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TMI Blog2023 (8) TMI 139X X X X Extracts X X X X X X X X Extracts X X X X ..... e of claiming the benefit of DTAA/ provisions of the Act as the case may be, whichever is more beneficial to the assessee in terms of section 90(2) of the Act. Thus, we are of the considered view that on merits, the issue raised in revisional proceedings u/s. 263 of the Act, the assessee has merit. There is no error in the assessment order in accepting claim of the assessee. The twin conditions for invoking section 263 i.e. assessment order should be erroneous and prejudicial to the interest of Revenue are not satisfied in the instant case, hence, the impugned order is set aside and appeal of the assessee is allowed. Revision u/s 263 - whether receipt of foreign remittances had been correctly offered to tax? - Assessee's assessment was selected for limited scrutiny - HELD THAT:- The limited scrutiny was confined to examine outward foreign remittances and whether receipt of foreign remittances had been correctly offered to tax. The issue raised by the CIT in proceedings u/s. 263 of the Act relating to carry forward of capital gains was not within the scope of limited scrutiny. Hence, the Assessing Officer could not have enquired into the issue of assessee s claim of carr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... set off of the capital loss against capital gains from same source of income, the unabsorbed capital loss was carried forward to the next financial year. The Assessing Officer allowed carry forward of the said capital loss. Admittedly, no specific query was raised by the Assessing Officer with respect to carry forward of capital loss in scrutiny assessment proceeding. The CIT invoked the provisions of section 263 and issued notice dated 09/02/2022 (at page 66 of the paper book). The ld. Counsel for the assessee submits that the CIT in show cause notice objected to carry forward of capital loss by selectively applying provisions of tax treaty/the Act. The assessee gave a detailed reply to the said notice on 22/02/2022 (copy of reply at page 68 of the paper book). The CIT without considering submissions of the assessee passed the impugned order holding that income under the head capital gains would be inclusive of all capital gains and losses as permissible under the Act, the assessee cannot selectively take the benefit of tax treaty and no losses will be selectively allowed to be carry forward under the Act. The ld. Counsel for the assessee pointed that the assessee had cited vario ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Ballarpur Industries Ltd. I.T. Reference No.27 of 2002 decided on 31/07/2017 by the Hon ble Bombay High Court. The ld. Departmental Representative prayed for dismissing appeal of the assessee. 4. We have heard the submissions made by rival sides and have examined the orders of authorities below. The ld. Counsel for the assessee has admitted the fact that the Assessing Officer in assessment proceedings has not raised any specific question with regard to carry forward of capital losses. Undisputedly, in Notes to Income Tax Return, the assessee has mentioned the fact of clamming treaty benefit on Capital Gains as exempt from tax under Article -13(4) of the India-Singapore DTAA and has also listed the capital loss from different streams of income under the head Capital Gains that has been carried forward for set off in future Financial Years in accordance with the provisions of section 74 of the Act. 5. The provisions of section 263 of the Act empowers the CIT to call for the records of any proceedings under the Act and examine the same if, the CIT is of the view that the Assessing Officer has failed to conduct enquiries which he ought to have made before passing the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es underlying IDRs have been carried forward for set off in future Financial Years under section 74 of the Act. The arguments of the assessee is that the assessee has different sources of income under the head Capital Gains . The assessee has set of losses within the same segment i.e. short term capital loss from sale of equity shares have been set against short term capital gain from sale of equity shares and the net amount (Losses) has been carry forward to be set off in future Financial Years to the extent permitted under the Act. Similar treatment has been given to short term capital loss from sale of units of equity oriented funds and sale of equity shares underlying IDRs. The contention of the assessee is that treatment given by assessee for intra segment set off i.e. within the same segment/source of income under the same head without setting off of losses from other source of income is permissible under the law. In other words, the assessee has claimed that it has validly treated gains/losses arising from each type of security to be a distinct source of income though under the head Capital Gains , the assessee is entitled to apply the provisions of the Act/India Sing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stream or fountain out of which the income springs to the assessee. Head of income is provided for clubbing purpose of those like minded incomes derived from different sources for the purpose of aggregation and allowable deductions. 