Income Tax Appellate Tribunal - Mumbai
Alibaba. Com Singapore E Commerce ... vs Deputy Commissioner Of Income Tax ... on 11 May, 2026
INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCHES, MUMBAI
BENCH: I
BEFORE HON'BLE BEENA PILLAI, JUDICIAL MEMBER
AND HON'BLE ARUN KHODPIA, ACCOUNTANT MEMBER
ITA 2070/MUM/2025
िन धा र ण व ष / Assmt. Year: 2022-23)
Permanent Account Number: AAHCA8415B
DEPUTY COMMISSIONER
ALIBABA. COM SINGAPORE OF INCOME TAX
E COMMERCE PRIVATE INTERNATIONAL TAX
LIMITED CIRCLE 1(1)(1)
C/O OF RBC & ROOM NO. 534, 5TH
ASSOCIATES LLP, KIND ATTN FLOOR, KAUTILYA
MR. RAJAN VORA / MR. BHAVAN, C -41 TO C-43 G
Vs.
PRANAY GANDHI 12TH
BLOCK BANDRA KURLA
FLOOR, THE RUBY 29,
COMPLEX BANDRA EAST
SENAPATI BAPAT MARG,
DADAR (WEST), MUMBAI- MUMBAI
400028, MAHARASHTRA MUMBAI-400051,
MAHARASHTRA
(अपी ला थ Appellant) ( थ Respondent)
िनधा रती ारा/Assessee Shri P.J.Pardiwala/ Madhur
represented by: Agrawal, AR
राज व ारा/Revenue represented Shri Satya Pal Kumar - CIT
by: (DR)
सु न वाई की तारीख / Date of conclusion of
23-Mar-2026
hearing:
घोषणा की तारीख / Date of pronouncement: 11-May-2026
आ दे श / ORDER
PER BEENA PILLAI, JUDICIAL MEMBER:
The present appeal has been filed by the assessee against the order passed by the DCIT, INT. Tax Circle 1(1)(1), Mumbai 1 ITA 2070/MUM/2025 ALIBABA. COM SINGAPORE E COMMERCE PRIVATE LIMITED (hereinafter referred to as "Ld. AO") u/s 143(3) r.w.s. 143(3) of the Income-tax Act, 1961, dated 29/01/2025 for A.Y. 2022-23 on the following grounds of appeal:-
"On the facts and circumstances of the case and in law, the learned Deputy Commissioner of Income Tax, International Tax Circle 1(1)(1), Mumbai (the Ld. AO'), has erred in assessing the total income of the Appellant in the assessment order passed under section 143(3) read with section 144C (13) of the Income Tax Act, 1961 ("the Act") for the captioned Assessment Year ("AY") (impugned order) pursuant to the directions issued by Hon'ble Dispute Resolution Panel -1, Mumbai (hereinafter referred to as the That on the facts and in circumstances of the case and in law, the Id.AO based on directions of the Hon'ble DRP has erred in:
General ground:
1. Assessing total income of the Appellant at INR 9,81,95,06,564 as against the returned income of INR 3,43,65,84,007;
Grounds on merits -Assessing Capital gains/losses on sale of Investments in contravention of provisions of Section 90(2) of the Act.
2. Ignoring the provisions of Section 90(2) of the Act, which provides that the Assessee has an option of applying the provisions of the Actor the India - Singapore Tax Treaty ("Tax Treaty") whichever is more beneficial to the Assessee;
3. Assessing capital gains arising on sale of investments during the year under consideration at IN 9,76,90,82,624 as against INR 3,38,61,60,067 by taxing capital gains income for investment acquired by the assessee prior to April 1, 2017, thus disregarding the explicit provisions of Article 13(4A) and Article 13(5) of the Tax Treaty.
4. Not appreciating the fact that each investment made by the assessee is a separate "source" ( come. for the purposes of application of the provisions of the Income-tax Act. 1961 and the Ta
5. Not appreciating the fact that the capital gains which are exempt as per Tax Treaty does not enter the computation of total income;
Initiating penalty proceedings under section 270A of the Act 2 ITA 2070/MUM/2025 ALIBABA. COM SINGAPORE E COMMERCE PRIVATE LIMITED
6. Erred in initiating the penalty proceedings under section 270A of the Act;
The Appellant craves for leave to add, amend, vary, omit or substitute or withdraw any of the aforesaid grounds at any time before or at the time of hearing of the matter with the Income Tax Appellate Tribunal ("ITAT").
The Appellant prays that appropriate relief be granted based on the said grounds of appeal and the facts and circumstances of the case."
2. Brief facts of the case are as under:-
The assessee is a foreign company incorporated in Singapore. It filed its return of income for the year under consideration declaring total income of Rs. 338,61,60,067/- on account of capital gain. The case was selected for scrutiny. During the course of assessment proceedings, the assessee furnished submissions through the e-filing portal as well as by way of physical submissions. The assessee through its Authorised Representative on 14/03/2024 and 22/03/2024, advanced various contentions with reference to the provisions of the Income-tax Act and the applicable DTAA, in support of the income offered and claims made by the assessee.
