TMI Blog2006 (1) TMI 228X X X X Extracts X X X X X X X X Extracts X X X X ..... income under any other head other than income under the head Capital gains . The expression used in sub-section (2) simply enables an assessee to set off business loss under any head of income including the head Capital gains . So, it appears that the Legislature has given a choice to a tax payer p in respect of loss arising from any other head except capital gain to set off the same either against the income under any head of the income or against the income under the head Capital gains whether relating to short-term capital asset or any other capital asset. If we further compare another sub-section of section 71 i.e., sub-section (3), it is evident that similar choice was not made available to an assessee because in case the net result is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned A.R. on the proposition that interpretation of a taxing statute should be construed as beneficial to the assessee. To sum up, we hereby direct the Assessing Officer to first set off the business loss against the income under the head Other sources and if balance is left, the same is directed to be set off against the income under the head Capital gains . Resultantly, the ground raised by the assessee is hereby allowed. In the result, the appeal is allowed. - HON'BLE MUKUL SHRAWAT, JUDICIAL MEMBER AND AHMAD FAREED, ACCOUNTANT MEMBER For the Appellant : S.U. Pathak, Adv. For the Respondent : Abhay Damle, Adv. ORDER Mukul Shrawat, Judicial Member. 1. This is an appeal filed by the assessee arising out of the order of CIT(A) dated 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Learned A.R. Mr. Pathak that due to the said action of Assessing Officer, there was disadvantage in difference of rate of tax as applicable under the head Capital gains 20 per cent and the higher rate of tax under the head Other sources . 2. We have looked into the legal aspect of this issue and have found that as far as the language of section 71(2) is concerned, there is no sequence prescribed for set off of loss under a particular head of income. For ready reference, relevant section is reproduced below:- 71.(2) Where in respect of any assessment year, the net result of the computation under any head of income, other than Capital gains , is a loss and the assessee has income assessable under the head Capital gains , such loss may, s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1) of section 71 specifies that in respect of any assessment year, if the net result of the computation under any head of income, other than the capital gain, is a loss and the assessee has no income under the head Capital gains , he shall be entitled to have the amount of such loss set off against his income assessable for that assessment year under any other head. So, the first step is that in case assessee has no income under the head 'Capital gains', then a loss under any head of income is subject to set off against income under any other head. Next comes into operation is sub-section (2) which is applicable in such cases where the assessee has income assessable under the head Capital gains . In the present appeal, sub-section ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h clear that wherever a restriction was required to be imposed against set off of income against a particular head of income, the same was prescribed under the statute. As far as application of sub-section (2) is concerned, we are of the considered view that an assessce is entitled to the set off of business loss against any head of income as also against capital gains. 2.1 Our view is further fortified by an old Circular No. 26(LXXVI-3) [F.No. 4(53)-IT)/54], dated 7-7-1955 wherein it was prescribed how loss suffered under one head could be set off against income under any other head. This circular was in respect of old section 24 of 1922 Act and the directions were that, quote the Department should adopt that mode which will give assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same was held as acceptable. 2.3. Having regard to the pith and substance of the afore cited circular further buttressed by the language of section 71(2) itself as elaborately discussed here-in-above, no ambiguity is left that the option is available to an assessee for set-off of any head of loss against any head of income including the capital gain assessable for that assessment year [Section 71(2)] of Income-tax Act. However, for the sake of completeness, we also refer the decisions in the cases of CIT v. Podar Cement (P.) Ltd. [1997] 226 ITR 625 (SC) and CIT v. Vegetable Products Ltd. [1973] 88 ITR 192 (SC) as cited by the Learned A.R. on the proposition that interpretation of a taxing statute should be construed as beneficial to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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