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TMI Blog2024 (6) TMI 331X X X X Extracts X X X X X X X X Extracts X X X X ..... he interpretation of law has to be made strictly and cannot be deemed to include the any other income or loss resulting or falling within the same source. The case of the assessee is squarely covered by the decision of Royal Calcutta Turf Club vs. CIT [ 1982 (6) TMI 21 - CALCUTTA HIGH COURT] wherein Hon ble High Court held that Section 10(27) of the Act excluded term only the income derived from a business of livestock breeding or poultry or dairy farming. The said section did not exclude the business of livestock breeding or poultry or dairy farming out rightly from the operation of the Act and therefore the loss suffered by the assessee was admissible deduction in computing the total income. If the source which produce the income is outside the ambit of charging provisions of the section in such case negative income or loss can be said to be outside the ambit of taxing provisions Consequently the negative income is also required to be ignored for tax purpose. In other words, where only one of the streams of income from a source is granted exemption by the legislature upon fulfillment of specified conditions then the concept of income includes loss would not be applicable. Thus, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asoning that since long term gain from sale of securities /shares are exempt in terms of provisions of Section 10(38) of the Act and therefore on the same analogy the long term capital loss resulting from the sale of equity shares with STT paid cannot be allowed to be set off against the taxable long term capital gain resulting from sale of any other asset. The Ld. CIT(A) while dismissing the appeal relied on the series of decision namely Harprasad & Co. Pvt. Ltd. [99 ITR 118], CIT vs. J. H Gotla [156 ITR 323], CIT vs. Coin health Food Pvt. Ltd. [304 ITR 308] , decision of Gujarat High Court in the case of Kishorebhai Bhikhabhai Virani vs. ACIT [367 ITR 261], decision of Hon'ble Delhi Tribunal in the case of Nikhil Sawhney vs. ACIT [119 taxmann.com 372], decision of Hon'ble Mumbai Tribunal in the case of DDIT (International Taxation) vs. Asia Pacific Performance SICAV [2015] 55 taxmann.com 333. Aggrieved assessee filed an appeal before the Tribunal challenging the said decision relied by the first appellate authority. 5. The Ld. A.R vehemently submitted that the long term capital loss Rs. 47,90,616/- incurred from the sale of equity shares on recognized stock was rightly set off a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. The Ld. A.R submitted that the legislature had not put any embargo or exclusion in respect of long term capital loss on sale of shares/securities carried out on the stock exchange to be set off against long term capital gain arising on sale of other capital asset. Reiterating his arguments , the Ld. A.R argued that the provisions of Section 2(14) of the Act defined the term capital asset and no specific exception has been carved on in respect of equity shares or securities as have been provided in the case of stock in trade ,agricultural land , personal effects ,Gold bonds and Special bearer bonds as enumerated in exceptions provided in (i) to (vi) to the said section. The Ld. A.R stated that Section 45 of the Act lays down the charge of tax on gain arising on transfer of capital asset thus covering the long term capital gain derived from sale of equity shares/securities whether or not they are listed on stock exchange and whether or not they are transferred with payment of STT. Again the manner and mode of computation of long term capital gain on sale of shares/securities is uniformly laid down in Section 48 of the Act. The Ld. A.R argued that where the resultant figure is lon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. Ltd. vs. DCIT [TS-326-ITAT-2015 (Mum)-TP]. The Ld. A.R has relied on the decision of Hon'ble jurisdictional High Court in the case of Royal Calcutta Turf Club vs. CIT in [144 ITR 709 (Cal)]. The Ld. Counsel for the assessee submitted that the Hon'ble Calcutta High Court while passing the above order has considered the decision of Hon'ble Supreme Court in the case of CIT vs. KaramchandPremchand Ltd. in [1960] 40 ITR 106 (SC). The Ld. A.R distinguished the decisions as relied upon by the Ld. CIT(A) while passing the appellate order and submitted that the decision in the case of Harprasad & Co. Pvt. Ltd. (supra), CIT vs. J. H Gotla (supra), CIT vs. Coin health Food Pvt. Ltd. (supra) , were rendered under different facts except the decision of coordinate benches in the case of Nikhil Sawhney vs. ACIT (supra) and in the case of DDIT (International Taxation) vs. Asia Pacific Performance SICAV (supra) and decision of Gujarat High Court in the case of KishorebhaiBhikhabhai Virani vs. ACIT (supra) which were decided against the assessee under the similar facts. The Ld. A.R submitted that in the case of Nikhil Sawhney vs. ACIT (supra) the Co-ordinate Bench has placed the sole reliance on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not the intent of legislation. The Ld. D.R submitted that the conjoint reading of Section 2(14), 45, 47, 48, 70 & 71 of the Act and the various case laws such as Nikhil Sawhney vs. ACIT (supra), Harprasad & Co. Pvt. Ltd. (supra) and other as relied by the ld CIT(A), non-allowing the set off of long term capital loss from quoted shares against the long term capital gain resulting from unquoted shares was rightly made by the AO and upheld by the Ld. CIT(A). The Ld. D.R therefore prayed that the order of authorities below may kindly be affirmed. 7. We have heard the rival submissions and perused the material on record including the various case laws cited by the rival parties. The undisputed facts are that during the year, the assessee has earned long term capital gain of Rs. 50,00,000/- from sale of unquoted shares of M/s IRC Infra and Reality Pvt. Ltd. and also incurred long term capital loss of Rs. 47,90,616/- from sale of quoted equity shares which was executed on the registered stock exchange and STT was duly paid. Therefore the issue before us for adjudication is whether the long term capital loss suffered on sale of equity shares can be set off against the long term capital ga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be deemed to include the any other income or loss resulting or falling within the same source. The case of the assessee is squarely covered by the decision of Hon'ble jurisdictional High Court in the case of Royal Calcutta Turf Club vs. CIT in (supra). In the said decision the assessee has incurred loss in broodmares account and in pig account which is set off against its income from other sources under the head business. The AO disallowed the claim for set off on the ground that the income if derived from these two heads were