2.1. Before the Ld.AO the assessee furnished computation of income along with evidences in support of long term capital gains earned during A.Y. 2022-23, the details of which are reproduced as under:
Sr. Date of
Particulars Amount
No. acquisition
Long term capital gain on transfer of Acquired before 1 6,38,29,22,557 shares of PayTM 01.04.2017 3 ITA 2070/MUM/2025 ALIBABA. COM SINGAPORE E COMMERCE PRIVATE LIMITED Sr. Date of Particulars Amount No. acquisition Treaty Benefit under Article 13(4) of 6,38,29,22,557 Indian-Singapore DTAA Taxable Capital gain Long term capital loss on transfer of Acquired before 2 (14,02,18,72,880) shares of Snapdeal 01.04.2017 Long term capital gain on transfer of Acquired after 3 5,78,16,19,437 share of Xpressbees 01.04.2017 Long term capital gain on transfer of Acquired after 4 11,62,64,13,511 share of Bigbasket 01.04.2017 Net taxable capital gain (2+3+4) 3,38,61,60,067 offered Bigbasket- Super Market Groceries Suppliers Private Limited PayTM- One97 Communications Limited Xpressbees- Busybees Logistics Snapdeal-
Solution Private Limited 2.2. The Ld.AO observed from the above chart that the assessee purchased shares of Indian companies namely PayTM and Snapdeal prior to 01/04/2017. It was further observed that the assessee earned long term capital gain of INR 6,38,29,22,557/- on alienation of shares of PayTM and claimed the same as exempt from tax under the provisions of the Income-tax Act, 1961 in view of Article 13(4) of the India-Singapore DTAA. The Ld. AO further observed that the assessee incurred long term capital loss of INR 14,02,18,72,880/- on alienation of shares of Snapdeal, which was not set off against the capital gain arising from transfer of shares of PayTM, despite both the shares having been acquired prior to 01/04/2017. However, the assessee set off the said long term capital loss arising from shares acquired prior to 01/04/2017 4 ITA 2070/MUM/2025 ALIBABA. COM SINGAPORE E COMMERCE PRIVATE LIMITED against the long term capital gain arising from transfer of shares acquired after 01/04/2017.
2.3. The Ld.AO after considering the submissions advanced by assessee, observed that, in respect of shares of Indian companies acquired prior to 01/04/2017, though there exists a provision for taxation under the Act, such gains are not taxable in India in view of Article 13(4A) of the India-Singapore DTAA. According to the Ld.AO, Article 13(4A) renders gains arising from alienation of shares acquired before 01/04/2017 outside the ambit of taxation under the Income-tax Act, 1961 and, therefore, such transactions are governed by the provisions of the DTAA rather than the provisions of the Act.
2.4. The Ld.AO further observed that the DTAA does not distinguish capital gain and capital loss arising from alienation of shares acquired before 01/04/2017 as separate sources of income incapable of being considered together for the purpose of computation of taxable capital gains. Accordingly, the Ld. AO rejected the contention of the assessee that long term capital loss arising from alienation of shares of Snapdeal acquired prior to 01/04/2017 would be governed by the provisions of the Act, while long term capital gain arising from transfer of shares of PayTM acquired prior to 01/04/2017 would be governed solely by Article 13(4A) of the India-Singapore DTAA.
5ITA 2070/MUM/2025 ALIBABA. COM SINGAPORE E COMMERCE PRIVATE LIMITED 2.5. The Ld. AO observed that neither the provisions of the Act nor the DTAA provide any such option to the assessee. The Ld.AO thus proceeded to computed the capital gains as under:-
Particulars Amount Shares Acquired before 01.04.2017 1. Long term capital gain on transfer of shares of PayTM 6,38,29,22,557 2. Long term capital loss on transfer of shares of Snapdeal (14,02,18,72,880)
Net capital gain/(loss) as per 13(4A) of Indian-Singapore DTAA (7,63,89,50,323) chargeable in Singapore Jurisdiction Shares Acquired after 01.04.2017
3. Long term capital gain on transfer of share of Xpressbees 5,78,16,19,437
4. Long term capital gain on transfer of share of Bigbasket 11,62,64,13,511
5. Net capital gain/(loss) as per 13(4B) of Indian-Singapore DTAA 1740,80,32,948 chargeable in Indian Jurisdiction
6. Net taxable capital gain offered in Income Tax Return for AY 3,38,61,60,067 2022-23 The proposed addition on account of non-disclosure of Capital 14,02,18,72,880 Gains under Income Tax Act,1961(5-6) Aggrieved by the variations proposed in the draft assessment order passed by the Ld. AO u/s 144C(1) of the Act, the assessee preferred objections before the Dispute Resolution Panel ("DRP").
3. Before the DRP, the assessee objected to the denial of its option to apply the provisions of the India-Singapore DTAA, the clubbing of gains and losses arising from transfer of investments acquired prior to 01.04.2017 as a single source of income, the computation of taxable capital gains of the Act.
3.1. The DRP, after considering the objections raised by the assessee, held that the approach adopted by the assessee in 6 ITA 2070/MUM/2025 ALIBABA. COM SINGAPORE E COMMERCE PRIVATE LIMITED segregating each capital gains transaction and selectively applying the provisions of the India-Singapore DTAA and the Income Tax Act at the transaction level was not in accordance with law. The Panel observed that the computation of capital gains for an assessment year has to be made in terms of the provisions of the Act and that the DTAA does not provide any independent computation mechanism. The DRP further held that once the net income is computed under the Income Tax Act, the assessee has to consistently opt either for the provisions of the Income Tax Act or the India-Singapore DTAA for the net capital gains computed for the assessment year and not apply them selectively to individual transactions. Accordingly, the Ld.AO was directed to treat all the four transactions as taxable capital gains transactions under the Act and compute the net capital gains by aggregating and netting off all the four transactions, comprising three positive income transactions and one negative income transaction.
