INCOME TAX ACT, 1961

Section 70 read with Section 54F

Loss - Set-off - Deductions under section 54F, whether should be allowed from net income computed after intra head adjustments -

Assessee challenged order of CIT(A) sustaining action of AO regarding disallowance of benefit of carry forward of long term capital loss of Rs. 14,76,729 on sale of shares for relevant year. Issue was as to whether it is lawful to first compute capital gain after doing intra head adjustments and whether deductions under section 54F should be allowed from the net income computed after intra head adjustments. Held: As per provisions of section 54F(1) on fulfillment of certain conditions, capital gain arose on sales of such assets will not be chargeable to capital gain under section 45. Scheme of sections 45 to 55A provides for computation of capital gains, and effect has to be given first to provision of capital gains as given under above scheme and then apply provisions of section 70. Section 70 would come into play only when capital gains have been computed in accordance with provisions contained in sections 45 to 55A. Thus, if, after working out of deduction under section 54F, if capital gain arising on sale of certain assets is not chargeable to capital gain, then loss arising to assessee on sales of another assets cannot be set-off from gain of such assets. It is not necessary that one should first apply section 70(3) and thereafter only, assessee could invest capital gain arising from long-term capital asset.

Followed: CIT, Circle-XIV v. Vijay M. Mahtaney (2013) 35 taxmann.com 228 (Mad) : 2013 TaxPub(DT) 2119 (Mad-HC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2015-16

SUBSCRIBE FOR FULL CONTENT