45. We, therefore, find that there is no basis in grouping short term capital assets as a separate source of income and long term capital assets as a separate source of income. Not only short term and long term assets are different sources of income, but even the different short term assets and different long term assets involved in the respective transactions are again different sources of income. When section 70 provides that a loss falling under a source of income can be set off against income from any other source under the same head, it means that the long term capital loss being a separate source can be set off against short term capital gains, which is another separate source of income. Within the provisions of law contained in section 70, there is no further identification of sources of income against which alone loss of a particular source can be set off. What is mentioned in the law is only source of income. As far as the head of income c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itius) Ltd.(supra) reiterated the position that the assessee is entitled to the benefit of Article-13 of DTAA in respect of capital gains and allowed carry forward of capital loss under the provisions of the Act. For the sake of completeness relevant extracts of the findings of the Co- ordinate Bench are reproduced herein under:- 12. ..We are unable to comprehend that now when admittedly the short term and long term capital gains earned by the assessee from transfer of securities during the year in question are exempt under Article 13 of the India-Mauritius Tax Treaty, where would there be any occasion for seeking adjustment of the brought forward STCL against such exempt income. Our aforesaid view is squarely covered by the order of the ITAT, Mumbai in the case of Flagship Indian Investment Company (Mauritius) Lid. (supra). In the case of the assessee before the Tribunal that pertained to A.Y. 2005-06 the assessee had brought fonvard capital loss of Rs. 87,06,49,335/- from transfer of securities in A.Y. 2002-03. The aforesaid loss was determined in the hands of the assessee vide an intimation under Sec. 143(1) for A.Y 2002-03. Observing, that since the capital gains were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ejected. At this stage, we may herein observe that it is for the assessee to examine whether or not in the light of the applicable legal provisions and the precise factual position the provisions of the IT Act are beneficial to him or that of the applicable DTAA. In any case, the tax treaty cannot be thrust upon an assesses. In case the assessee during one year does not opt for the tax treaty, it would not be precluded from availing the benefits of the said treaty in the subsequent years. Our aforesaid view is fortified by the order of the ITAT, Pune in Palm Computer Systems Ltd. (supra). We thus in terms of our aforesaid observations, not being able to persuade ourselves to subscribe to the view taken by the A.O/DRP, who as noticed by us herein above had sought adjustment of the b/forward STCL against the exempt short term and long term capital gains earned by the assessee during the year in question, thus 'set aside' the order of the A.O in context of the issue under consideration. Accordingly, we direct the A.O to allow carry forward of the b/forward STCL of Rs. 3926,36,70,910/- to the subsequent years. From the reading of above decisions, it is evident that there i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the CIT in proceedings u/s. 263 of the Act relating to carry forward of capital gains was not within the scope of limited scrutiny. Hence, the Assessing Officer could not have enquired into the issue of assessee s claim of carry forward of capital loss. Once the Assessing Officer had no jurisdiction to enquire into an issue on account of limited scrutiny, the revisional powers u/s. 263 of the Act can only be exercised on the issues which are subject matter of limited scrutiny. It is not the case of Revenue that limited scrutiny was expanded to complete scrutiny. 14. In the case of Su-Raj Diamond Dealers Pvt. Ltd. (supra), the Co-ordinate Bench has held that revisional jurisdiction cannot be exercised for broadening the scope of jurisdiction that was vested with the Assessing Officer for framing the assessment. The CIT under section 263 of the Act cannot delve on the issue which was not within the domain of limited scrutiny under CASS. Similar view was expressed by the Tribunal in the case of Sonali Hemant Bhavsarin (supra) and various other decisions. 15. Thus, in view of undisputed facts and the decision cited above, we hold that the CIT exceeded his jurisdiction in exe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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