TMI Blog2023 (5) TMI 311X X X X Extracts X X X X X X X X Extracts X X X X ..... d be given to both. Therefore, if the submission of the assessee that in the present case the income chargeable under the head capital gains is to be computed only as per section 48 of the Act is accepted, then the same would render the computation mechanism provided in section 112(1)(c)(iii) of the Act completely otiose and redundant. We also find no merits in the assessee's submission that if the case of the assessee is governed under two provisions of the Act, then it has the right to choose to be taxed under the provision which leaves him with a lesser tax burden. In the present case, the capital gains has to be computed only by reference to provisions of section 112(1)(c)(iii) of the Act. Further, it cannot be disputed that if as per section 112(1)(c)(iii), the 1st and 2nd proviso to section 48 of the Act are not given effect, the assessee will have a long-term capital gains from the sale of unlisted shares of the Indian company. Therefore, we find no infirmity in the orders passed by the lower authorities taxing the long-term capital gains as per section 112(1)(c)(iii) - As a result, grounds raised by the assessee are dismissed. - ITA no.1627/Mum./2022 - - - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or amend the above grounds of appeal at any time before or at the time of hearing of the appeal so as to enable the Honorable Income-tax Appellant Tribunal to decide this appeal according to the law. 3. The only grievance of the assessee is against computation of capital gains by applying the provisions of section 112(1)(c)(iii) instead of 1st proviso to section 48 of the Act. 4. The brief facts of the case as emanating from the record are: The assessee is a company incorporated in the United Arab Emirates and is mainly involved in investment activities. For the year under consideration, the assessee filed its return of income on 19/10/2018 declaring a total income of Rs. Nil. The return of income filed by the assessee was selected for scrutiny and statutory notices under section 143(2) and section 142(1) were issued and served on the assessee. On perusal of the submissions filed by the assessee pursuant to the aforesaid notices, it was observed that during the year under consideration, the assessee has sold the shares of Intellecap Advisory Services Private Limited (Indian Company) and declared a long-term capital loss of Rs.3,63,87,392 after applying proviso 1 to section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1)(c)(iii) without giving effect to the 1st and 2nd proviso to section 48 of the Act. Accordingly, the Assessing Officer computed the long-term capital gains of Rs. 17,13,59,838 under section 112(1)(c)(iii) of the Act. 6. The assessee filed detailed objections before the learned DRP against the addition made by the AO. Vide directions dated 14/03/2022, issued under section 144C(5) of the Act, the learned DRP rejected the objections filed by the assessee. In conformity with the directions issued by the learned DRP, the Assessing Officer passed the impugned final assessment order dated 23/04/2022. Being aggrieved, the assessee is in appeal before us. 7. During the hearing, the learned Authorised Representative ( learned AR ) submitted that section 112 of the Act applies only if the total income of the assessee includes any income arising from the transfer of a long-term capital asset which is chargeable under the head capital gains and where such income from transfer of a long-term capital asset forms part of the total income, section 112 provides for the manner in which the tax payable by the assessee on the total income shall be computed. The learned AR further submitted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . As per section 45 of the Act, any profits or gains arising from the transfer of a capital asset shall be chargeable to income tax under the head capital gains and shall be deemed to be the income of the previous year in which the transfer took place. Section 48 of the Act deals with mode of computation‟ and the same reads as under:- 48. The income chargeable under the head Capital gains shall be computed, by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely : (i) expenditure incurred wholly and exclusively in connection with such transfer; (ii) the cost of acquisition of the asset and the cost of any improvement thereto; (iii) in case of value of any money or capital asset received by a specified person from a specified entity referred to in subsection (4) of section 45, the amount chargeable to income-tax as income of such specified entity under that sub-section which is attributable to the capital asset being transferred by the specified entity, calculated in the prescribed manner 11. Further, the 1st and 2nd proviso to section 48 of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eign currency (i.e. sale price). The purpose of 1st proviso is to neutralise the exchange rate fluctuation. In the present case, the assessee by application of section 48 read with 1st proviso computed the long-term capital loss of Rs.3,63,87,392, as elaborated on page 2 of the draft assessment order. It is this long-term capital loss, which has been sought to be carried forward by the assessee to subsequent years. 13. On the other hand, the 2nd proviso to section 48 of the Act deals with long-term capital gains other than capital gain as referred to in 1st proviso and in such a case benefit of indexation shall be available to the assessee. Since in the present case, the assessee is a non-resident and sold shares (unlisted) of an Indian company, therefore, the assessee has not claimed any benefit of 2nd proviso to section 48 of the Act. 14. Section 112(1)(c)(iii) of the Act, which is relevant for the present appeal, deals with tax on long-term capital gains and same reads as under:- 112. (1) Where the total income of an assessee includes any income, arising from the transfer of a long-term capital asset, which is chargeable under the head Capital gains , the tax payable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ination of Tax in Certain Special Cases, we find that though the said section deals with the determination of tax payable by the assessee on the total income which includes any income arising from the transfer of a long-term capital asset chargeable under the head capital gains . However, in the case of a non-resident (not being a company) or a foreign company, sub-clause (iii) of clause (c) to sub-section (1) also provides the mode of computation of capital gains. As per section 112(1)(c)(iii) of the Act, in case of a non-resident, capital gains arising from the transfer of a long-term capital asset, being unlisted securities or shares of a company in which public are not substantially interested, shall be computed without giving effect to 1st and 2nd proviso to section 48 of the Act. The aforesaid section further provides a tax rate of 10% on the capital gains so computed. Therefore, we are of the considered opinion that section 112(1)(c)(iii) is a special provision for the computation of capital gains, in case of a non-resident, arising from the transfer of unlisted shares and securities. While, on the other hand, section 48 of the Act is a general provision, which deals with t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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