2024 (6) TMI 148 - AT - Income Tax

Error in the computation of the capital gain - HELD THAT - Assessee claimed that the correct computation of capital gain is ₹ 859,680/ against ₹ 791,221/- taken by the learned assessing officer. Assessee has already filed an application under section 154 of the income tax act wherein 4 computational errors are pointed out. AO is directed to correct the same after verification. Accordingly those grounds are allowed for statistical purposes. Set-off of short-term capital loss against short-term capital gains - As per AO claim of the assessee who is having capital gains which are taxable at the rate of 15% where assessee has opted to set-off of losses having lowered taxability with gains of higher taxability is not in order - AO computed set-off of short-term capital loss is covered under section 111A of the income tax act against short-term capital gains chargeable to tax at the rate of 15% and further did not grant any set of on short-term capital gain which is chargeable to tax at the rate of 30% - As per assessee Short-term capital loss was set off against the net short-term capital gain on which no securities transaction taxes paid whereas as per revenue Short-term capital loss should be first set of against short-term capital gain on which securities transaction tax is paid - HELD THAT - According to section 70 (1) where assessee suffers loss in respect of any source under any head of income other than capital gain, assessee is entitled to have the amount of such loss set of against his income from any other source under the same had. Therefore, these provisions speaks about inter head adjustment other than the head of capital gains. For capital gains provisions of section 70 (2) of the act provides that where assessee suffers short-term capital loss, assessee shall be entitled to set off such losses against capital gain computed in a similar manner as under section 48 to 55 of the act. According to section 70 (3) of the act where assessee suffers long-term capital loss, assessee shall be entitled to set of such losses against long-term capital gains computed in similar manner as provided under section 48 to section 55 of the act. It is clear that section 48 to section 55 does not provide for rate of tax on capital gain. It specifically lays down the computation mechanism of capital gain and certainly not tax on such capital gains. Assessee has incurred short-term capital losse (which is subject to securities transaction tax) and also earned short-term capital gain (which is not subject to securities transaction tax and taxable as per section 115AD at the rate of 30%). Thus, assessee submits that that short-term capital loss on which securities transaction taxes paid, can be set of against the short-term capital gain which is not subject to securities transaction tax. Further such capital gain is also computed as per section 115AD of the act. It is not the case before us that either in the computation of short-term capital gains or short-term capital loss there is any difference in the manner of computation. Therefore, short-term capital gain arising during the year and short-term capital loss arising during the year are computed in a similar manner as provided under section 48 to section 55 of the income tax act. Further as we have already stated that section 48 to section 55 of the income tax act does not lay down any rate of tax payable on short-term capital gain. No reason to deprive the assessee from set-off of short-term capital losses suffered by the assessee for the same year against the short-term capital gains earned by the assessee. Such claim is in accordance with the provisions of section 70 (2) of the act. Thus we direct AO to allow set-off of short-term capital loss suffered by the assessee against short-term capital gain and allow ground of the appeal of the assessee.

Summary

Issues Involved:
1. Set-off of short-term capital loss against short-term capital gain.
2. Arithmetical errors in the computation sheet.
3. Levy of interest u/s 234A.

Summary:

Issue 1: Set-off of Short-term Capital Loss Against Short-term Capital Gain

Background: The assessee, a company registered in Mauritius, filed its return of income declaring a total income of Rs. 17,736,990 for the assessment year 2021-22. The assessee claimed set-off of brought forward short-term capital losses against short-term capital gains.

Assessee's Claim: The assessee argued that u/s 70 of the Income Tax Act, it is allowed to set off short-term capital losses against short-term capital gains irrespective of the tax rates applicable to these gains.

Revenue's Stand: The assessing officer (AO) contended that the set-off should be done in a manner where losses on gains taxable at 15% should not be set off against gains taxable at 30%, as per the income tax rules which provide separate columns for set-off and carry forward of losses.

Tribunal's Decision: The Tribunal held that u/s 70(2), the assessee is entitled to set off short-term capital losses against short-term capital gains computed in a similar manner as per sections 48 to 55 of the Act. The Tribunal found no reason to deprive the assessee of this set-off, supporting the assessee's claim with judicial precedents. Thus, the Tribunal directed the AO to allow the set-off of short-term capital losses against short-term capital gains irrespective of the tax rates.

Issue 2: Arithmetical Errors in the Computation Sheet

Assessee's Claim: The assessee pointed out errors in the computation of income from capital gains, stating that the correct income from capital gain is Rs. 859,680, whereas the AO computed it at Rs. 791,221. The assessee had filed an application u/s 154 for rectification, which was still pending.

Tribunal's Decision: The Tribunal directed the AO to correct the computational errors after verification. Thus, the grounds related to computational errors were allowed for statistical purposes.

Issue 3: Levy of Interest u/s 234A

Assessee's Claim: The assessee argued that the interest u/s 234A should not be levied as the return of income was filed within the extended time limit of 15/3/2022.

Tribunal's Decision: The Tribunal directed the AO to verify whether the return was filed within the due date and decide the issue accordingly. Thus, the ground related to the levy of interest u/s 234A was allowed to the extent of verification.

Conclusion:

All the appeals filed by the assessee were partly allowed, with the Tribunal directing the AO to allow the set-off of short-term capital losses against short-term capital gains irrespective of the tax rates, correct the computational errors, and verify the levy of interest u/s 234A.

Order pronounced in the open court on 31.05.2024.