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2014 (10) TMI 108 - HC - Income TaxSet off of STCG on transaction of shares against LTCG on sale of immovable property Held that - Sub-section (2) and (3) of section 70 clearly states that where the result of the computation made for any AY in respect of any short-term capital asset is a loss, the assessee shall be entitled to have the amount of such loss set off against the income, if any, as arrived at under a similar computation made for the assessment year in respect of any other capital asset -the assessee shall be entitled to have the amount of loss set off against the income, if any, as arrived at under a similar computation made for the AY in respect of any other capital asset not being a short-term capital asset the Tribunal also held the same Decided against revenue.
Issues:
1. Whether short term capital loss can be set off against long term capital gain under the Income Tax Act, 1961? Analysis: The primary issue in this case revolves around the interpretation of Section 70 of the Income Tax Act, 1961, regarding the set off of losses from one source against income from another source under the same head. The Revenue contended that a short term capital loss can only be set off against a short term capital gain and not against a long term capital gain. However, the appellate authorities, as supported by Circular No.8 of 2002 issued by CBDT, clarified that losses from transfer of short-term capital assets can be set off against any capital gains, whether short term or long-term. On this basis, both the appellate authorities upheld the deletion of disallowance of set off of short term capital loss against long term capital gains. Therefore, the crux of the judgment lies in the correct interpretation of the provisions of the Income Tax Act, 1961, and the relevant circular issued by CBDT. The court concluded that the language of the Act allows for the set off of short term capital losses against any capital gains, irrespective of whether they are short term or long term. As a result, the substantial question of law was answered in favor of the assessee, leading to the dismissal of the appeal by the Revenue.
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