TMI Blog2011 (4) TMI 705X X X X Extracts X X X X X X X X Extracts X X X X ..... he asset a long term capital asset - under section 74(1)(b) the assessee is entitled to the claim of set off of long term capital loss against the income arising from the sale of office premises, the gain of which is short term due to the deeming provision but the asset is long term. - Decided in favor of assessee. - 1508 (MUM.) OF 2010 - - - Dated:- 27-4-2011 - D.K. AGARWAL, R.K. PANDA, JJ. Venugopal C. Nair for the Appellant. A.K. Nayak for the Respondent. ORDER R.K. Panda, Accountant Member. This appeal filed by the assessee is directed against the order dated 12-12-2009 passed by the ld. CIT(A)-5, Mumbai relating to assessment year 2005-06. 2. The assessee in its ground of appeal has challenged the order of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be extended beyond that. It cannot be said that section 50 converts a long term capital asset into a short term capital asset. Therefore the assessee has correctly claimed the set off. 5. However the Assessing Officer was not convinced with the explanation given by the assessee. He noted that the decision of the Jurisdictional High Court relates to allowability of exemption under section 54E for investment made and has no application as far as section 50 is concerned. The ruling also says that the restriction under section 50 is limited to computation of capital gains only and not the exemption provisions. Therefore the decision is not applicable to the case of the assessee. He accordingly rejected the claim of set off. 6. Before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he balance, if any, would attract tax applicable to the short term capital gain. 7. However, the ld. CIT(A) was not satisfied and upheld the action of the Assessing Officer by holding as under : "I have carefully considered the above facts. The appellant has placed reliance on certain decisions which are factually distinguishable and are not on the issue directly. The question of setting of long term capital loss against short term capital gains determined under section 50 has not been adjudicated in the said decisions. Moreover, on examining the issue in the light of the provisions of section 50 read with section 2(42A) which defines the term short term capital assets meaning an asset held by assessee for not more than thirty six month ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 47,13,107 on the ground that the capital gain derived by the assessee is short term capital gain on transfer of a depreciable asset in view of the deeming provisions of section 50(2) of the Income-tax Act. While doing so, he distinguished the decision of the Jurisdictional High Court in the case of ACE Builders (P.) Ltd. (supra) which has been upheld by the ld. CIT(A). 10. We find the provisions of section 74(1)(b) reads as under : "74. (1) Where in respect of any assessment year, the net result of the computation under the head "Capital gains" is a loss to the assessee, the whole loss shall, subject to the other provisions of this Chapter, be carried forward to the following assessment year, and ( a ) ** ** ** ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be set off only against long-term capital gains. However, a short-term capital loss, may be carried forward and set off against any income under the head "Capital gains". 40.3 The existing provisions of sub-section (3) of section 74 are transitory provisions with regard to carry forward of capital losses relating to assessment year 1987-88 and earlier years. Since these provisions have become redundant, the Finance Act, 2002, has omitted this sub-section. 40.4 These amendments will take effect from 1st April, 2003, and will accordingly apply in relation to assessment year 2003-04 and subsequent years." 11. We find the Hon'ble Bombay High Court in the case of ACE Builders (P.) Ltd. (supra) at pages 219 and 220 has held as under : "I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital asset". Therefore, in view of the ratio laid down by the Jurisdictional High Court, the brought forward long term capital loss can be set off against the capital gain on account of transfer of the depreciable asset which has been held by the assessee for more than 36 months thereby making the asset a long term capital asset . In this view of the matter, we hold that under section 74(1)(b) the assessee is entitled to the claim of set off of long term capital loss against the income arising from the sale of office premises, the gain of which is short term due to the deeming provision but the asset is long term. The ground raised by the assessee is accordingly allowed. 13. In the result, the appeal filed by the assessee is allowed. - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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