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TMI Blog2022 (4) TMI 684X X X X Extracts X X X X X X X X Extracts X X X X ..... me [long term capital gain u/s 10(38)], there would be an absurd outcome. We find that the lower authorities are not justified in setting off losses against the exempted long-term capital gain thereby reducing the quantum of carry forward of losses claimed by the assessee. We therefore direct the Ld. AO to allow full carry-forward of losses as claimed by the assessee without set-off against exempted long-term capital gain. Appeal of assessee allowed. - I.T.A. No. 1546/Ahd/2019 - - - Dated:- 13-4-2022 - Smt. Annapurna Gupta, Accountant Member And Ms. Madhumita Roy, Judicial Member For the Assessee : Shri S. N. Soparkar, Sr. Adv., Shri Parin Shah, AR For the Revenue : Shri Purushottam Kumar, Sr. DR ORDER PER Ms. MADHUMITA ROY - JM: The instant appeal filed by the assessee is directed against the order dated 28.08.2019 passed by the Commissioner of Income Tax (Appeals)-1, Ahmedabad arising out of the order dated 13.12.2018 passed by the DCIT, Circle-1(1)(1), Ahmedabad under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) for A.Y. 2016-17. 2. The assessee has raised following Grounds: 1) The lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant has relied upon the decision of Hon ble Mumbai ITAT in the case of G.K. RammurthyVs. JCIT (2010) 2 ITR (T) 139 (Mumbai). It is seen that the Hon ble ITAT in the later decision in the case of Raptakos Brett Co. Ltd. Mumbai in ITA No. 3317 / Mum / 2009 1692 / Mum / 2010 dated 10/06/2015 on allowability of set off against long-term capital gain has held that section 10(38) excludes in express terms only the income arising from transfer of long-term assets being equity shares or equity fund which is chargeable to STT and not entire source of income from capital gains arising from transfer of shares. It does not lead to exclusion of computation of capital gain of long term capital assets or short term capital assets being shares. Following the above arguments, the Assessing Officer was justified to set off short-term capital loss on long-term capital gain. Similar view has been held by Hon ble Gujrat High Court in the case of KishorbhaiBhikhabhai Virani Vs. ACIT (2014) 367 ITR 261. In view of the above, the computation made by Assessing Officer is upheld. 5. Being aggrieved by the order of Ld. CIT(A), the assessee has preferred this appeal and now before us. 6. B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee is covered under this Clause (38) of section 10 and therefore it is not to be included in the Total Income. (iv) Thereafter, Chapter IV prescribes Computation of Total Income . Section 14 is the opening section of this Chapter, which prescribes: Save as otherwise provided by this Act, all income shall, for the purposes of charge of income-tax and computation of total income, be classified under the following heads of income:- A. Salaries B. XXX C. Income from house property D. Profits and gains of business or profession E. Capital Gains F. Income from other sources (v) Thereafter section 15 to section 59 prescribe detailed provisions for the computation of taxable income under the various heads enumerated in S. No. A to F of section 14 noted above. When we compute incomes under these heads, sometimes we arrive at negative incomes (i.e. losses) and sometimes at positive income (i.e. profit). (vi) Thereafter, section 70 to 80 falling within Chapter VI prescribe the scheme of set-off and carry-forward of negative incomes (i.e. losses) against positive incomes (i.e. profits). The interpretation coming out of above pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal and therefore the decision is squarely applicable. (ii) NikhilSawhney 119 taxmann.com 372 (Delhi High Court): In this case, the assessee claimed set-off of exempted long term capital loss u/s 10 (38) against taxable income. The revenue did not allow claim of assessee. On appeal by assessee, the Hon ble High Court held: 39. In view of the above facts, judicial precedents as well as the authoritative commentary on The Income Tax Law And Practice, we are of the view that the lower authorities have not committed any error in ignoring the loss incurred by the assessee on sale of shares and securities, on which assessee has paid securities transaction tax, holding that when the income is exempt, then both positive income as well as the negative loss, both, do not enter into the regular computation of the assessee. Accordingly, the orders of the lower authorities are upheld wherein the assessee has been denied the set of and or carry forward of long-term capital loss of ₹ 90,80,571/- on transfer of shares on which the assessee has paid securities transaction tax and are covered by the provisions of Section 10 (38) of the Act. In this decision, the Hon ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see has also relied upon this decision to support the claim of assessee. On a careful consideration of the decision, we observe that it holds the proposition that the exempted long-term capital loss u/s 10(38) does not enter into computation of total income and therefore such loss cannot be set off against taxable income. Likewise the exempted long-term capital gain u/s 10(38) does not enter into computation of total income and therefore a taxable loss cannot be set off against such exempt income. Hence the reliance of Ld. CIT(A) on this decision is totally mis-placed. This decision is clearly in favour of assessee and rightly relied upon by Ld. A/R. 12. Now, there remains one more decision in Raptakos Brett Co. Ltd., ITA No. 3317 / Mum / 2009 1692 / Mum / 2010 dated 10/06/2015 (ITAT-Mumbai) relied upon by the Revenue, which we would certainly like to discuss. In this case, the assessee claimed set off of exempted Long term capital loss u/s 10(38) against the taxable Long term capital gains of ₹ 94,12,00,000/- and paid tax on balance taxable Long-term Capital Gain. Ld. AO did not allow set off with the reasoning that the loss from exempted source does not enter into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not help the Revenue. 13. Having considered the scheme of law as also the interpretation taken in various legal precedents discussed above including the binding decision of Hon ble Jurisdictional High Court of Gujarat in Kishorbhai Bhikhabhai Virani (Supra), we are inclined to hold that the assessee has rightly claimed the carry forward of Long-Term Capital Loss (STT not paid) of ₹ 15,41,625/- and Short-Term Capital Loss of ₹ 5,06,74,578/- without setting off against the exempted Long-Term Capital Gain (STT paid) of ₹ 2,62,06,472/- u/s 10(38). 14. At this stage we would also like to make an additional mention that even if assume, without accepting, that the revenue s contention is correct in setting off losses against exempt income [long term capital gain u/s 10(38)], there would be an absurd outcome. 15. In view of foregoing discussion, we find that the lower authorities are not justified in setting off losses against the exempted long-term capital gain thereby reducing the quantum of carry forward of losses claimed by the assessee. We therefore direct the Ld. AO to allow full carry-forward of losses as claimed by the assessee without set-off aga ..... X X X X Extracts X X X X X X X X Extracts X X X X
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