4. On receipt of the DRP direction, the Ld.AO passed the final assessment order making addition of Rs.6,38,29,22,558/- on account of non-disclosure of capital gains under the Act.
Aggrieved by the final assessment order framed by Ld.AO, assessee is in appeal before this Tribunal.
5. Before us, the Ld.Sr.Counsel submitted that the assessee, Alibaba.com Singapore E-Commerce Private Limited is a company incorporated under the laws of the Republic of Singapore and is controlled and managed from Singapore. It was submitted that the 7 ITA 2070/MUM/2025 ALIBABA. COM SINGAPORE E COMMERCE PRIVATE LIMITED assessee is engaged in the business of providing B2B online marketplace services on the Alibaba.com International Website connecting small and medium-sized buyers and sellers and also acts as an investment holding company holding investments in various entities.
5.1. The Ld.Sr.Counsel further submitted that the assessee is a tax resident of Singapore within the meaning of Article 4 of the India-Singapore Double Taxation Avoidance Agreement ("DTAA"). In support of the said contention, the assessee furnished a copy of the certificate of incorporation issued in Singapore, Tax Residency Certificate ("TRC") issued by the Singapore tax authorities certifying the assessee as a tax resident of Singapore, along with Form No. 10F. It was submitted that the aforesaid documents clearly establish the residential status of the assessee under the India-Singapore DTAA.
5.2. The Ld.Sr.Counsel submitted that under Article 13(4) of the India Singapore DTAA, it is only country of residence, that is Singapore in the present case, who has the right to tax the capital gains and thus, the gains accrued to the assessee world not be subjected to tax in India. He submitted that Ld.AO invoked provisions of Article 24(1) of the DTAA to deny the benefit of Article 13(4) of the DTAA. The Ld.Sr.Counsel submitted that Article 24(1) provides for conditions in respect of non-taxability of exempt income. He further submitted that, since the capital gains are not taxable in India in view of the language provided under Article 13(4) 8 ITA 2070/MUM/2025 ALIBABA. COM SINGAPORE E COMMERCE PRIVATE LIMITED of the DTAA, question of exemption of said income in India would not arise. It was submitted that, the provisions of Article 24(1) are not applicable for the following two reasons:-
• Income earned outside Singapore are not taxable. However, since the income was considered for laxation at the time of filing the return of income on accrual basis, provisions of Article 24(1) which deals with taxation on remittance basis in Singapore would not apply.
• Capital gains are not taxable in India and thus, the question of exemption does not arise. Consequently, Article 24(1) of the India-Singapore DTAA does not apply.
5.3. The Ld.Sr.Counsel submitted that Hon'ble Bombay High Court in case of CIT v. Citicorp Investment Bank (Singapore) Ltd., reported in [2023] 151 taxmann.com 501/457 ITR 203 and in the case of CIT v. APL. Co. Pte. Ltd reported in [2023] 156 taxmann.com 530 has upheld the order of the Tribunal on identical facts.
5.4. The Ld.Sr.Counsel emphasised that capital gains/ losses arising on account transfer of share is a separate source of income and it is eligible to claim the benefit of Article 13(4) in respect of the capital gains under India - Singapore DTAA. In respect of losses, the assessee did not claim the benefit of article 13(4) of the India - Singapore DAA but claimed to be governed by the provisions of the Act in respect of carry forward of losses. It was submitted that in respect of each source of income, the assessee is entitled to claim the provisions of the Act or the provisions of the India 9 ITA 2070/MUM/2025 ALIBABA. COM SINGAPORE E COMMERCE PRIVATE LIMITED Singapore DTAA, whichever is more beneficial at the option of the Assessee. This is in accordance with provisions of section 90(2) of the Act. He placed reliance in this regard on the following decisions:
• Matrix Partners India Investment Holdings, LLC v. DCIT (ITA No. 3097/Mum/2023) (Mumbai - Tribunal) • Joint CIT v. Montgomery Emerging Markets Fund [2006] 100 ITD 217 (Mumbai) (SB) • IBM World Trade Corpn. v. DDIT [2012] 20 taxmann.com 728/54 SOT 39 (Bangalore) affirmed by the Hon'ble Karnataka High Court in DIT v. IBM World Trade Corpn. [2020] 120 taxmann.com 151/276 Taxman 211[2021] 436 ITR 641 (Karnataka) 5.5. On the contrary, the Ld.DR relied on the orders of the authorities below.
We have perused the submissions advanced by both sides in light of the records placed before this Tribunal.
