ITAT Pune has permitted a fresh India-Singapore Double Taxation Avoidance Agreement (DTAA) claim for ₹17.15 lakh mutual fund gains, directing the Assessing Officer to verify and recompute tax liability. The assessee, a non-resident individual working in Singapore, filed his return of income on June 26, 2024, declaring total income of ₹17,73,990 including capital gains of ₹17,15,446 from mutual fund units. The Centralised Processing Centre processed the return under Section 143(1) on September 6, 2024, accepting the returned income without making any adjustment. The tax liability of ₹1,70,372 was adjusted against the available TDS credit.
While the assessee claimed the full tax exemption towards the capital gains under Article 13(5) of the India-Singapore DTAA, the tax authorities dismissed the appeal without examining the treaty claim on merits. The Additional/Joint Commissioner (Appeals) dismissed the appeal, stating that Section 246(1)(a) permitted an appeal against an intimation under Section 143(1) only where the assessee objected to adjustments made during processing. Since CPC had accepted the return exactly as filed, there was no adjustment against which an appeal could be maintained. The omission to claim a benefit in the original return did not, by itself, prevent its consideration at the appellate stage.
The Tribunal followed the jurisdictional Bombay High Court's judgment in Pruthvi Brokers & Shareholder case, which dismissed the Revenue's appeal and upheld the Tribunal's order where new claims made by the assessee were allowed. The ITAT set aside the first appellate order and directed the assessee to furnish a revised computation concerning the capital gains before the jurisdictional Assessing Officer. The Assessing Officer was directed to recompute the tax liability according to the facts and law, in light of the Mumbai Tribunal's decision in Mrs. Anushka Sanjay Shah. Any consequential refund was to be granted after verification of documents relating to the capital gains, with the assessee given reasonable opportunity of hearing.
The decision supports consideration of a fresh treaty claim in appellate proceedings even where CPC has processed the return without adjustment and the assessee himself had originally offered the income to tax. Amit Gupta, Partner at Saraf and Partners, described this as a significant judgment premised on the underlying ethos of investment-based tax deductions under the Income Tax Act. The judgment clearly relays that the substance of the transaction has to be looked into especially from the fund flow/reinvestment perspective, with the taxpayer demonstrating through gift deed and bank statements that the wife's contribution was actually gifted by him.
