1987 (4) TMI 4 - SC - Income Tax

Sale of investment - Capital Loss - section 24(3) - such loss can be carried forward and set off against capital gains in subsequent year

Summary

Issues:
1. Rejection of claim for set off of capital loss by the Income-tax Officer.
2. Dismissal of appeal by the Appellate Assistant Commissioner based on notional nature of loss.
3. Tribunal's decision on entitlement to set off of loss under the old Act.
4. Interpretation of provisions of section 80 of the Income-tax Act, 1961.
5. Merger of Income-tax Officer's order with Appellate Assistant Commissioner's order.
6. Application of relevant provisions under the 1922 Act and the 1961 Act.

Analysis:

The case involves an appeal challenging the rejection of a claim for set off of capital loss by the Income-tax Officer for the assessment year 1965-66. The assessee, a private limited company, disclosed capital gains but sought to set off a capital loss sustained in the assessment year 1957-58. The Income-tax Officer disallowed the claim, stating the loss was notional and not genuine. The Appellate Assistant Commissioner upheld this decision, leading to the assessee's appeal before the Tribunal.

The Tribunal concluded that the assessee was entitled to the set off of the loss under the old Act, as the Income-tax Officer failed to compute the loss or pass an adverse order. The Tribunal found that the Appellate Assistant Commissioner's characterization of the loss as notional was unjustified. The High Court examined the provisions of the 1922 Act and the 1961 Act, emphasizing that the Income-tax Officer had indeed computed the loss in the assessment order for 1957-58.

Regarding the interpretation of section 80 of the 1961 Act, the High Court held that the claim of set off was admissible, despite the wording of the section. The Court agreed with the Tribunal's decision and found against the Revenue. The Court highlighted the continuity of benefits under the old Act in the new Act, supporting the admissibility of the set off claim.

The judgment addresses the issue of merger of the Income-tax Officer's order with the Appellate Assistant Commissioner's order, emphasizing the correctness of the Tribunal's decision and dismissing the appeal with costs. The Court's analysis focused on the relevant provisions of the Acts, ensuring the assessee's entitlement to the set off of the loss, ultimately upholding the Tribunal's decision and rejecting the Revenue's appeal.