6. We find that an identical issue came up for consideration before the Coordinate Bench of the Tribunal in the case of Prashant Kothari vs. Int. Tax Ward 3(1)(1) reported in [2025] 174 taxmann.com 1244 (Mumbai - Trib.), wherein the Tribunal, while examining the scope and applicability of Article 13 read with Article 24 of the India-Singapore DTAA in the context of taxation of capital gains, considered and followed various judicial precedents on the issue. The Coordinate Bench, after detailed analysis of the treaty provisions and the interplay between the provisions of the Act and the DTAA, adjudicated the controversy in the light of the principles 10 ITA 2070/MUM/2025 ALIBABA. COM SINGAPORE E COMMERCE PRIVATE LIMITED laid down in the earlier judicial pronouncement in case of Matrix Partners India Investment Holdings, LLC v. DCIT (supra) holding as under:-
"36. We find that the matter relating to segregation of capital gains and capital losses, being separate sources of income for availing the tax treaty benefits to the extent they are more beneficial to the assessee has been dealt with by various Benches of the Tribunal from time to time and we can gainfully refer to the latest decision of the Coordinate Bench in case of Matrix Partners India Investment Holdings, LLC (supra) where the matter has been examined at length and the relevant findings therein read as under:
"6. The case of the assessee before us is to analyse whether assessee can be allowed to carry forward the loss without being set off against the capital gains in circumstances where both the situation aroses out of shares acquired prior to 01/04/2017 in the Indian Mauritius DTAA. It is also necessary to analyse if the DTAA between India Mauritius is interpreted in good faith as per Article 31 of Viena Convention on the Law of Treaties in the present facts of the case.
6.1. Admittedly, the assessee is registered under the laws of Mauritius and is engaged in investing in unlisted companies to achieve long term capital appreciation through multi-stage and multi-sector investments. It is involved in investing activity as per the objects of the DTAA which encouraged mutual trade and investment. It has made several investments over the years and earned profits as well as losses from these investments.
6.2. It cannot be ignored that, a prudent businessman makes investments for earning profits but also incurs losses, as it is part and parcel of making investments. The provisions of section 90(2) of the Act itself provides that, the provisions of the Act shall apply to the extent they are more beneficial to the assessee. Accordingly, the Appellant has claimed the exemption on capital gains earned on some shares and carried forward the capital loss on some shares under the Act. This is not in contravention of the object but is only a beneficial position opted by the assessee which is provided under law.
6.3. As far as the capital gain earned by the assessee from sale of shares of CFS during the year under consideration, claimed as exempt in view of Article 13(4) of the India Mauritius DTAA, Ld.AO 11 ITA 2070/MUM/2025 ALIBABA. COM SINGAPORE E COMMERCE PRIVATE LIMITED allowed it. The Ld.AO disputed only carry forward of the short term capital loss suffered from sale of shares of Maharana, without being set off against the gain earned from sale of shares of Maharana.
6.4. A query was therefore raised by the bench whether, 'Gains' under Article 13(3)/(4) includes 'loss' ?
6.4.1. It was submitted that the primary purpose of a DTAAs amongst others is to provide tax relief by preventing double taxation. Further, section 90(2) of the Act, inter alia, provides that when the Government of India has entered into a DTAA with Government of any other country for granting relief of tax, or as the case may be for avoidance of double taxation, in relation to an assessee to whom such agreement applies, the provisions of the Act shall apply to the extent these are more beneficial to that assessee. It was also submitted that, Section 90 of the Act, only grants relief, it does not impose any liability and the DTAA cannot act to the disadvantage of the taxpayer, and merely because India has entered into DTAA with Mauritius, the assessee can neither be denied the taxability under the scheme of the Act, nor can the DTAA be forced upon the assessee, who may wish to avail tax treaty benefit for one source of income and avail benefit in respect of loss under the Act as beneficial to the assessee as provided by law.
6.4.2. It is noted that, Article 31 of Viena convention on the law of treaties states that, treaties should be interpreted in good faith, in accordance with the ordinary meaning to be given to the terms of the treaties in their context, and in the light of the its object and purpose. It also states that the context for the purpose of interpretation of the treaty shall comprise in addition to the test, including its preamble and annexes. One of the most difficult areas of treaty interpretation is how to cope up with silence of absent terms, if the treaty dose not expressly make provision for the matter in issue, should it be assumed that it is not covered depends on the nature of the treaty and the interaction of the various elements of Viena rules. In the present facts of the case the double taxation avoidance agreements is based on the principle to provide tax relief by preventing double taxation.
6.4.3. As per India Mauritius DTAA read with section 90(2), capital gains are to be taxed based on the place of residence of the recipient, by granting relief of tax on such gains in India. Admittedly, the treaty is silent in respect of the loss if earned by an assessee and leaves it unclear whether, one has to deduce to interpret loss being included along with gain. This in our opinion 12 ITA 2070/MUM/2025 ALIBABA. COM SINGAPORE E COMMERCE PRIVATE LIMITED can be possible subject to later negotiations and are not regulated by the treaty. The nature of the treaty in the present fact is key factor and therefore, what is not expressly granted is not permitted.
6.4.4. In so far as, applicability of good faith in interpreting the treaty provisions, we note that good faith differs from most of the other elements under the Viena rules. It applies to the whole process of interpreting for treaty rather than solely to the meaning of particular words or phrases within it. Although, it is difficult to give precise content to the concept generally, it does include one principle that applies to the interpretation of specific terms used in a treaty, commonly described as the principal "effectiveness". The aspect of the principle of effectiveness is preferring an interpretation that fulfils the aims of the treaty and the intent of the contracting states as given in various Articles.
6.4.5. Applying the above rules to Article 13(4) of India Mauritius DTAA, it is clear that non taxability of the capital gains in India prior to 01/04/2017 cannot act to the disadvantage of the tax payer. This is because section 90(2) is clear to mean that Government of India entered into DTAA with the Government of Mauritius, according to which the capital gains is not taxable in India. However, the provisions of the act shall apply to the extent they are more beneficial to the tax payer.
