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2021 (1) TMI 474 - AT - Income TaxNon setting off the short term capital gain against long term capital loss brought forward - HELD THAT:- Since the law regarding losses under the head “Capital gains” has undergone changes from time to time, a question often arises whether the law that should prevail is the law pertaining to the year in which loss was suffered or the year in which set off is claimed. The answer is where a right for more liberal treatment is already earned cannot be lost because of subsequent restriction, since vested right cannot be divested, unless specifically withdrawn either explicitly or by implication. In other words, existing rights of set off cannot be treated as withdrawn. In the instant case, the appellant acquired depreciation plant in AY 1996-97, being electric meters which were disposed off during the year giving rise to capital gain taxable u/s 50. There is merit in the contentions of the appellant that prior to amendment to section 70 & 74 by the Finance Act, 2002, the carry forward capital loss was not bifurcated between short term capital loss and long term capital loss. As mentioned earlier, in Kotak Mahindra Capital Co. Ltd. [2012 (8) TMI 339 - ITAT MUMBAI] held inter alia (i) that provisions of section 74(1) as amended w.e.f. 01.04.2003, would apply only to long term capital loss relating to assessment year 2003-04 and onwards and (ii) that restriction imposed therein in terms of setting off long term capital loss only against long term capital gains and not against short term capital gain is applicable only in relation to long term capital loss incurred by assessee in assessment year 2003-04 and subsequent years and same is not applicable to long term capital loss relating to and brought forward from period prior to assessment year 2003-04 which shall be governed by provisions of section 74(1) - prior to amendment made w.e.f. 01.04.2003. We direct the AO to allow set off of capital loss carried forward from AY 2001-02 against capital gains earned by the appellant during the year under consideration. In the submissions filed before the Tribunal dated 30.11.2020, the appellant claims carry forward capital loss of AY 2001-02 at ₹ 90,12,331, whereas in the written submission filed before the Ld. CIT(A) dated 03.09.2016, it claims ₹ 88,61,301/- as balance of AY 2001-02 available for set off against the capital gains of the year under consideration. The AO is directed to verify the above. Appeal of the assessee is allowed.
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