2018 (6) TMI 1800 - AT - Income Tax

Short Term Capital Loss (on which STT was paid) set off against the Short Term Capital Gain (on which STT is not paid) - AO held that the assessee cannot set off the short term capital gain (Non STT paid) against the short term capital loss of STT related transaction because the STCG earned on account of Non STT paid chargeable to tax @30% whereas assessee opted to set off STT paid STCL liable to tax@10% under section 111A against the STCG earned on account of non STT paid which is chargeable to tax @30% under the Act - HELD THAT - CIT(A) by following the decision in case of First State Investments (Hongkong) Ltd. 2009 (7) TMI 908 - ITAT MUMBAI , Fidelity Investment Trust Fidelity Overseas Fund 2009 (8) TMI 856 - ITAT MUMBAI and ADIT v. Legg Mason Asia (Ex Japan) Analyst Fund 2013 (11) TMI 361 - ITAT MUMBAI held that the assessee is entitled to set off STCL (STT paid) against STCG (non STT paid) transaction as computed during the year. Therefore, the assessing officer is directed to allow set off the STCG earned on (non STT) transaction. We have noted the ld. CIT(A) passed order by following the various orders of Tribunal, hence, we do not find any reasons to interfere with the order. No contrary decision was brought to our notice. Therefore, the ground of appeal raised by revenue is dismissed - Appeal filed by the revenue is dismissed.

Summary

Issues:
1. Allowance of set off of short term capital loss against short term capital gain.

Analysis:

The appeal and cross objection in this case pertain to the order of the ld. Commissioner of Income-tax (Appeals) for Assessment Year 2006-07. The main issue raised by the Revenue is regarding the set off of short term capital loss against short term capital gain. The Revenue contests the decision of the ld. CIT(A) to allow the set off of short term capital loss (STT paid) against short capital gain (Non STT paid) instead of setting it off against short term capital gain (STT paid) of a similar transaction. The Revenue also relies on a decision of the Karnataka High Court in a similar case. The brief facts reveal that the Assessing Officer rectified the set off of short term capital gain, leading to the appeal by the assessee.

The ld. CIT(A), in line with precedents from the Mumbai Tribunal, allowed the set off of short term capital loss (STT paid) against short term capital gain (non-STT paid) for the relevant transactions. The ld. CIT(A) directed the Assessing Officer to permit the set off, granting partial relief to the assessee. The Revenue, dissatisfied with this decision, filed the present appeal before the Tribunal.

During the hearing, the ld. AR of the assessee contended that the Revenue's appeal was covered by various decisions cited by the ld. CIT(A). The ld. AR submitted legal precedents in support of the order. On the other hand, the ld. DR for the Revenue relied on the Assessing Officer's order.

Upon considering the submissions and reviewing the orders of the authorities below, the Tribunal noted the Assessing Officer's stance on the taxability of short term capital gains. However, following the Mumbai Tribunal decisions, the ld. CIT(A) held that the assessee was entitled to set off the short term capital loss (STT paid) against the short term capital gain (non-STT paid) for the transactions in question. The Tribunal found no reason to interfere with the ld. CIT(A)'s order as it was consistent with the Tribunal's decisions and no contrary decision was presented. Consequently, the appeal filed by the Revenue was dismissed.

As a result of the dismissal of the Revenue's appeal, the discussion on the grounds raised by the assessee in its Cross Objection became academic. Therefore, the appeal of the Revenue was dismissed, and the cross objections of the assessee were deemed infructuous. The order was pronounced in open court on the specified date.