6.4.1. The Ld.AR in support relied on following observations from the decision of Hon'ble Pune Bench in case of Patni Computers Systems Ltd., reported in (2008) 114 ITD 159.
8. The law laid down by the Hon'ble Supreme Court in binding on us under Article 141 of the Constitution of India. The prevailing legal position, therefore, is that once an income is held to be taxable in a tax jurisdiction under a double taxation avoidance agreement, and unless there is a specific mention that it can also be taxed in the other tax jurisdiction, the other tax jurisdiction is denuded of its powers to tax the same. To that extent, the worldwide basis of taxation in the scheme of the Indian Income-tax Act is no longer applicable in a situation provisions of a double taxation avoidance agreement entered into under section 90 apply. The next question then arises whether in a loss situation in the PE State, as is the case before us, can the assessee be forced to go for taxation in accordance with the provisions of the treaty with the said PE State. The provisions of section 90(2) of the Indian Income-tax Act are quite unambiguous and categorical in this regard. Section 90(2), inter alia, provides that when the Government of India has entered into a double taxation avoidance agreement with Government of any other country, "in relation to an assessee to whom such agreement applies, the provisions 13 ITA 2070/MUM/2025 ALIBABA. COM SINGAPORE E COMMERCE PRIVATE LIMITED of this Act shall apply to the extent these are more beneficial to that assessee". Section 90 only grants relief; it does not impose any liability. Even without such provisions, Courts in US and Germany, as indeed in other parts of the world, have held that a treaty cannot act to the disadvantage to the taxpayer. In other words, therefore, merely because India has entered into a double taxation avoidance agreement with a foreign country, the assessee cannot be denied the taxability under the scheme of the Indian Income-tax Act. The scheme of the double taxation avoidance agreement cannot, therefore, be thrust upon the assessee. In this particular case, it is obviously to the advantage of the assessee that he is taxed in India on the basis of his worldwide income, which includes losses incurred abroad, and not to invoke the provisions of the IndiaJapan tax treaty. The provisions of the Indian Income-tax Act must, therefore, apply to that extent. Then comes the objection of the revenue that in the event of the assessee not opting for treatment on the basis of India-Japan tax treaty this year, he will be shut out from availing the benefits of the said treaty in the subsequent years. We see no support for this proposition. Under the Income-tax Act, every year is an independent unit, and it is for the assessee to examine whether or not, in the light of the applicable legal provisions and in the light of the precise factual position, the provisions of the Income-tax Act are beneficial to him or that of the applicable double taxation avoidance agreement. There is no specific bar on such an approach of the assessee, and in the absence thereof, we cannot impose the same. In any event, this question is relevant only in the year in which the assessee claims the treaty benefits and not in this year in which the provisions of the Act are clearly more beneficial to the assessee, and, therefore, the assessee does not claim the treaty protection. Just because the assessee may, in Assessing Officer's perception, may claim treaty protection in a subsequent year, the treaty provisions cannot be thrust on the assessee this year as well. In this view of the matter, the assessee was indeed eligible to claim taxation on worldwide basis, disregard the scheme of taxability under the India- Japan tax treaty, and, in effect, claim deduction of loss incurred by the PE in Japan. The CIT(A) was thus justified in his conclusion to the effect that losses of assessee's PE in Japan are to be taken into account while computing assessee's total income liable to tax in India.
Now coming to the contention whether each transaction can be considered as a separate source of income.
6.5. The Ld.AR placed reliance on the following observations by Hon'ble Mumbai Special Bench in case of Montgomery Emerging Market Fund reported in (2006) 100 ITD 217 in support of the above argument. Hon'ble Special bench observed the distinction between 'source of income' and 'head of income' and that there can be multiple source of income under the same head of income. Hon'ble Special Bench also observed that, what 14 ITA 2070/MUM/2025 ALIBABA. COM SINGAPORE E COMMERCE PRIVATE LIMITED is taxed by the Act is not different source of income, independently and that income from different source is clubbed under respective heads that are finally aggregated into the total income. The relevant extract of the observations of the Hon'ble Special Bench in this regard held as under:-
"44. Therefore, it is very apparent that source of income does not mean head of income. The Assessing Officer has proceeded on a hypothesis as if the source of income is the head of income itself. This is not a proper construction of law provided in section 70. Short term capital gains/loss as well as long term capital gains/loss both are computed under the head "capital gains" for the aggregation of income culminating into total income which is taxable under the Income-tax Act. What is taxed by the Income-tax Act is not different sources of income independently, but income from different sources clubbed under respective heads and finally aggregated into the total income. The classification of income under different heads for computing the total income does not interfere with the independent character of different sources of income available to an assessee. Both, short term capital gains/loss and long term capital gains/loss are different sources of income, falling under the same head "capital gains". Even under short term capital gains, different transactions will be different sources of income resulting in short term capital gains/loss. Likewise, different transactions of long term capital assets will be different sources of income for an assessee to arrive at long term capital gains/loss. This is reflected in the scheme of computation of capital gains provided in section 48 where gains or loss is computed on the basis of individual asset and transaction and not on the basis of class of assets. Therefore, we have to agree with the argument of the learned senior counsel that every transaction of a property is a different source of income for the assessee. Head of income is not the source of income. Source of income is having the direct nexus with the 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.
