TMI Blog2010 (3) TMI 880X X X X Extracts X X X X X X X X Extracts X X X X ..... e carried forward of brought forward losses of the earlier years to the subsequent years and the AO and the ld. CIT(A) have erred in not allowing the same. The AO is directed to allow the carry forward of brought forward loss of earlier years to the subsequent years according to law. The ground taken by the assessee is, therefore, allowed. In the result, assessee s appeal stands allowed. - D.K. AGARWAL AND B. RAMAKOTAIAH, JJ. P.J. Pardiwala and Nitesh Joshi for the Appellant. S.M. Keshkamat for the Respondent. ORDER D.K. Agarwal, Judicial Member. - This appeal preferred by the assessee is directed against the order dated 27-3-2008 passed by the ld. CIT(A) for the assessment year 2005-06. 2. Briefly stated facts of the case are that the assessee-company is incorporated and a tax resident of Mauritius. The assessee is registered with SEBI as a sub-account of JP Morgan Fleming Asset Management, which is registered with SEBI as a Foreign Institutional Investor. The return was filed declaring total income at Rs. Nil. During the course of assessment proceeding it was inter alia observed by the Assessing Officer from the return of income, "schedul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e capital losses brought forward from the earlier assessment years, to subsequent years, under the provisions of the Act." 4. At the time of hearing the ld. Sr. Counsel for the assessee submits that the assessee in the return of income in "schedule-E, statement of losses allowances brought forward from preceding assessment years and carried forward" has claimed carry forward of capital losses pertaining to assessment year 2002-03 of Rs. 87,06,49,335 which were assessed under section143(1) in that assessment year. He further submits that for the impugned assessment year 2005-06 the entire capital gains earned by the assessee was exempt from tax under the Tax Treaty and hence, the assessee did not have any capital gains assessable to tax for the year. He further submits that even, in the absence of capital gains chargeable to tax, the assessee is entitled to carry forward the brought forward capital losses of the earlier years to the subsequent years. He further submits that according to the Assessing Officer since the return of income for the assessment year 2005-06 claiming capital gains earned from sale of shares is exempt from tax in India, it necessarily follows that capit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be subject to tax in India. He further submits that the assessee while claiming capital gains on sale of shares should have first set off the brought forward losses arising from the preceding assessment years. Under the Act the assessee is not entitled to claim exemption of capital gain on the ground that the same is not taxable being non-resident and to claim carry forward of brought forward losses of preceding assessment years to subsequent years. It has to be adjusted in the year under consideration and hence, the Assessing Officer was justified in disallowing the claim of the assessee. He further submits that the assessment for the assessment year 2002-03 was completed under section 143(1) of the Act, therefore, in the year under consideration the Assessing Officer while considering the impugned claim of the assessee has passed a speaking order under section 143(3) that the claim of carry forward of brought forward losses is not allowable. He therefore, submits that the order passed by the Assessing Officer and confirmed by the ld. CIT(A) be upheld. 6. We have carefully considered the submissions of the rival parties and perused the material available on record. We find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the loss cannot be set off against the income of the subsequent year is not binding on the assessee." 8. In CIT v. Western India Oil Distributing Co. Ltd. [2001] 249 ITR 517 (SC). Their Lordships following the decision in Manmohan Das case ( supra ), have observed and held as under (page 517 headnotes): "From the decision of the High Court ( see [1980] 126 ITR 498) that, since the Tribunal had found that the income of the assessee was assessable under section 10 of the Indian Income-tax Act, 1922, for the assessment years 1943-44 to 1953-54, but for the assessment year 1954-55, the assessee had secured a pecuniary advantage by reason of its income being assessed under the head "Income from other sources", and for that reason benefit of carry forward was denied to the assessee, while retaining that advantage the assessee could not be permitted to reagitate that question and submit that the income for that year had to be reassessed under the correct head "Business" under section 10, and, therefore, the unabsorbed depreciation for the years 1943-44 to 1953-54 could be allowed to be set off against business income arising in the assessment years 1959-60 to 1962-63, but ..... 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