In a recent ruling, the Mumbai Income Tax Appellate Tribunal (ITAT) in the case of iShares ESG Aware MSCI ETF, held that short-term capital loss (STCL) on securities where Securities Transaction Tax (STT) is paid can be set off against short-term capital gains (STCG) from other sources even if those gains are taxed at a different rate.
The dispute was whether losses taxed at 15% (under section 111A of the Income Tax Act) could be set off against gains taxed at 30% (under section 115AD). The Revenue argued against this, invoking Section 70(2) to deny the set-off on the basis of different tax rates.
The Tribunal rejected the Revenue’s stance, clarifying that Section 70(2) only requires similar computation under sections 48 to 55 and does not distinguish between STT-paid and non-STT transactions.
By relying on prior rulings – including the iShares MSCI and JC Capital LLC cases – the ITAT emphasized that the Act allows such set-offs regardless of the applicable tax rates.
Accordingly, it directed the Assessing Officer to allow the set-off and ruled in favour of the assessee. The ruling not only provided relief to the taxpayer but also affirmed the precedence of judicial consistency over pending Revenue appeals.