(emphasis supplied) 6.5.1. From the above one can infer that there is no basis in grouping long term/short term capital assets. It can also be inferred that, long term and short term are different sources of income. Further, Hon'ble Special bench also observed that even the different short term assets and long term assets involved in the respective transactions are again different sources of income. In the present facts of the case, losss earned from sale of shares of 15 ITA 2070/MUM/2025 ALIBABA. COM SINGAPORE E COMMERCE PRIVATE LIMITED Maharana and the gain earned from sale of shares of Maharana are therefore different sources of income. And further as per the observations of Hon'ble Special Bench, even under short term/long term computation, every transaction is a different source.
6.5.2. Further, the Co-ordinate Bench of this Tribunal in the case of Credit Suisse (Singapore) Co. (Mauritius) Ltd. In ITA No. 1107 and 1108/Mum/2022, upheld the theory of the segregation of capital gain for drawing DTAA to the extent of more beneficial to the assessee. The relevant finding of the Tribunal is reproduced as under:
"8. In the case of Flagship Indian Investment Co (Mauritius) Ltd.(supra), the assessee had claimed benefit of Article -13 of the DTAA in respect of 'Capital Gains' and had sought to carry forward capital losses of the earlier years as the same could not be set off against capital gains for the relevant assessment year. The Assessing Officer and CIT(A) rejected assessee's claim of carry forward of capital losses on the pretext that since the assessee had claimed benefit of exemption under Article 13 of the DTAA on capital gains, capital losses are also exempt. When the issue reached before the Tribunal, the Coordinate Bench placing reliance on the decision in the case of CIT vs. Western India Oil Distributing Co. Ltd., 249 ITR 517 (SC) and CIT vs. Manmohan Das 59 ITR 699(SC) and also after considering CBDT Circular No.22 of 1944 dated 29/07/1944 held that the assessee is justified in claiming carry forward of brought forward losses of the earlier years to the subsequent years and at the same time upheld assessee's claim of capital gains as exempt under the provisions of Article -13 of the DTAA. Thus, the Tribunal accepted the theory of segregation of capital gains and capital losses for drawing benefits of DTAA/the Act to the extent they are more beneficial to the assessee.
9. In the case of Goldman Sachs Investments (Mauritius) Ltd. (supra), the Co-ordinate Bench placing reliance on the decision of Flagship Indian Investment Co (Mauritius) 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 Coordinate 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) 16 ITA 2070/MUM/2025 ALIBABA. COM SINGAPORE E COMMERCE PRIVATE LIMITED 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 not taxable in India as per Article 13 of the IndianMauritius Tax Treaty, the A.O being of the view that capital loss would also be exempted, and therefore, the assessee would not be entitled to claim the set-off of the same against the capital gains for the relevaye assestment years. On benefit of carry forward of such capital losses of the earlier years, thus, declined the appeal, the CIT(A) upheld the order of the A.O. On further appeal, the Tribunal concluded that the assessee was fully justified in claiming the carry forward of the capital losses of the earlier years to the subsequent years, and both the A.O and the CIT(A) were in error in not allowing the same. Accordingly, the A.O was directed to allow the carry forward of the capital losses of the earlier vears to the subsequent years, according to law. As in the aforesaid case, in the case of the present assessee before us, as the short term and long term capital gains earned by the assessee from transfer of securities during the year in question are admittedly exempt from tax under Article 13 of the IndiaMauritius tax treaty, therefore, the brought forward STCL of the previous years was rightly carried forward by the assessee to the subsequent years......... The Tribunal further held:
... Now coming to the claim of the revenue that as Sec. 45 of the Act, by virtue of India-Mauritius tax treaty was rendered unworkable in respect of "capital gains" derived by the assessee from transfer of securities in India, therefore, the "capital losses" would also not form part of the assessee's "total income", and thus, could not be computed under the Act. we are afraid does not find favour with us. Apropos the aforesaid observation of the A.O, we are of the considered view that the same had been arrived at by loosing sight of the fact that the "capital losses" in question had been brought forward from the earlier years and had been determined and allowed to be carried forward by the A. while framing the assessment for A.Y 2012-13, vide his order passed u/s 143(3), date 19- 3-2015 and had not arisen during the year under consideration i.e A.Y 2013-14. Accordingly, the claim of the A.O that the "capital losses"
b/forward from the earlier years, pertaining to a source of income that was exempt from tax was thus not to be carried forward to the subsequent years, being devoid of any merit, is thus rejected. 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 17 ITA 2070/MUM/2025 ALIBABA. COM SINGAPORE E COMMERCE PRIVATE LIMITED 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 hereinabove 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 is no impedement in segregating capital losses and capital gains from different source of income under the head 'capital gains' for the purpose 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."
7. It is relevant to understand the scheme of the act, to find out if the capital gains earned by the assessee from sale of shares that does not form part of total income of virtue of DTAA would enter the computation of total income. Section 4 of the act is the charging section that describes the rates on income charged for a particular assessment year. Section 2(45) defines the total income to be the amount of income referred to section 5 and computed in the manner laid down in the Act. Section 14 of the act categorises income under various heads of income like salaries, income from house property, profit and gains from business of profession, capital gains and income from other sources. Section 66 to 80 deals with the aggregation of income and set off /carry forward of loss.
