AT THE RATE 30 PERCENT PLUS SURCHARGE AND EDUCATION CESS 6,24,21,979 [ 4 ] AGGRIEVED , ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT ( A ). LEARNED CIT ( A ) WAS OF THE VIEW THAT THERE IS NO COMPARTMENTALISATION IN INCOME TAX ACT 1961, IN SECTION 70 AND 74, OF SHORT TERM CAPITAL GAIN / SHORT TERM CAPITAL LOSS AS STT PAID AND NON STT PAID . HE ALSO NOTED THAT SINCE THERE IS ARE DIRECT BINDING JUDICIAL PRECEDENTS ON THE ISSUE, IN FAVOU R OF THE ASSESSEE, HE WOULD RATHER FOLLOW THE SAME . HE REFERRED TO, AND RELIED UPON, A COORDINATE BENCH DECISION, IN THE CASE OF FIRST STATE INVESTMENTS ( HONG KONG ) LTD VS ADIT [( 2009 ) 33 SOT 26 ( MUM )] , TO REVERSE THE STAND OF THE ASSESSING OFFICER, AND ACCEPT THE PLEA OF THE ASSESSEE . THE ASSESSING OFFICER IS AGGRIEVED AND IS IN APPEAL BEFORE US . [ 5 ] WE HAVE HEARD THE RIVAL CONTENTIONS PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF APPLICABLE LEGAL POSITION . [ 6 ] WE FIND THAT THE ISSUE IN APPEAL IS SQUARELY COVERED, IN FAVOUR OF THE ASSESSEE, BY A SERIES OF DECISIONS OF COORDINATE BENCHES IN THE CASES OF FIRST STATE INVESTMENTS ( HONGKONG ) LTD . VS DDIT [ 2010 ] 132 TTJ 218 ( MUM ) , ACIT VS . M / S . MAC CHARLES INDIA LTD . ITA NOS . 586 & M / S DAI CHI LIFE INSURANCE COMPANY LTD . ITA NO . 590 / MUM / 2019 PAGE 5 OF 5 481 / BAN / 2012, JCIT VS . MONTGOMERY EMERGING MARKETS FUND [ 2006 ] 100 ITD 271 ( MUM ) ( SB ) , DDIT VS . M / S . DWS INDIA EQUITY FUND ITA NO . 5055 / MUM / 2010, DDIT VS . M / S . CENTRAL STATE SOUTH EAST & SOUTH WEST AREAS PENSION FUND ITA NO 3986 / MUM / 2010, ADIT VS . M / S . SEI INVESTMENTS CANADA COMPANY ENGINEERING MARKET EQUITY FUND ITA NO . 3150 / MUM / 2009, ACIT VS . M / S . T . ROWE PRICE INTERNATIONAL DISCOVERY FUND ITA NO . 7627 / MUM / 2011, HSBC GLOBAL INVESTMENT FUNDS, BRIC MARKETS FUND VS / DDIT ITA NO . 9034 / MUM / 2010, CA PITAL INTERNATIONAL EMERGING MARKETS FUND VS / DDIT [ 2013 ] 145 ITD 491 ( MUM ) , GSB CAPITAL MARKETS LTD . VS DCIT [ 2016 ] 156 ITD 770 ( MUM ) AND CIT VS . VEGETABLE PRODUCT LTD . [ 1973 ] 88 ITR 192 ( SC ). LEARNED DEPARTMENTAL REPRESENTATIVES HAS FAIRLY ACCEPTED THIS P OSITION AND COULD NOT POINT ANY REASON AS TO WHY WE SHOULD DEVIATE FROM THESE DECISIONS, EVEN THOUGH SHE RELIED UPON THE STAND OF THE ASSESSING OFFICER . RESPECTFULLY FOLLOWING THESE JUDICIAL PRECEDENTS, WE APPROVE THE STAND OF THE CIT ( A ) AND DECLINE TO INT ERFERE IN THE MATTER . [ 7 ] IN THE RESULT, THE APPEAL IS DISMISSED IN THE TERMS INDICATED ABOVE . PRONOUNCED IN THE OPEN COURT TODAY ON THE 27 TH DAY OF MAY , 2020 . S D / - SD/ - SAKTIJIT DEY PRAMOD KUMAR ( JUDICIAL MEMBER ) ( VICE PRESIDENT ) MUMBAI, DATED THE 27 TH OF MAY , 2020 COPIES TO : ( 1 ) THE APPELLANT ( 2 ) THE RESPONDENT ( 3 ) CIT ( 4 ) CIT ( A ) ( 5 ) DR ( 6 ) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, MUMBAI