TMI Blog2009 (7) TMI 908X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of the case are that the assessee is a tax resident of Ireland and registered with SEBI as a sub-account of First State Investments (Hongkong) Limited, which is registered as Foreign Institutional Investor. During the year, the assessee earned income from capital gains on sale of shares and also dividend income. The following working of short-term capital gain was declared by the assessee : Rs. "Short-term capital gain (up to Sept. 30, 2004) 3,654,959 Less : Short-term capital loss (up to Sept. 30, 2004) (814,966) Less : Short-term capital loss (post Sept. 30, 2004) (2,839,993) Total NIL Short-term capital gain (post Sept. 30, 2004) 47,216,333 Less : Short-term capital loss (post Sept. 30, 2004) (14,083,881) Total taxable capital gains 33,132,452" 4 . On perusal of this working, the Assessing Officer noted that the assessee had set-off short-term capital loss taxable under section 111A (at the rate of 10 per cent) against the short term capital gain (others) earned during the period 1-4-2004 to 30-9-2004 taxable under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of having the amount of any short-term capital loss set-off against the short-term capital gain from any other short-term capital asset. He stated that there was an option given to the assessee and, hence, calculation so made by the assessee was correct. In support of his arguments that in the absence of any express bar in the provision, the discretion should be given to the assessee in the matter of set-off, he relied on the Special Bench order of the Tribunal in the case of Jt. CIT v. Montgomery Emerging Markets Fund [2006] 100 ITD 217 (Mum.). While referring to the judgment of the Hon ble High Court in the case of J.C. Thakkar v. CIT [1955] 27 ITR 658 (Bom.), the learned A.R. contended that the interpretation in favour of the assessee was to be adopted. For the same proposition, he relied on the order passed by the Tribunal in the case of ITO v. V.R. Nimbkar [1986] 19 ITD 714 (Bom.). 6. In the opposition the learned Departmental Representative submitted that section 111A was introduced with effect from 1-4-2005 providing for taxation of short-term capital gains on certain transactions which were chargeable to securities transactions tax at the reduced rate of 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period be allowed set-off against the short-term capital gain of the former period to the extent of the excess of short-term capital gain over the short-term capital loss up to the cut-off date, i.e., 30-9-2004. On the other hand, the revenue is contending that only the short-term capital loss suffered by the assessee in the period before the cut-off date should be set-off against the short-term capital gain of that period and the remaining amount of Rs. 28.39 lakhs (Rs. 36.54 lakhs - Rs. 8.14 lakhs) be taxed at the rate of 30 per cent. 8. At this juncture, it will be relevant to consider the language of section 70, which runs as under : "70. (1) Save as otherwise provided in this Act, where the net result for any assessment year in respect of any source falling under any head of income, other than capital gains , is a loss, the assessee shall be entitled to have the amount of such loss set-off against his income from any other source under the same head. (2) Where the result of the computation made for any assessment year under sections 48 to 55 in respect of any short-term capital asset is a loss the assessee shall be entitled to have the amount of such loss set-off ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt-term capital loss with any other capital gain. It means the inter-head set-off of short-term capital loss is permissible against any income under the head Capital gain . However, the position is slightly different under sub-section (3) when it comes to dealing with the set-off of long-term capital loss. This provision states that the long-term capital loss can be set-off only against the long-term capital gain and not the short-term capital gain. So the option which is available to the assessee for setting off the short-term capital loss against the short-term capital gain or long-term capital gain, is not there when there is a long-term capital loss, which can be set-off only against the long-term capital gain and not against the short-term capital gain. 11. In the present appeal, the controversy is still narrower inasmuch as the short-term capital loss which was set-off by the assessee against the short-term capital gain, has been accepted and the net figure of short-term capital gain after set-off of short-term capital loss continues to remain the same. The dispute is only about the choice of setting off of short-term capital loss suffered after the cut-off date against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue in the language of the sub-section that the option is with the assessee and he will decide as to whether the short-term capital loss from the first transaction ought to be set off against the short-term capital gain of the transaction No. 2 or 3 or 4, etc., as the case may be. Our view about the vesting of the discretion in assessee for the purposes of set-off of short-term capital loss against any short-term capital gain is fortified when the language of sub-section (3) of section 70 is considered, which specifically prohibits the setting off of long term capital loss against short-term capital gain. It has been provided in unambiguous words in sub-section (3) that the long-term capital loss can be set off only against long-term capital gain and not against the short-term capital gain. If the intention of the Legislature had been not to confer the choice on the assessee in the matter of setting off of the short-term capital loss suffered in the post cut-off date against the short-term capital gain of the pre-cut-off date, it would have clearly set out such intention in the language of sub-section (2) itself, as has been done in sub-section (3). In the absence of any stipulation ..... X X X X Extracts X X X X X X X X Extracts X X X X
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