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2023 (10) TMI 1013 - ITAT MUMBAIBeneficial provisions of the India-Mauritius DTAA in respect of STCG - carry forward the LTCL as per section 74 of the Act - Capital gains derived by the tax resident of Mauritius in India - tax treatment adopted in respect of capital gains and losses from transfer/ alienation of Indian securities - HELD THAT:- As assessee is a company incorporated in and a tax resident of Mauritius engaged in investment activities in India through the Foreign Direct Investment Route or through subsidiaries. It holds a valid Tax Residency Certificate (TRC) issued by the Mauritian Tax Authorities. Short term capital loss can be carried forward or adjusted intra head but the long term capital loss can be carried forward or intra head adjusted cannot be made against the short term capital loss or gain. Therefore, the legislature has kept this difference in carry forward as well as intra head adjustment separate for LTCG/LTCL and STCG/STCL. Perusal of Section 70 to Section 74, it can be seen that the Legislature itself has recognized LTCG/LTCL and STCG/ STCL to be two distinct sources owing to computational dissimilarities. Accordingly, the Assessee, by virtue of the provisions of section 90(2) of the Act is eligible to claim the beneficial provisions of the Treaty in respect of STCG and with regard to LTCL, the assessee has only option to apply the provisions of section 74 of the Act, accordingly chose to carry forward LTCL. In this regard, for the proposition that a taxpayer is able to choose the provisions of the Act or those of the Treaty for different sources of income, reliance is placed on decision of Bangalore ITAT in case of IBM World Trade Corpn. [2020 (10) TMI 367 - KARNATAKA HIGH COURT] - In this case, it is held that in case of multiple sources of income an Assessee is entitled to adopt provisions of the Act for one source of Income while applying the provisions of DTAA for the other source. It is clear that source of income has a direct nexus with the stream out of which the income springs to the assessee. The heads of income are provided to aggregate similar incomes derived from different sources for deduction and taxation purposes. In the head of income “Capital Gains”, the short-term and long-term assets are different sources of income, but each transaction constituting the short-term and long-term assets are different sources of income. Accordingly, gains / losses arising from different transactions are distinct transactions and a separate source of income; accordingly, STCG / STCL and LTCG / LTCL are distinct and separate streams of income arising to an assessee. Section 90(2) of the Act provides the provisions of the Act or the provisions of the Treaty, whichever are beneficial, shall apply to the assessee. As held by the Bangalore ITAT and affirmed by the Hon'ble Karnataka High Court in case of IBM World Trade Corporation (supra), the provisions of section 90(2) of the Act will apply to each stream of income and not the head of income. Respectfully, following the decisions in case of IBM World Trade Corporation(supra), Dimension Data Asia Pacific Pte. Ltd. (2018 (12) TMI 57 - ITAT MUMBAI) and Montgomery Emerging Markets Fund (2006 (3) TMI 202 - ITAT BOMBAY-H), the Assessee has claimed beneficial provisions of the India - Mauritius DTAA in respect of STCG and allowed to carry forward the LTCL as per section 74 of the Act. Allow the Assessee's claim for carry forward of LTCL - Decided in favour of assessee.
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