9911796707
TMI Blog2009 (7) TMI 908X X X X Extracts X X X X X X X X Extracts X X X X ..... ongkong) Limited, which is registered as Foreign Institutional Investor. During the year, the assessee earned income from capital gains on sale of shares and also dividend income. The following working of short-term capital gain was declared by the assessee :- Rs. "Short-term capital gain (up to Sept. 30, 2004) 3,654,959 Less : Short-term capital loss (up to Sept. 30, 2004) (814,966) Less : Short-term capital loss (post Sept. 30, 2004) (2,839,993) Total NIL Short-term capital gain (post Sept. 30, 2004) 47,216,333 Less : Short-term capital loss (post Sept. 30, 2004) (14,083,881) Total taxable capital gains 33,132,452" 4 . On perusal of this working, the Assessing Officer noted that the assessee had set-off short-term capital loss taxable under section 111A (at the rate of 10 per cent) against the short term capital gain (others) earned during the period 1-4-2004 to 30-9-2004 taxable under section 115AD (at the rate of 30 per cent). He did not approve the computation done by the assessee, as in his opinion it was incumbent upon the assessee to first work out the short-term capital gain and short term capital loss under the head "Others" and under section 111A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter of set-off, he relied on the Special Bench order of the Tribunal in the case of Jt. CIT v. Montgomery Emerging Markets Fund [2006] 100 ITD 217 (Mum.). While referring to the judgment of the Hon'ble High Court in the case of J.C. Thakkar v. CIT [1955] 27 ITR 658 (Bom.), the learned A.R. contended that the interpretation in favour of the assessee was to be adopted. For the same proposition, he relied on the order passed by the Tribunal in the case of ITO v. V.R. Nimbkar [1986] 19 ITD 714 (Bom.). 6. In the opposition the learned Departmental Representative submitted that section 111A was introduced with effect from 1-4-2005 providing for taxation of short-term capital gains on certain transactions which were chargeable to securities transactions tax at the reduced rate of 10 per cent. He also took us through section 115AD which provides that where the total income of a foreign institutional investor includes income by way of short-term capital gains arising from the transfer of securities, the income-tax is to be calculated at the rate of 30 per cent on such income. It was submitted that the assessee was trying to shift certain income chargeable to tax at the rate of 30 per cent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at period and the remaining amount of Rs. 28.39 lakhs (Rs. 36.54 lakhs - Rs. 8.14 lakhs) be taxed at the rate of 30 per cent. 8. At this juncture, it will be relevant to consider the language of section 70, which runs as under : "70. (1) Save as otherwise provided in this Act, where the net result for any assessment year in respect of any source falling under any head of income, other than 'capital gains', is a loss, the assessee shall be entitled to have the amount of such loss set-off against his income from any other source under the same head. (2) Where the result of the computation made for any assessment year under sections 48 to 55 in respect of any short-term capital asset is a loss the assessee shall be entitled to have the amount of such loss set-off against the income, if any, as arrived at under a similar computation made for the assessment year in respect of any other capital asset. (3) Where the result of the computation made for any assessment year under sections 48 to 55 in respect of any capital asset (other than a short-term capital asset) is a loss, the assessee shall be entitled to have the amount of such loss set-off against the income, if any, as arrived a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t-term capital gain. So the option which is available to the assessee for setting off the short-term capital loss against the short-term capital gain or long-term capital gain, is not there when there is a long-term capital loss, which can be set-off only against the long-term capital gain and not against the short-term capital gain. 11. In the present appeal, the controversy is still narrower inasmuch as the short-term capital loss which was set-off by the assessee against the short-term capital gain, has been accepted and the net figure of short-term capital gain after set-off of short-term capital loss continues to remain the same. The dispute is only about the choice of setting off of short-term capital loss suffered after the cut-off date against the short-term capital gain earned prior to the cut-off date. This position has arisen due to the introduction of section 111A for the first time from this year only which provides for lower rate of tax on short-term capital gains arising on the transactions which have suffered securities transaction tax. It is further pertinent to mention that such dispute is relevant only for the first year of the operation of this provision and ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed when the language of sub-section (3) of section 70 is considered, which specifically prohibits the setting off of long term capital loss against short-term capital gain. It has been provided in unambiguous words in sub-section (3) that the long-term capital loss can be set off only against long-term capital gain and not against the short-term capital gain. If the intention of the Legislature had been not to confer the choice on the assessee in the matter of setting off of the short-term capital loss suffered in the post cut-off date against the short-term capital gain of the pre-cut-off date, it would have clearly set out such intention in the language of sub-section (2) itself, as has been done in sub-section (3). In the absence of any stipulation in this regard in sub-section (2), we are satisfied that the choice has been left over to the assessee in taking decision about the setting off of short-term capital loss from one transaction against any other short-term capital gain, whether within or outside the cut-off date. If higher benefit pours in from the exercise of the option in a particular way vis-a-vis the lower benefit resulting in the other way, then the higher benefit ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