exempt u/s 10(27) of the Act and therefore correspondingly loss incurred from the same activities also did not enter the computational provisions of the Act. The AO's action of disallowing the claim of set off was upheld by the successive appellate authorities on. On reference u/s 256(1) of the Act, the Hon'ble High Court held that Section 10(27) of the Act excluded term only the income derived from a business of livestock breeding or poultry or dairy farming. The said section did not exclude the business of livestock breeding or poultry or dairy farming out rightly from the operation of the Act and therefore the loss suffered by the assessee was admissible d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in law in treating the long term capital loss incurred on sale of listed shares on the same footing as that of long term capital gain and thereby denying the carry forward of long term capital loss since long term capital gain was exempt u/s 10(38) of the Act. According to Ld. AR what is contemplated in section 10(38) is exemption of positive income and losses will not come within the purview of the said section. Inviting our attention to the provisions of Section 70 & 71 wherein the Legislature has laid down the manner in which the Long term capital loss is to be set-off and carried forward to subsequent years, the Ld. AR submitted that the Legislature has not put any embargo to exclude Long term capital loss from sale of shares to be set off against Long term capital gain arising on account of sale of other capital asset. The Ld. AR submitted that it is not a case where the source of income itself is exempt from tax and therefore any gain/loss derived in any manner there from is to be ignored for tax purposes. He submitted that capital asset is defined in Section 2(14) which inter alia includes shares & securities. The levy of income-tax on capital gain arising upon transfer of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from tax u/s 10(38) of the Act then by equal measure any loss arising in the hands of the assessee from transfer of listed securities sold on payment of STT should also remain outside the ambit of charging provisions of the Act. It is true that the judicial authorities including the Hon'ble Supreme Court in the case of CIT Vs J.H. Gotla (156 ITR 323) held that the expression 'income' shall include loss because the loss is nothing but negative income. It is cardinal principle of interpretation of statutes that the observations and findings of the Court must be understood in the context of the facts involved in the case decided by the Court. It is not proper to divorce the observation of the Court from the facts involved in the case. It is well laid down that the text of the statute must be understood in the context in which it is used and therefore any particular observation of the Court in the judgment cannot be considered or applied in its isolation or divorced from the context in which it was rendered. In the case of CIT Vs J.H. Gotla (supra), the issue before the Apex Court was M/s. United Investments. AY- 2013-14 assessee's claim in the context of aggregation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the streams of income from the 'source' is granted exemption by the Legislature upon fulfillment of specified conditions, then the concept of 'income' includes 'loss' will not apply. In this background it is necessary to examine now as to whether the 'source' of long term capital gain i.e. long term capital asset being equity shares is completely outside the M/s. United Investments. AY- 2013-14 charging provisions or not. On reference to Section 2(14) of the Act which defines the term 'capital asset', it is noted that there is no specific exception carved on in respect of equity shares or securities like in the case of agricultural land or personal effect. Further Section 45 which lays down the charge of tax on gain arising on transfer of 'capital asset' covers the long term capital gain derived on sale of equity shares whether or not they are listed on stock exchange and whether or not they are transferred on payment of STT. The manner and mode of computation of long term capital gain on sale of shares is uniformly laid down in Section 48 of the Act. In case the resultant figure is a long term capital loss, the manner for claimi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous situation arising under Section 10A which is also part of Chapter III, the Board has accepted the legal proposition that even though the income is exempt but the loss arising from the same source is liable to be assessed and granted set off as per law. In view of the foregoing we find merit in the Ld. AR's contention that the exemption u/s 10(38) has been carved out in respect of a specific instance and that too where there is a positive income and upon fulfillment of conditions set out therein. We therefore find force in Ld. AR's submissions that merely because the capital gain arising on sale of long term listed shares upon payment of STT was exempt, for such reason alone the loss incurred on long term listed shares upon payment of STT will also be outside the charging provisions of the Act. 11. In this regard we find the Ld. AR's reliance on the judgment of the jurisdictional Calcutta High Court in the case of Royal Calcutta Turf Club Vs CIT (supra) to be relevant………….. 12. We also note that the above judgment of the jurisdictional Calcutta High Court was applied by the coordinate Bench of this Tribunal at Mumbai in the case of Rap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an be applied only when the entire source of income falls within the charging provision of Act but where the source of income is otherwise chargeable to tax but only a specific kind of income derived from such source is granted exemption, then in such case, the proposition that the term income includes loss would not be applicable. Thus if the source which produce the income is outside the ambit of charging provisions of the section in such case negative income or loss can be said to be outside the ambit of taxing provisions Consequently the negative income is also required to be ignored for tax purpose. In other words, where only one of the streams of income from a source is granted exemption by the legislature upon fulfillment of specified conditions then the concept of income includes loss would not be applicable. Similarly in the second decision of DDIT vs. Asia Pacific Performance SICAV (supra) has relied on the decision of Hariprasad & Co. Pvt. Ltd. (supra), CIT vs. J H Gotla (supra) and CIT vs. Gold Coin Health Food Pvt. Ltd. (supra) which are distinguishable of facts. In the case of Kishorebhai Bhikhabhai Virani vs. ACIT (supra) the issue was decided against the assessee bu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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