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2010 (2) TMI 28 - ITAT BOMBAY-GLoss on sale of shares to be set off against exempt LTCG - sale of shares arising after 1st Oct., 2004 on which STT was paid and which was exempt under s. 10(38) - HELD THAT:- As sec 10(38) has been inserted with a particular object to grant exemption to such income as tax has already been levied on some different footings. If we accept the contention of the Revenue to adjust long-term capital loss against exempt income (long-term capital gain) that will be contrary to law and contrary to the intention, object and purpose of the legislature in introducing cl. (38) to s. 10 of the Act. We are at considered opinion that incomes which do not form part of the total income do not enter the computation of total income at all i.e., under any of the heads of income mentioned in s. 14. Therefore, the question of aggregating them under Chapter VI at all does not arise. Therefore, the question of set off of the same u/s 70(3) also does not arise for consideration. Therefore, the right of carry forward u/s 74(1) in respect of the long-term capital loss suffered by the assessee is not hit by the provisions of s. 70(3). On acceptance of Revenue's view on the issue, there is absurd outcome of interpretation if the facts are reversed, then, long-term capital loss from taxable assets will have to be adjusted against the long-term capital gains exempt u/s 10(38). Suppose in the case on hand, if there is taxable long-term capital gain before 1st Oct., 2004 of Rs. 33,01,57,200 and long-term capital loss of Rs. 9,23,55,945, which may be exempt u/s 10(38) after 1st Oct., 2004, then the loss from exempt source would be set off against taxable gain; such set off is contrary to law. We are not in agreement with the view of the Revenue that long-term capital loss is to be set off against exempt income (long-term capital gains) after 1st Oct., 2004. We, therefore, set aside the orders of the Revenue authorities and allow the claim of the assessee.
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