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TMI Blog2011 (4) TMI 721X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act but the computation under sections 48 to 55 of the Act - The Assessing Officer is therefore directed to accept the claim of the assessee in this regard - The appeal of the assessee is accordingly allowed. - 3190 (MUM.) OF 2010 - - - Dated:- 8-4-2011 - N.V. VASUDEVAN, PRAMOD KUMAR, JJ. Paresh Saparia for the Appellant. Smt. Ashima Gupta for the Respondent. ORDER N.V. Vasudevan, Judicial Member. This is an appeal by the assessee against the order dated 28-1-2010 of CIT(A)-XXXV, Mumbai, relating to assessment year 2004-05. 2. The grounds of appeal of the assessee read as follows: "1. The Learned CIT(A) erred in non-granting set off of indexed long term capital loss against non-indexed long term capital gains. 2. The set off of indexed long term capital loss against non-indexed long term capital gains requires to be allowed." 3. The assessee is an individual. He carries on the business of share trading. For assessment year 2004-05, he filed a return of income offering income under the head "Capital Gains" as follows: INCOME FROM CAPITAL GAINS: Long Term Capital Gain/Loss As per Statement No. 1 attached ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her than capital indexed bonds issued by the Government : Provided also that where shares, debentures or warrants referred to in the proviso to clause (iii) of section 47 are transferred under a gift or an irrevocable trust, the market value on the date of such transfer shall be deemed to be the full value of consideration received or accruing as a result of transfer for the purposes of this section : Provided also that no deduction shall be allowed in computing the income chargeable under the head "Capital gains" in respect of any sum paid on account of securities transaction tax under Chapter VII of the Finance (No. 2) Act, 2004. Explanation. For the purposes of this section, (i) "foreign currency" and "Indian currency" shall have the meanings respectively assigned to them in section 2 of the Foreign Exchange Regulation Act, 1973 (46 of 1973); (ii) the conversion of Indian currency into foreign currency and the reconversion of foreign currency into Indian currency shall be at the rate of exchange prescribed in this behalf; (iii) "indexed cost of acquisition" means an amount which bears to the cost of acquisition the same proportion as Cost Inflation Index for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f income-tax calculated on such long-term capital gains at the rate of twenty per cent : Provided that where the total income as reduced by such long-term capital gains is below the maximum amount which is not chargeable to income-tax, then, such long-term capital gains shall be reduced by the amount by which the total income as so reduced falls short of the maximum amount which is not chargeable to income-tax and the tax on the balance of such long-term capital gains shall be computed at the rate of twenty per cent ; (b) in the case of a domestic company, (i) the amount of income-tax payable on the total income as reduced by the amount of such long-term capital gains, had the total income as so reduced been its total income; and (ii) the amount of income-tax calculated on such long-term capital gains at the rate of twenty per cent; (c) in the case of a non-resident (not being a company) or a foreign company, (i) the amount of income-tax payable on the total income as reduced by the amount of such long-term capital gains, had the total income as so reduced been its total income; and (ii) the amount of income-tax calculated on such long-term cap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nst the long term capital gain of Rs. 69,86,923 + 2,65,054. While computing the long term capital loss the assessee availed of the benefit of indexation as per the second proviso to section 48 of the Act. However, while computing the long term capital gain the assessee did not avail the benefit of indexation and rather took the benefit of proviso to section 112(1) of the Act by which long term capital gain was taxable only at 10 per cent as against the normal rate of 20 per cent had the benefit of indexation been claimed. 7. The question before the Assessing Officer was whether the set off of long term capital loss against the long term capital gain as claimed by the assessee could be allowed. The claim for such set off is to be decided in accordance with the provisions of section 70(3) of the Act. We shall extract the entire provisions of section 70 of the Act as the same would be relevant while dealing with the arguments advanced before us by the parties. The provisions of section 70 of the Act, read as follows: "70. Set off of loss from one source against income from another source under the same head of income. (1) Save as otherwise provided in this Act, where the net resul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without benefit of indexation the assessee has earned long term capital gain of Rs. 3,46,571. The long term capital gain of Rs. 2,65,054 being item No. 2 of the computation of long term capital gain, is the net result of long term capital gain computation as follows: Actual long term capital gain on sale of shares was Rs. 38,51,126. The assessee claimed exemption under section 54F to the extent of Rs. 35,86,072 which was allowed only to the extent of Rs. 17,86,476. Thus long term capital gain was determined at Rs. 20,64,650. 10. The Assessing Officer accordingly determined the long term capital gain of the assessee as follows: As per statement No. 1 (as discussed actual loss) Rs. 3,46,571 As per statement No. 2 (recomputed above) Rs. 20,64,650 As per statement No. 3 Rs. 69,86,923 Rs. 87,05,002 11. On appeal by the assessee the CIT(A) by order dated 26-11-2007 allowed the assessee s appeal and directed the Assessing Officer to accept the computation of capital gain as claimed by the assessee. On further appeal by the revenue, the ITAT in ITA No. 962/Mum./2008 by order dated 8-9-2009 directed the CIT(A) to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de this issue to the file of CIT(A). Thus the Hon ble Tribunal was aware of the fact that the words "similar computation" in section 70(3) were not examined in depth while dealing with the case of Mohanlal N. Shah. I find that the crux of the issue involved in this appeal revolves around the interpretation of words "under similar computation" in section 70(3). This means that only if the capital gains and capital losses are made under similar computation, the set off could be allowed and not otherwise. In this circumstances, I find that the Assessing Officer has correctly restricted the set off of capital loss by reworking the same without indexation and set off the same against non-indexed Long Term Capital Gains. The order of the Assessing Officer is perfectly in order as per the language of section 70(3) and I do not find any reason to interfere with the assessment order and the same is confirmed." 12. Aggrieved by the order of the CIT(A), the assessee is in appeal before the Tribunal. 13. We have heard the rival submissions. The learned counsel for the assessee submitted that the expression "similar computation" as used in section 70(3) of the Act refers to the computation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all 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." 16. A plain reading of the provisions of section 70(3) of the Act shows that the first part of the provisions refers to a loss as computed under sections 48 to 55 of the Act in respect of any capital asset. The second part of the provisions refers to income if any as arrived at under similar computation. Thus the second part refers only to the mode of computation under sections 48 to 55 and that would be the correct interpretation. It cannot be said that the second part of the provisions by using the expression "similar computation", refers to a similar computation under either the second proviso to section 48 or proviso to section 112(1) of the Act. As rightly contended on behalf of the assessee, the provisions of section 70(3) of the Act existed much prior to the mode of computation of capital gain without applying the benefit of indexation which were introduced later by an Amendment in the year 2000. It cannot be therefore that the Legislature would ..... X X X X Extracts X X X X X X X X Extracts X X X X
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