1992 (5) TMI 43 - AT - Income Tax

Capital Asset, Long-term Capital Gains, Loss On Sale, Short-term Capital Loss, Words And Phrases

Summary

Issues:
1. Interpretation of provisions regarding set off of short-term capital loss against long-term capital gains under section 80T of the Income Tax Act.
2. Applicability of section 70(2)(i) and section 71(3) in determining the set off of capital gains and losses.
3. Comparison of legal positions under section 70(2)(i) and section 71(3) in the context of capital gains taxation.

Analysis:
The judgment pertains to two appeals by the Revenue concerning the income-tax assessments of an assessee involving long-term capital gains and short-term capital losses from the sale of shares for the assessment years 1982-83 and 1983-84. The main contention was whether the short-term capital loss should be set off against long-term capital gains before allowing relief under section 80T of the Income Tax Act. The Revenue argued that as per section 70(2)(i), the short-term capital loss must be set off against long-term capital gains. However, the assessee relied on section 71(3) to support the position that the short-term capital loss should be adjusted against income from other heads, not against long-term capital gains.

The Tribunal analyzed the provisions of section 70(2)(i) and (ii) along with section 71(3) of the Act. It concluded that section 70(2)(i) pertains to set off of short-term capital loss against short-term capital gains, while section 71(3) allows for set off of losses from one head against income from another. The Tribunal found the Revenue's argument untenable, emphasizing that section 70(2)(i) does not mandate set off of short-term capital loss against long-term capital gains. It clarified that section 71(3) specifically enables set off of short-term capital loss against income from other sources, supporting the assessee's position.

The Tribunal referenced the Madras High Court decisions in similar cases to support its interpretation. It highlighted that the language of the statute and the provisions of sections 45 and 48 of the Act indicate that capital gains should be computed without adjusting any other losses. Therefore, the Tribunal upheld the Dy. Commissioner (Appeals)' decision to allow relief under section 80T for the entire long-term capital gains without offsetting the short-term capital losses. The appeals by the Revenue were dismissed, confirming the orders of the Dy. Commissioner (Appeals).