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TMI Blog2011 (5) TMI 236X X X X Extracts X X X X X X X X Extracts X X X X ..... ught forward capital loss, having failed to appreciate that: a. Section 54EC is an exemption section, which lays down that "capital gains are not to be charged on investment in certain bonds". b. To the extent of investment made in bonds prescribed under section 54EC, capital gains are exempt ab initio and do not enter into the computation of total income; c. Only the balance capital gains (after exemption under section 54EC), if any, are taxable, if not offset by brought forward capital losses; d. The appellant's view is supported by the structure of the Income tax Return Form (Form 1) itself as explained to the CIT in our letter dated 8 February, 2010." 2. On merits, thus, the short issue that we are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the interest of the revenue, and is liable to subjected to revision under section 263 as such. In response to show cause notice, it was submitted by the assessee that deduction under section 54EC is to be granted while computing income taxable under the head "income from capital gains" and it is only after the said exercise having been carried out that the question of setting off long term capital loss brought forward would arise. Learned Commissioner, however, was not impressed. He was of the view that section 54EC is beneficial section to the assessee but while availing the said benefit, the assessee cannot be entitled to have benefit of Section 54EC as well as carried forward business loss". On this basis, learned Commissioner conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purpose of setting off brought forward loss, the very object and purpose of exemption is nullified. It is submitted that the stand of the learned Commissioner is not only erroneous but wholly contrary to the basic scheme of carried forward and set off of loss. Learned departmental representative, on the other hand, relies upon the order of the learned Commissioner and invites our attention to the provisions of section 80AB. It is his contention that deduction granted under the Income tax Act, cannot be more than the income which is included in the gross total income. However when, it is pointed out to him that section 80AB deals with deduction under chapter VIA whereas section 54EC falls under Chapter IV and, therefore, 80AB has no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst such income as or assessable under the head capital gains in a subsequent year. A plain reading of these provisions would show that while section 54EC comes into play in the process of computing capital gains which are assessable under the head "capital gains" section 74(1) (b) comes into play only when the income assessable to tax under the head capital gains is computed. The stage at which set off of carried forward long term capital loss is to be given is subsequent to the stage at which income under the head capital gains is computed and deduction under section 54EC is to be given in the course of the latter. In this view of the matter, the question of setting off brought forward long term capital loss arises only after the income ..... X X X X Extracts X X X X X X X X Extracts X X X X
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