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Issues Involved:
The judgment addresses three questions of law referred by the Revenue regarding the entitlement of the assessee to set off a loss against capital gains for the assessment year 1975-76. Question 1: The first issue revolves around whether the Appellate Tribunal was correct in allowing the assessee to set off a loss of Rs. 20,000 from the assessment year 1972-73 against long-term capital gains for 1975-76. The assessee claimed that a loss of Rs. 20,000 incurred in 1972-73 should be set off as a capital loss against the capital gains of 1975-76. The Income-tax Officer and the Appellate Assistant Commissioner rejected this claim, but the Tribunal ruled in favor of the assessee. Question 2: The second issue questions the sustainability of the Appellate Tribunal's view that the loss in 1972-73 was a capital loss under the head "Capital gains" and whether there was a transfer within the meaning of section 2(47) of the Act. The Tribunal's decision was based on the claim that the loss in 1972-73 was a capital loss and could be carried forward to subsequent years for set off against capital gains. The Commissioner's order allowed the loss to be carried forward but did not specify it as a loss under section 45 of the Act. Question 3: The final issue pertains to whether, considering the provisions of section 74 of the Income-tax Act, the assessee was entitled to set off the loss of Rs. 20,000 from 1972-73 against long-term capital gains for 1975-76. The judgment delves into the nature of the loss claimed by the assessee, which arose from a deposit made in a company that was wound up. The court analyzes whether this loss qualifies as a capital loss eligible for carry forward and set off against capital gains. The court examined the contentions of both parties, with the Revenue arguing that the loss was not a capital loss as per section 45 of the Act, while the assessee's counsel contended that the loss should be considered a capital loss based on the Commissioner's order allowing it to be carried forward. The court concluded that the loss claimed by the assessee did not meet the criteria to be considered a capital loss under section 45 of the Act. It emphasized the necessity of a transfer of capital assets for a loss to be treated as a capital loss, citing relevant legal precedents to support its decision. In light of the above analysis, the court answered all three questions of law in favor of the Revenue, denying the assessee's claim for set off and awarding costs to the Revenue.
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