7.1. Hon'ble Bombay High Court in case of CIT vs. M. N. Raigi reported in (1949) 17 ITR 180 considered as to whether share income of a partner which does not form part of the total income, is to be added to the total income in order to determine the rate at which income tax was payable by the partner. Section 16 of Income tax Act 1922, corresponding to section 66 of the Income tax Act 1961 was subject matter for consideration in the aforesaid decision. Hon'ble Court after analysing the scheme of computation observed and held as under :
Now, the scheme of the Indian Income-tax Act is that income, profits and gains of an assessee are liable to tax subject to certain exemptions and exceptions. Although certain sums may be exempted from taxation, still they may form part of the total income of an assessee in order to determine the rate at which income-tax is payable. Therefore it follows that the total income of an assessee is not necessarily wholly subject to tax. Portions of it may be exempt from taxation and yet may be computed for the purpose of determining the rate at which tax is payable. Mr. Joshi's 18 ITA 2070/MUM/2025 ALIBABA. COM SINGAPORE E COMMERCE PRIVATE LIMITED contention is that all sums which are exempted from taxation must still be brought into the total income of the assessee for the purpose of determining the rate at which income-tax is payable, except where the statute in terms excludes these sums from the total income of the assessee. It is pointed out that in Section 4, sub-section (3), certain incomes, profits or gains falling within the classes mentioned in that sub- section are not to be included in the total income of the person receiving the income, and Mr. Joshi argues that except in these cases, in every other case, although the tax is not payable on certain sums, they must be included in the total income for the purpose of determining the rate. It is therefore argued that although under Section 25(4) an exemption is given to the assessee because there is a succession to the business carried on and no tax is payable by the assessee, the sum which is exempted under this sub-section does form part of the total income for the purpose of determining the rate. Total income is defined in Section 2(15) of the Act, and it means total amount of income, profits and gains computed in the manner laid down in this Act. Therefore, it would be erroneous to suggest that total income is to be determined only in the light of Section 4, sub- section (3), of the Act. How total income is to be computed and determined depends upon the various provisions contained in the Act as a whole. Then we might look at various sections which provide for exemptions from the payment of tax. There is Section 7 which contains various provisos which cover sums not liable to tax. Similarly Section 8. Section 14 also contains exemptions with regard to certain sums on which no tax is payable, and Section 15 contains exemptions in cases of life insurance. It will be noticed that the language used in all these sections, to which I have referred, is similar, if not indentical, with the language used in Section 25(4), viz., that the tax is not payable on these different sums. Now, if Mr. Joshi's contention was sound, then with regard to these various exemptions which I have enumerated, although tax is not payable, they should all be included in the total income for the purpose of determining the rate payable in respect of income-tax. Now, the short and conclusive answer to that contention is Section 16 of the Indian Income- tax Act. It is that section which in terms includes in the total income of an assessee only certain sums which are exempted from the payment of tax. Therefore, by implication, where the sums are not included in the total income by Section 16, those sums are not only exempted from the payment of tax, but they are also excluded from the total income. Now, when we look at Section 16, it does not include the sum covered by Section 25(4) as a sum which is to be included in the total income of the assessee. The scheme, therefore, of the Income-tax Act is clear and is very different from what Mr. Joshi suggests it is. The scheme is that wherever one finds an exemption or exclusion from payment of tax, the exemption or exclusion also operates for the purpose of computing the total income. Not only is the sum not liable to tax, but it is also not to form part of the total income for the purpose of determining the rate. When the Legislature 19 ITA 2070/MUM/2025 ALIBABA. COM SINGAPORE E COMMERCE PRIVATE LIMITED indends that certain sums, although not liable to tax, should be included in the total income, it expressly so provides, as it is done in Section 16, and therefore Prima facie, when we come to Section 25(4) and when we find that the assessee is not liable to pay tax on the sum received by him as his share of the partnership, that sum cannot and does not form part of his total income. Mr. Joshi has not succeeded in pointing out to us any provision in the Act whereby this particular sum covered by Section 25 (4) has been made a part of the total income of the assessee. Therefore, in my opinion, the share of the profit of the assessee in the firm of S.B. Billimoria & Co., in the accounting year 1942 cannot be included in the total income of the assessee for ascertaining the rate of income-tax.
7.2. It is thus clear from the above observation from the Hon'ble Bombay high court that, income does not form part of the total income do not enter the computation of the total income at all applying the above principle above ratio to the present facts of the case the capital gains that are already exempt under the DTAA which are binding on the parties being exempt in India, cannot enter the computation of total income of assessee in India. Therefore, setting off the loss suffered by the assessee from sale of shares of Maharana, against the gains earned from sale of shares of Maharana would tantamount to taxing the gain in India which is in violation of Article 13(3)(4) of DTAA as it stood prior to amendment.
8. Now we shall examine the provision relating to carry forward of the loss suffered from sale of shares of Maharana the assessee in the present case as carry forwarded long-term capital loss as per section 74 of the Act. Reference is made to the CBDT Circular No. 22 of 1944 dated 29/07/1944 that states that: "If the total income is a loss it has to be carry forwarded subject to the provisions us. 24(2) of the Indian income tax act 1922 and cannot be set off against any income which does not form part of the total income." The circular also stated that, "the non resident otherwise would not get any relief in the Indian Taxation on account of loss incurred by in India." Accordingly the Ld.AO is directed to grant the carry forward of the loss as claimed by the assessee."
