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| The Tax Publishers2019 TaxPub(DT) 8422 (Mum-Trib) INCOME TAX ACT, 1961
Section 70 Section 10(38)
Section 10(38) exempts only a stream of capital gain from tax and not the entire source. So if the assessee incurs loss in sale of equity shares, the gain from sale of which is exempt under section 10(38), then such loss will be allowed to be set off against long-term capital gain from sale of shares as well from sale of other assets.
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Loss - Set off - Set-off of LTCL on sale of quoted equity shares against LTCG earned on sale of properties - AO denied set off on the ground of transactions of sale of quoted equity shares being exempt from tax under section 10(38)
Assessee earned long-term capital gains (LTCG) of Rs. 127 lakhs on sale of certain properties. Assessee had also reflected LTCG on sale of quoted equity shares for Rs. 48 lakhs which was claimed exempt under section 10(38) since sale transactions were charged to Securities Transaction Tax (STT). At the same time, assessee suffered long-term capital loss (LTCL) of Rs. 311 lakhs on similar sale of quoted equity shares transactions which were also subjected to payment of STT. Assessee, in its computation of income, claimed set-off of this loss against LTCG aggregating to Rs. 175 lakhs earned on properties and equity shares. The balance amount was carried forward to subsequent year. AO denied set-off and carry forward of stated losses on the ground that since long-term capital gains were exempt from tax, losses of similar nature would not be available for such adjustment. Held: Concept of income including losses would apply only when entire source was exempt from tax and not in cases were only one particular stream of income was falling in exempt provisions. The income contemplated under section 10(38) was only a part of source of capital gains on shares and only a limited portion of source was treated as exempt and not entire capital gains. Accordingly, assessee would be entitled or set-off of long-term capital losses of Rs. 311 lakhs against aggregate long-term capital gains of Rs. 175 lakhs and entitled to carry forward unutilized losses.
Relied:Raptakos Brett & Co. Ltd. v. Dy. CIT (2015) 58 Taxmann.com 115 (Mum-Trib) : 2015 TaxPub(DT) 2490 (Mum-Trib), Kishorebhai Bhikhabhai Virani v. ACIT (2015) 367 ITR 261 (Guj) : (2015) 55 Taxmann.com 91 (Guj) : 2014 TaxPub(DT) 3879 (Guj-HC) and Royal Calcutta Turf Club v. CIT (1983) 144 ITR 709 (Cal.) : (1983) 12 Taxman 133 (Cal) : 1983 TaxPub(DT) 750 (Cal-HC).
REFERRED :
FAVOUR : In assessee's favour.
A.Y. : 2013-14
IN THE ITAT, MUMBAI BENCH
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