INCOME TAX ACT, 1961

Section 74

Loss - Set-off - Allowability of set-off of non-STT paid long-term capital gain on sale of shares with STT paid long-term capital loss on sale of shares -

Assessee firm engaged in business of investment of shares, securities and bonds claimed set-off of long-term capital gain of Rs. 4.62 crores without indexation incurred on sale of shares for which no Security Transaction Tax (STT) as paid, with long-term capital loss of Rs. 4.71 crores incurred on sale of shares on which it had paid STT and balance loss of Rs. 9 lakhs. AO took the view that long-term capital gain earned on sale of shares on which STT was paid was exempt under section 10(38) and therefore, loss incurred on sale of shares wherein STT had been paid and had resulted in long-term capital loss could not be allowed to be set off with non-STT paid long-term capital gain. Held: Sections 70-80 do not speak about payment of STT at all. There is no mention of STT even in section 74 which talks about set-off and carry forward of losses under the head 'capital gains'. Even payment of STT on long-term capital gain or long-term capital loss does not make it a separate source of income and the source of income is not exempt under section 10(38) only a particular segment of such source is exempt under section 10(38), i.e., long-term capital gains on which STT is paid. Accordingly, set off of STT paid long-term capital loss was indeed permissible with non-STT paid long-term capital gain.

Followed:United Investments v. Astt. CIT ITA No. 511/Kol/2017, dated 1-7-2019 : 2019 TaxPub(DT) 6231 (Kol-Trib).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2013-14

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