DIT (IT) 4(1), MUMBAI V. LEGG MASON AISA (EX JAPAN) ANALYST FUND, MUMBAI

ITA 7625/MUM/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70949 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 06-03-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 11-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS BHAVNA YASHROY
• Keywords: Capital asset
• Section: 11A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUM BAI .. , , BEFORE SHRI I. P. BANSAL, JM AND SHRI SANJAY ARORA , AM ./ I.T.A. NO. 7625/MUM/2011 ( / ASSESSMENT YEAR: 2008-09) ASSISTANT DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION)-4(1), 133, SCINDIA HOUSE, BALLARD PIER, MUMBAI - 400 038 / VS. LEGG MASON ASIA (EX JAPAN) ANALYST FUND C/O. S. R. BATLIBOI & CO. 18 TH FLOOR, EXPRESS TOWER, NARIMAN POINT, MUMBAI - 400 021 ./ ./PAN/GIR NO. AAATC 6603 P ( /APPELLANT ) : ( !' / RESPONDENT ) # / APPELLANT BY : MRS. BHAVNA YASHROY !' $ # / RESPONDENT BY : SHRI RAJAN VORA % &'( $ )* / DATE OF HEARING : 27.08.2013 +,- $ )* / DATE OF PRONOUNCEMENT : 27.08.2013 . / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE REVENUE DIRECTED AGAINST T HE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-11, MUMBAI (CIT(A) FOR SH ORT) DATED 30.08.2011, ALLOWING THE ASSESSEES APPEAL CONTESTING ITS ASSESSMENT U/S .143(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMENT YEAR (A. Y.) 2008-09 VIDE ORDER DATED 25.11.2010. 2 ITA NO.7625/MUM/2011 (A.Y. 2008-09) ASST. DIRECTOR OF INCOME TAX (IT) VS. LEGG MASON ASIA (EX JAPAN) ANALYST FUND 2. THE APPEAL RAISES A SINGLE ISSUE, PER ITS ONLY E FFECTIVE GROUND, READING AS UNDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT SET OFF OF LOSS OF SHO RT TERM CAPITAL GAIN AS CLAIMED BY THE ASSESSEE IS CORRECT IGNORING THE PRO VISIONS OF SECTION 70(1) WHICH REQUIRES THE ASSESSEE TO FIRST COMPUTE THE R ESULT OF THE TRANSACTION IN RESPECT OF A PARTICULAR CATEGORY AND IN CASE THERE IS LOSS AT THIS STAGE, THEN THE ASSESSEE CAN SET IT OFF AGAINST GAINS FROM THE SAME CATEGORY OF TRANSACTION. 3.1 AT THE VERY OUTSET, IT WAS SOUGHT TO BE MENTION ED BY THE LD. AUTHORIZED REPRESENTATIVE (AR), THE ASSESSEES COUNSEL, THAT T HE ISSUE ARISING FOR ADJUDICATION IN THE INSTANT CASE IS COVERED BY A SERIES OF ORDERS BY TH E TRIBUNAL, PLACING A PAPER-BOOK (PB) CONTAINING FOUR SUCH ORDERS ON RECORD. THE ISSUE, I .E., WHETHER THE ASSESSEE IS ENTITLED TO ADJUST THE LOSS ON SHORT TERM CAPITAL ASSETS (STCA) ARISING ON ONE SET OF TRANSACTIONS, I.E., ON MARKET TRANSACTIONS, WITH THE SHORT TERM CAPIT AL GAIN (STCG) ARISING TO IT ON ANOTHER SET OF TRANSACTIONS, I.E., OFF MARKET TRANSACTIONS . HE WOULD THEN