37. In light of aforesaid discussion, we find merit in the contention advanced by the ld AR that where the assessee wishes not to claim the tax treaty benefit and seeks to be governed by the provisions of the Act, the assessee be allowed to carry forward short-term capital losses incurred during the year amounting to Rs. 53,13,457/- on sale of specified listed and unlisted shares to subsequent years without setting off the same against the short term capital gains. The Assessing officer is directed accordingly to allow carry forward of short term capital losses amounting to Rs 53,13,457/- and in respect of gross short term capital gains, the Assessing officer is directed to allow the benefit of Article 13(4) 20 ITA 2070/MUM/2025 ALIBABA. COM SINGAPORE E COMMERCE PRIVATE LIMITED of India- Singapore DTAA as we have discussed above. In the result, the additional ground of appeal is allowed."
6.1. Respectfully following the aforesaid judicial precedents, particularly the decision of the Coordinate Bench in the case of Prashant Kothari v. Int. Tax Ward 3(1)(1) (supra) , which in turn relied upon the decisions in Matrix Partners India Investment Holdings LLC v. DCIT, Joint CIT v. Montgomery Emerging Markets Fund (supra) and various other decisions discussed hereinabove, we are of the considered opinion that each investment/transaction giving rise to capital gains or capital losses constitutes a separate source of income. The assessee, therefore, is entitled to avail the benefit of the provisions of the Act or the applicable DTAA, whichever is more beneficial, in terms of section 90(2) of the Act, qua each such source of income.
6.2. In case of Prashant Kothari v. Int. Tax Ward 3(1)(1) (supra), the assessee therein claimed benefit of Article 13(4A) of the India-
Singapore DTAA in respect of long-term capital gain arising on transfer of shares of one, 97 Communications Limited, which were admittedly acquired prior to 01.04.2017. At the same time, the assessee therein chose to be governed by the provisions of the Act in respect of the long-term capital loss arising from transfer of shares of Snapdeal and sought carry forward thereof under the provisions of the Act.
6.3. In our considered opinion, such a course of action is permissible in law and cannot be faulted merely because the 21 ITA 2070/MUM/2025 ALIBABA. COM SINGAPORE E COMMERCE PRIVATE LIMITED assessee opted for treaty benefit in respect of one source of income and provisions of the Act in respect of another source of income.
6.4. We are unable to concur with the view taken by the Ld.AO/DRP that all the transactions giving rise to capital gains/losses are required to be compulsorily aggregated and subjected uniformly either to the provisions of the Act or to the DTAA. Such an approach, in our view, overlooks the settled distinction between "source of income" and "head of income", as explained by the Hon'ble Special Bench in Joint CIT v. Montgomery Emerging Markets Fund (supra). Merely because the transactions fall under the common head "Capital Gains" would not obliterate their independent character as separate sources of income.
6.5. We further note that the capital gains arising from transfer of shares acquired prior to 01.04.2017, being governed by Article 13(4A) of the India-Singapore DTAA, do not form part of the taxable income in India. Consequently, such exempt gains cannot be forced into the computation mechanism under the Act for the purpose of setting off losses arising from other transactions. The approach adopted by the Revenue effectively results in indirect taxation of gains which are otherwise not taxable in India under the DTAA and is therefore contrary to the scheme of section 90(2) of the Act and the settled legal position explained in the judicial precedents referred to hereinabove.
Accordingly, we hold that the assessee was justified in claiming exemption under Article 13(4A) of the India-Singapore DTAA in 22 ITA 2070/MUM/2025 ALIBABA. COM SINGAPORE E COMMERCE PRIVATE LIMITED respect of long-term capital gains arising from transfer of shares acquired prior to 01.04.2017 and simultaneously claiming carry forward/set off of long-term capital loss under the provisions of the Act in respect of other transactions. We, therefore, direct the Ld.AO to grant the treaty benefit as claimed by the assessee and delete the addition made on account of alleged non-disclosure of capital gains under the Act.
Accordingly, the grounds raised by the assessee stand allowed.
In the result the appeal filed by the assessee stands allowed.
Order pronounced in the open court on 11th May, 2026.
Sd/- Sd/-
ARUN KHODPIA BEENA PILLAI
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai
Dated: 11/05/2026
Sc. Sr. P.S.
23
ITA 2070/MUM/2025
ALIBABA. COM SINGAPORE E
COMMERCE PRIVATE LIMITED
Copy to:
ALIBABA. COM SINGAPORE E COMMERCE PRIVATE LIMITED , C/O OF RBC & ASSOCIATES LLP, KIND ATTN MR. RAJAN VORA / MR. PRANAY GANDHI 12TH FLOOR, THE RUBY 29, 1 SENAPATI BAPAT MARG, DADAR (WEST), MUMBAI-400028, MAHARASHTRA DEPUTY COMMISSIONER OF INCOME TAX INTERNATIONAL TAX CIRCLE 1(1)(1), 2 ROOM NO. 534, 5TH FLOOR, KAUTILYA BHAVAN, C -41 TO C-43 G BLOCK BANDRA KURLA COMPLEX BANDRA EAST MUMBAI, MUMBAI-400051, MAHARASHTRA 3 THE PCIT / CIT, 4 THE D.R., ITAT, MUMBAI BENCH 5 GUARD FILE TRUE COPY ASSISTANT REGISTRAR / SR. PRIVATE SECRETARY I.T.A.T., MUMBAI 24