2012 (5) TMI 55 - AT - Income Tax

Set off of short term capital loss on transaction Security Transaction Tax had been paid against short term capital gain arising from non STT transactions - Held that - Under the provisions of section 70(2), short term capital loss arising from any asset can be set off against short term capital gain arising from any other asset under a similar computation made - merely because the two set of transactions are liable for different rate of tax it cannot be said that income from these transactions does not arise from similar computation made as computation in both the cases has to be made in similar manner under the same provisions in favour of assessee

Summary

Issues:
Set off of short term capital loss from STT paid transactions against short term capital gain from non STT transactions.

Analysis:
The appeal dealt with the issue of whether short term capital loss from Security Transaction Tax (STT) paid transactions could be set off against short term capital gain from non-STT transactions. The Assessing Officer (AO) disallowed the set off, citing different tax rates for the transactions. The assessee, a Foreign Institutional Investor (FII), argued that there was no restriction on set off under Section 70(2) and referred to relevant case laws supporting their position. The Commissioner of Income Tax (Appeals) agreed with the assessee, emphasizing that income computation precedes tax rate application. The Tribunal also considered previous decisions, including the case of First State Investments (Hong Kong) Ltd. vs. ADIT, and held that short term capital loss from STT paid transactions could indeed be set off against short term capital gain from non-STT transactions. The Tribunal upheld the CIT(A)'s decision, dismissing the revenue's appeal.

In summary, the Tribunal's judgment clarified that short term capital loss from STT paid transactions can be set off against short term capital gain from non-STT transactions, as both types of income arise from a similar computation process. The decision was based on the interpretation of relevant provisions and previous case laws, ultimately affirming the assessee's entitlement to the set off.