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TMI Blog2022 (10) TMI 1208X X X X Extracts X X X X X X X X Extracts X X X X ..... eferred to as "the CIT(A)"] for the Assessment Years 2015-16, whereby the CIT(A) had partly allowed the appeal filed by the Assessee against the Assessment Order, dated 20.02.2019, passed under section 143(3) read with Section 144C(3) of the Income Tax Act, 1961 (hereinafter referred to as "the Act"). 3. The Revenue has raised the following grounds of appeal read as under: "1. In the facts & circumstances of the case, Ld. CIT(A) has erred in holding that since the capital gains are exempted as per India Mauritius DTAA, they don't form part of the assessable income, therefore brought forward LTCL/STCL Losses cannot be set off against the LTCG & STCG of the AY under consideration. Assessable income is required to be computed as per provisions of the I.T. Act. Benefit if any of the relevant Articles of the DTAA has to be taken on the net taxable income calculated after giving effect to all the provisions of the IT Act including Section 74 of the Act. 2. In the facts & circumstances of the case, Ld. CIT(A) has grossly erred in directing the A O. to allow carry forward of brought forward Short-term & Long term losses to the subsequent years ignoring provisions of Section 74 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnational Taxation) - 2(3)(2): [2021] 187 ITD 184 (Mumbai - Trib.)[24-09-2020]. 6. Being aggrieved by the relief granted by the CIT(A), the Revenue has preferred the present appeal raising grounds specified in paragraph 3 above which are taken up in seriatim hereinafter. 7. The Ld. Departmental Representative appearing before us submitted that the Assessing Officer was justified in setting off the brought forward Short/Long Term Capital Losses with the current year Short/Long Term Capital Gains as per Section 74 of the Act. He submitted that the CIT(A) erred in holding that since the Long/Short Term Capital Gains were exempt as per Article 13(4) of the DTAA, the same do not formed part of the assessable income of the current year and therefore, cannot be set off with the Brought Forward Short/Long Term Capital Gains. The Ld. Departmental Representative submitted that the benefit of the relevant Article of DTAA has to be given in respect of net taxable income computed as per the provisions of the Act (including Section 74 of the Act). He relied upon the assessment order in support of his contentions. 8. Per contra, the Ld. Authorised Representative for the Assessee submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee from transfer of securities in India during the year under consideration i.e A.Y. 2013-14, were to be adjusted against the STCL brought forward by the assessee from the earlier years, and thus, only the balance amount of STCL was to be carried forward to the subsequent years. At this stage, we may herein observe that the assessee had claimed the short term and long term capital gains arising in its hands from transfer of securities during the year under consideration i.e. A.Y. 2013-14, as exempt, under Article 13 of the India Mauritius Tax Treaty. As regards the claim of the assessee that the capital gains on transfer of securities in India was not exigible to tax in India as per Article 13 of the India-Mauritius tax treaty, we find, that the same is not in dispute. On a careful perusal of the observations of the DRP, we find that a direction has been given by the panel for adjustment of the brought forward STCL against the short term and long term capital gains earned by the assessee during the year under consideration. We are thus confronted with a direction of the DRP, wherein despite accepting that the short term and long term capital gains earned by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Article 13 of the India-Mauritius tax treaty, therefore, the brought forward STCL of the previous years was rightly carried forward by the assessee to the subsequent years. As regards the reliance placed by the ld. D.R on the observations of the lower authorities that as the words "income" or "profits and gains" were to include losses also, therefore, now when Sec. 45 of the Act, by virtue of the India Mauritius tax treaty was rendered unworkable in respect of "capital gains" derived by the assessee from transfer transactions carried out in India, the "capital losses" would also not form part of its "total income", and thus, were not required to be computed under the Act, we are afraid the same does not find favour with us. Before adverting any further, we may herein reiterate that the DRP vide its order passed u/s 144C(5), dated 21-11-2016, had concluded, that now when the "capital loss" was allowed to be carried forward by the A.O, vide his order passed under sec. 143(3), dated 19-3-2015 for A.Y 2012-13, the same could not have thereafter been reviewed in the assessment proceedings of any subsequent year. As the said observation of the DRP has not been assailed any further by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions. 13. We shall now advert to the second limb of the grievance of the assessee. As is discernible from the records, the assessee had brought forward from the preceding years Long term capital losses aggregating to Rs. 7,63,95,386/- [B/forward LTCL from A.Y 2009-10: Rs. 1,09,800/- (+) B/forward LTCL from A.Y 2012-13 : Rs. 7,62,85,586/-]. Admittedly, the aforesaid Long term capital loss of Rs. 7,63,95,386/- was determined and allowed to be carried forward by the A.O while framing the assessment in the case of the assessee for A.Y 2012-13, vide his order passed u/s 143(3), dated 19-3-2015. In fact, the aforesaid factual position had duly been taken cognizance of by the DRP at Para 2.3 of its order passed u/s 144C(5), dated 21-11-2016. As observed by us hereinabove, the DRP had observed that once the STCL was allowed to be carried forward by the A.O in a scrutiny assessment order passed u/s 143(3) for a particular assessment year, the same cannot be reviewed in the assessment proceedings of any subsequent assessment year. In our considered view, now when the DRP had directed the A.O to allow carry forward of the STCL brought forward from the preceding years, there can be no just ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before us, and on the basis of our observations recorded hereinabove, we herein conclude that the assessee is duly entitled for carry forward of its brought forward Long term capital losses of Rs. 7,63,95,386/- to the subsequent years. Further, in terms of our observations and reasoning adopted for concluding that the brought forward STCL of the earlier years are not to be adjusted against the Short term capital gain earned by the assessee during the year in question, we herein direct that on the same basis the brought forward Long term capital losses of the earlier years shall not be set off against the Long term capital gain earned by the assessee from transfer of securities during the year in question i.e. A.Y 2013-14. The Ground of appeal No. 3 is allowed in terms of our aforesaid observations." (Emphasis Supplied) 10. In the present case, there was no dispute that the Assessee was entitled to claim the benefit of exemption from tax in India granted by Article 13(4) of the DTAA in respect of Short/Long Term Capital Gains arising during the relevant previous year. The contention of the Revenue was that the aforesaid benefit of Article 13(4) of DTAA could only be claimed in res ..... 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