2020 (7) TMI 742 - AT - Income Tax

Disallowance of claim of set-off of B/f unabsorbed Short Term Capital Loss against the current year s income from Short Term Capital Gain - claim of the assessee is not tenable in view of the fact that in his statement recorded u/s 132(4), the assessee has not claimed the adjustment of brought forward loss on account of the short term capital gain declared - whether or not, the brought forward short term capital loss which has been duly allowed by the department in the earlier years is eligible to be set off against the short term capital gains of the current year declared by the assessee ? - HELD THAT - We find that the assessee has filed the computation of income correctly. The computation filed is as per the scheme of computation provided in the Income Tax Act. The provisions of Section 74 clearly provides for set off of short term capital losses which can be allowed to be carried forward and set off against income, if any, under the head capital gains assessable for the assessment year in respect of any other capital asset. The statute confers carry forward and set off of losses hence the same cannot be denied in the absence of any specific provisions or conditions laid down in the same statute to disallow such benefits. It is a fact on record that the short term capital loss which has been incurred in the assessment year 2007-08 and the same has been allowed by the revenue to be carried forward till the assessment year 2010-11, hence, the same cannot be disallowed to be set off against the short term capital gain earned by the assessee during the assessment year 2011-12. Appeal of the assessee is allowed.

Summary

Issues:
Disallowance of set-off of unabsorbed short term capital loss against current year's income from short term capital gain.

Analysis:
The appeal was filed against the order of the ld. CIT(A)-16, New Delhi, where the assessee raised grounds regarding the disallowance of the claim of set-off of unabsorbed short term capital loss against the current year's short term capital gain. The assessee declared short term capital gains of ?15,22,00,000, which was offered for tax during search and seizure proceedings under section 132(4) of the Income Tax Act, 1961. The Assessing Officer disallowed the set-off of the brought forward short term capital loss of ?49,83,312 against the short capital gain declared in the current year, citing that the claim was not made during the statement recorded under section 132(4).

The issue before the tribunal was whether the brought forward short term capital loss, allowed by the department in earlier years, is eligible to be set off against the short term capital gains of the current year. The tribunal noted that the assessment year under consideration was framed after a search action and found no merit in the Assessing Officer's contention that the assessee did not claim adjustment of the brought forward loss during the statement recorded under section 132(4). The tribunal emphasized that the Assessing Officer cannot expect the assessee to seek such set off on their own or for the authorized officer to inquire about brought forward losses during the statement recording.

The tribunal observed that the computation of income filed by the assessee was in accordance with the provisions of the Income Tax Act. Section 74 of the Act allows for the set off of short term capital losses against income assessable under the head "capital gains." Since the short term capital loss had been allowed to be carried forward till the relevant assessment year, the tribunal held that disallowing the set off against the short term capital gain earned in the current year was not justified. Therefore, the tribunal allowed the appeal of the assessee, emphasizing the statutory provisions allowing for carry forward and set off of losses without specific conditions to disallow such benefits.

In conclusion, the tribunal ruled in favor of the assessee, allowing the set-off of the unabsorbed short term capital loss against the current year's income from short term capital gain.