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TMI Blog1990 (7) TMI 157X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment year 198283, for which its accounting year ended on 31-3-82. At the relevant time, the assessee was a minor and had income from business carried through his guardian. He was also a beneficiary in the income of two trusts. During the year, the assessee sold certain shares of Garware Polyester Plastics Ltd., and Garware Nylons Ltd. From the sale of these shares, he earned certain long-term capital gains. The assessee also sold shares of RSDV Investments P. Ltd., in which he incurred short-term capital loss of Rs. 1,95,900. The assessee claimed deduction u/s 80T against the gross amount of long-term capital gains, whereas the ITO took the stand that the short-term capital loss had first to be adjusted against the long-term capital gain and that the deduction u/s 80T was available only against the net long-term capital gains after adjustment of such short-term capital loss u/s 70(2)(i). Against this stand of the ITO, the assessee went in appeal. 3. The CIT (Appeals), relying on the decision of the Madras High Court in Addl. CIT v. K.AL.KR. Ramaswamy Chettiar [1979] 120 ITR 694, allowed the appeal of the assessee and directed the ITO to recompute the deduction u/s 80T as cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pital loss and capital gain either in respect of long-term capital asset or short-term capital asset could be effected only at the instance of the assessee and such adjustment could not be unilaterally done by the ITO. In the present case, the assessee had offered to be assessed on long-term capital gains earned by it without claiming the benefit of adjustment under sec. 70(2)(i). In this view of the matter, argued the counsel for the assessee, the order of the CIT(A) was correct and did not call for any interference. 6. We have considered the submissions made. We have also gone through the order of the CIT(A), the relevant judgment cited and the provisions of section 80T and section 70. In our opinion, the decision of the CIT(A) is correct and does not call for any interference. The relevant portion of section 80T reads as under : --- " 80T . Where the gross total income of an assessee not being a company includes any income chargeable under the head ' Capital gains ' relating to capital assets other than short-term capital assets (such income being, hereinafter, referred to as longterm capital gains), there shall be allowed ; in computing the total income of the assessee, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of any other capital asset not being a short-term capital asset. In short, this sub-clause provides that long-term capital loss can only be set off against long-term capital gains, whereas the assessee may, if he so chooses, set off short-term capital loss against long-term capital gains. This issue came for consideration before the Madras High Court in CIT v. V. Venkatachalam [1979] 120 ITR 688. At page 694 of the report, another decision of the Madras High Court has been appended as an appendix where similar issue came for consideration. The question referred to the Madras High Court in that case read as under : " Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the assessee was entitled to relief under section 80T on the gross amount of capital gains on assets other than short-term capital assets but not on the net amount after set off of short-term capital assets but not on the net amount after set off of short-term capital loss under section 70(2) of the Income-tax Act ?" At page 695, the Madras High Court observed as under : " The opening words ' here the gross total income of an asset not being a company in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he operative portion of section 74(1)(a) provided that where in respect of any assessment year, the net result of the computation under the head " Capital gains " is a loss, such loss shall, subject to the other provisions of this Chapter, was to be dealt with as provided in clauses (i) and (ii) of that sub-section. The language of this section (section 74) uses the expression " shall " and leaves no one in doubt that the provisions of the section are mandatory, whereas the language of section 70, which uses the expression " shall be entitled to ", supports the interpretation that the adjustment contemplated in that section is optional and not mandatory. The adjustment of short-term capital loss against long-term capital gains cannot be forced on the assessee who does not ask for such adjustment. The Gujarat High Court in Gautam Sarabhai's case was not required to consider section 70(2) which is of relevance in the present case and, therefore, that decision is distinguishable and cannot be applied to the facts of the present case. 7.1 In M. Seshasayee's case also, the Madras High Court was required to consider a similar issue. The Madras High Court accepted the contention of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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