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TMI Blog2009 (6) TMI 901X X X X Extracts X X X X X X X X Extracts X X X X ..... hout indexation) (hereinafter referred to as LTCG) as under: Indexed long-term capital loss : (Rs. 33,09,082) Long-term capital gains without indexation : Rs. 76,82,965 Net long-term capital gains : Rs. 43,78,883 During the course of assessment proceedings, the explanation of the assessee was that the provisions of section 70(3) of the Act provided that the loss arising from the transfer of a long-term capital asset shall be set off against the income arising from the transfer of long-term capital assets. It was further contended that section 70(3) of the Act does not differentiate between long-term capital loss/gain with indexation or without indexation. The Assessing Officer rejecting the claim of the assessee observed that section 70(3) of the Act contemplates that where there were more than one type of computation of long-term capital gain and if there was a loss made in one type of computation, such loss cannot be set off against the gain made in another type of computation. The set off of loss claimed by the assessee against the long-term capital gain was rejected by the Assessing Officer. Another reason for rejecting the claim of the assessee was that different sla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng-term capital asset. The learned authorised representative for the assessee reiterated the facts on record and the provisions of section 112(1)(d) of the Income-tax Act. Our attention was drawn to the computation of long-term capital loss and our attention was also drawn to the order of the Assessing Officer giving effect to the order of the Commissioner of Income-tax (Appeals) wherein the long-term capital gains without indexation of Rs. 76,82,965 has been adjusted against the revised long-term capital loss of Rs.50,75,853 resulting in further addition of Rs. 26,07,112. The learned authorised representative for the assessee placed reliance on the decision of the Delhi Bench of the Tribunal in the case of Devinder Prakash Kalra v. Asst. CIT [2005] 97 TTJ 372. The learned Departmental representative for the Revenue placed reliance on the provisions of section 70(3) of the Income-tax Act. It was further pointed out that section 112 of the Act does not form part of sections 48 to 55 under which capital gains were computed. The learned Departmental representative further brought to our notice in the proviso to section 112 of the Act, the word used is "shall". The learned Departmenta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... short-term or long-term is to be computed under the provisions of sections 48 to 55 of the Act. Under section 70 the set off of loss from one source against the income from another source is provided and section 70(3) of the Act reads as under: "70(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 at under a similar computation made for the assessment year in respect of any other capital asset not being a short-term capital asset." Section 70(3) of the Act postulates that for any assessment year where there is a loss in respect of long-term capital asset, 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 long-term capital asset. Section 112 of the Act provides for tax on long-term capital gains. Section 112 of the Act provides that where the total income of the assessee includes any income arising from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 112(1) of the Act. In respect of listed securities/units or zero coupon bonds, the option is available to the assessee, to compute the tax payable on the income arising on the transfer of such assets either by indexation of cost of acquisition or without indexation. The proviso to section 112(1) of the Act provides that where the assessee exercises the option of indexation of cost of acquisition and working out the tax on income from long-term capital gains with indexation, rate of tax applicable is 20 percent as provided under the Act. However, in case the assessee opts not to resort to the provisions of the second proviso to section 48, i.e., opts for long-term capital gain without indexation, then the tax is to be worked out at the rate of 10 percent of such amount of capital gain. In cases, where the assessee computes the income from longterm capital gains with indexation on which tax payable is at the rate of 20 percent of such gains and such tax exceeds 10 percent of the amount of capital gains worked out by the assessee without indexation, then the proviso to section 112 of the Act provides that the excess shall be ignored for computing the tax payable by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loss from one source as against the gain from another source under the same head of income, then the provisions of section 70 come into play. Section 70(1) clearly provides that 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 set off of such loss against his income from any other source under the same head. Section 70(2) provides that where as a result of the computation of income under sections 48 to 55 in respect of any short-term capital asset, if there is a loss, then the assessee shall be entitled to set off of the said loss against the income, if any, as arrived at under a similar computation made for the assessment year in respect of any other short-term capital asset. Section 70(3) of the Act provides for similar computation in respect of capital asset other than a short-term capital asset. Section 71 of the Act provides for set off of loss from one head against income from another head and section 72 provides for carry forward and set off of business losses. Reading the provisions of set off of carry forward losses against the income arising to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g on the transfer of short-term capital asset could be set off against the gain arising from the transfer of long-term capital asset. But after the amendment with effect from April 1, 2003, the amended provisions of section 70 do not allow such set off between the gain/loss arising on transfer of shortterm capital asset/long-term capital asset. The provisions of section 112 of the Act are only to be applied for working out the tax on long-term capital gains as clarified by us in paragraphs hereinabove. There are two methods of computing the tax on income arising from transfer of long-term capital asset, i.e., with indexation or without indexation and in case where the tax payable being 10 percent of the amount of capital gains without indexation is less than the tax worked out on transfer of long-term capital asset after indexation, then the assessee has an option of paying the lower amount of tax. The two methods of computing the gain/loss on transfer of long-term capital asset fall under the same head of income, i.e., capital gains on transfer of long-term capital asset. The spirit of section 70(3) covers all such transactions where the gains are arising on the transfer of long- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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