TAKE US TO THE RELEVANT FINDING IN THE CASE OF FIRST STATE INVESTMENTS (HONGKONG) LTD. VS. ASST. D IRECTOR OF INCOME TAX (IT) [2011] 8 ITR (TRIB) 315 (MUMBAI), WHICH IS ONE OF T HE CASE LAWS CITED (AT PB PGS.5-14), WHEREIN IT HAS BEEN HELD AS UNDER : HELD , ALLOWING THE APPEAL, THAT THE MATTER OF COMPUTATI ON OF INCOME WAS A SUBJECT WHICH CAME ANTERIOR TO THE APPLICATION OF T HE RATE OF TAX. ONLY WHEN THE INCOME WAS COMPUTED UNDER THE PROVISIONS OF THE ACT, WOULD THE QUESTION OF APPLICABILITY OF THE CORRECT RATE OF IN COME-TAX WOULD COME INTO BEING. THE COMPUTATION OF CAPITAL GAIN PRESCRIBED U NDER SECTION 48 OF THE ACT CANNOT BE CONFUSED WITH THE RATE OF TAX LIABLE TO BE CHARGED ON THE INCOME UNDER SECTION 48 OF THE ACT COULD NOT BE CON FUSED WITH THE RATE OF TAX LIABLE TO BE CHARGED ON THE INCOME UNDER THE HE AD CAPITAL GAINS SO COMPUTED. THE COMPUTATION OF CAPITAL GAIN IS GOVERN ED BY SECTION 48 WHEREAS THE RATES OF TAX ARE GOVERNED BY SECTIONS 1 11A AND 115AD OF THE ACT. THE AUTHORITIES BELOW HAD ERRED IN NEGATING TH E ASSESSEES COMPUTATION OF SHORT-TERM CAPITAL GAIN. SIMILAR VIEW, HE WOULD CONTINUE, HAS ALSO BEEN TAKE N BY THE TRIBUNAL IN THE CASE OF FIDELITY INVESTMENT TRUST FIDELITY OVERSEAS FUND VS . ADD. DIT (IT) (IN ITA NO.6055/MUM/2008 DATED 18.08.2009). 3 ITA NO.7625/MUM/2011 (A.Y. 2008-09) ASST. DIRECTOR OF INCOME TAX (IT) VS. LEGG MASON ASIA (EX JAPAN) ANALYST FUND 3.2 THE LD. DEPARTMENTAL REPRESENTATIVE (DR), ON BE ING CONFRONTED WITH THE SAID CONTENTION, WHILE CONCEDING TO THE ISSUE ARISING FO R CONSIDERATION BEING THE SAME AS THAT ADJUDICATED BY THE DECISIONS BEING RELIED UPON, WOU LD YET PLACE EMPHASIS ON THE LANGUAGE OF SECTION 70(2), WHICH IS STATED TO BE RELEVANT FO R THE PURPOSE. NO DOUBT, HE WOULD SUBMIT, THAT A LOSS ARISING IN RESPECT OF A STCA CO ULD BE SET OFF AGAINST THE INCOME ARISING TO THE ASSESSEE FOR THE RELEVANT YEAR ON AN OTHER STCA. SO HOWEVER, THE STATUE EMPLOYS THE WORDS SIMILAR COMPUTATION IN THE RELE VANT PROVISION OF S. 70(2), SO THAT THE LOSS IN ON MARKET TRANSACTIONS WOULD NEED TO BE F IRST ADJUSTED AGAINST THE INCOME, IF ANY, AGAINST SIMILAR, I.E., ON MARKET TRANSACTIONS, AN D ONLY THE BALANCE ADJUSTED AGAINST THE INCOME ARISING ON OFF MARKET TRANSACTIONS. 4. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. THE ISSUE THAT BASICALLY ARISES IS AS TO WHETHER TH E ASSESSEE HAS AN OPTION TO ADJUST THE LOSS ARISING ON A STCA AGAINST THE INCOME ARISI NG FROM SUCH ASSETS FOR THE SAME YEAR, IRRESPECTIVE OF WHETHER THE TRANSACTIONS ARE CATEGO RIZED AS OFF MARKET TRANSACTIONS OR ON MARKET TRANSACTIONS. THIS, TO OUR MIND, WOULD BE S O AS LOSS IS ONLY NEGATIVE INCOME, AND IS, IN ANY CASE, ASSESSABLE UNDER THE SAME HEAD OF INCOME; ANY TAXABLE INCOME UNDER THE ACT BEING REQUIRED TO BE CLASSIFIED AND ASSESSE D TO TAX UNDER A PARTICULAR HEAD OF INCOME. THAT IS, THE ACT DRAWS NO DISTINCTION WITH REFERENCE TO THE SAID (OR FOR THAT MATTER ANY OTHER) CATEGORIES OF INCOME, OR EVEN WITH REFER ENCE TO THE TAX RATE THAT THE DIFFERENT TYPES OF TRANSACTIONS, AS WHERE UNDERTAKEN ON OR BE FORE A PARTICULAR DATE (30/9/2004) VIS- A-VIS THAT AFTER THE SAID DATE, AS FAR AS ITS ASSES SABILITY, AND CONSEQUENTLY AGGREGATION UNDER CHAPTER VI, THERE-UNDER IS CONCERNED. SUB-SEC TION (1) OF SEC. 70, REFERRED TO BY THE REVENUE IN ITS GROUND OF APPEAL, REFERS TO A SOURCE OF INCOME (UNDER A HEAD), AND IS IN ANY CASE NOT APPLICABLE TO INCOME ASSESSABLE AS CAPITA L GAINS. REFERENCE THERETO IS THEREFORE BE TO NO MOMENT; RATHER, WOULD IF AT ALL SIGNIFY TH AT INCOME ON TRANSFER OF STCAS IS REGARDED AS ONE CATEGORY OR SOURCE OF INCOME U/S. 7 0(2). AS EXPLAINED BY THE TRIBUNAL IN THE CASE OF FIRST STATE INVESTMENTS (HONGKONG) LTD. (SUPRA), THE COMPUTATION OF INCOME IS 4 ITA NO.7625/MUM/2011 (A.Y. 2008-09) ASST. DIRECTOR OF INCOME TAX (IT) VS. LEGG MASON ASIA (EX JAPAN) ANALYST FUND A PROCESS ANTERIOR TO THE APPLICATION OF THE TAX RA TE, SO THAT THE DIFFERENTIAL IN THE TAX RATES IS RENDERED AS OF NO RELEVANCE. WE, ACCORDINGLY, FIND NO INFIRMITY IN CLARIFYING TH AT THE OPTION TO SET OFF THE LOSS ARISING UNDER THE SAME CLASS OF INCOME, I.E., ON ST CA, NOTWITHSTANDING THE WORDS SIMILAR COMPUTATION IN SECTION 70(2), WOULD LIE WITH THE A SSESSEE, AS EXPLAINED BY THE TRIBUNAL IN THE CASE OF FIDELITY INVESTMENT TRUST FIDELITY OVERSEAS FUND (SUPRA). THE WORDS SIMILAR COMPUTATION, TO WHICH OUR ATTENTION WAS DRAWN BY T HE LD. DR, SEEKING TO DRAW A DISTINCTION BETWEEN THE DIFFERENT TYPES OF TRANSACT IONS ON THAT BASIS, WOULD ONLY MEAN THE COMPUTATION AS MADE U/SS. 48 TO 55 OF THE ACT, AND NOTHING MORE. FURTHER, THE SAME IS AGAIN TO BE WITH REFERENCE TO ANY ASSET OTHER THAT A STCA. THE ARGUMENT IS THUS WITHOUT MERIT. WE DECIDE ACCORDINGLY. 5. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . /-)0 ' $ / $ ) 12 ORDER PRONOUNCED IN THE OPEN COURT ON AUGUST 27, 20 13 SD/- SD/- (I. P. BANSAL) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER % ( MUMBAI; 3& DATED : 27.08.2013 '.&../R ROSHANI , SR. PS ! ' #$%& ' &$ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. !' / THE RESPONDENT 3. % 5) ( ) / THE CIT(A) 4. % 5) / CIT CONCERNED 5. 8'9: !)&;< , * ;<- , % ( / DR, ITAT, MUMBAI 6. :=> ?( / GUARD FILE ! ( / BY ORDER, )/(* + (DY./ASSTT. REGISTRAR) , % ( / ITAT, MUMBAI