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2016 (1) TMI 80 - ITAT MUMBAI

2016 (1) TMI 80 - ITAT MUMBAI - TMI - Disallowance of set off of brought forward loss from transfer of short-term capital asset against gains arising from transfer of long-term capital asset - Held that:- As seen from the explanatory notes to Finance Act, 2002 , the loss arising from transfer of short-term capital asset can be set off against any capital gains, whether short-term capital gains or long-term capital gains . It further stipulated that the anomaly existing due to long-term capital g .....

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arising from transfer of shortterm capital asset can be set off against income from capital gains assessable for the assessment year in respect of any other capital asset.

Assessee company has rightly claimed the set off of brought forward loss arisen from the transfer of short-term capital asset incurred during the assessment year 2009-10 to be set off against the gains arising from transfer of long-term capital asset earned during the previous year relevant to the assessment year 20 .....

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g ITA No. 307/Mum/2014, is directed against the orders dated 22-10-2013 passed by the learned Commissioner of Income Tax(Appeals)- 8, Mumbai (Hereinafter called the CIT(A) ), for the assessment year 2010-11. 2. Although the assessee company has raised five grounds of appeal in this appeal filed with the Tribunal but the effective issue involved in this appeal is regarding not allowing the set off of brought forward loss arising from transfer of short-term capital asset incurred during the previo .....

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143(2) of the Income Tax Act,1961(hereinafter called the Act ) , it was seen by the learned assessing officer( Hereinafter called the AO ) that the assessee company has claimed set off of brought forward loss arisen from transfer of short-term capital asset ₹ 19,21,095/- during the previous year relevant to the assessment year 2009-10 against the gains arising from transfer of long-term capital asset of ₹ 39,89,236/- earned by the assessee company during the previous year relevant to .....

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forward to the following assessment year, and - (a) insofar as such loss relates to a short term capital asset, it shall be set off against income, if any, under the head capital gains assessable for that assessment year in respect of any other capital asset. While the A.O. disallowed the loss in view of section 70(3) of the Act which reads as under:- Set off of loss from one source against income from another source under the same head of income. 70 1. Save as otherwise provided in this Act, wh .....

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ncome, if any, as arrived at under a similar computation made for the assessment year in respect of any other capital asset. (3) where the result of the computation made for any assessment year under section 48 to 55 in respect of any capital asset (other than a short term capital asset) is a loss, the assessee shall be entitled to have the amount of such loss set off against the income, if any, as arrived at under a similar computation made for the assessment year in respect of any other capita .....

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-2013 passed u/s 143(3) of the Act, the assessee company carried the matter before the CIT(A) and made submissions that the section 70(3) of the Act is not applicable to this issue and the A.O. has erred in invoking the provisions of section 70(3) of the Act. The assessee company , inter-alia submitted before the CIT(A) that the assessee company has rightly claimed set off of brought forward loss arisen from transfer of short-term capital asset during the previous year relevant to the assessment .....

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made applicable from A.Y. 2003-04 onwards. Memorandum explaining relevant Clause no. 28 of the Finance Bill of 2002 in respect of Amendment proposed and carried out in Sec: 74 is enclosed herewith. The object of the said amendment was to rectify the anomaly by amending the said Section to provide that "where in respect of any A. Y., the net result of computation under the head 'capital gain' is a loss to the assessee, in so far as such loss relates. to a short term assets, it shall .....

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tion abundantly clear that b/f STCL available for set off against LTCG earned in the subsequent A.Y. made effective from 1.4.2003 end accordingly, it is being made applicable from A. Y. 2003-04 onwards. Memorandum explaining relevant clause no. 28 of the Finance Bill of 2002 in respect of Amendment proposed and carried out in Sec. 74 is enclosed herewith. The assessee company also submitted that Section 70 of the Act is not applicable because it deals with intra-head set off of capital losses in .....

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transfer of short-term capital asset in the present case is assessed @ 15% tax rate and gain arising from transfer of long-term capital asset is assessed at 20% tax rate and hence appeal of the assessee company was rejected and the assessment order of the A.O. was upheld whereby the CIT(A) held that brought forward loss incurred on transfer of short-term capital asset(on which STT was paid ) of ₹ 19,21,095/- is not allowed to be set off against gain arising from sale of longterm capital a .....

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ls with intra-head adjustment of losses incurred during the year while section 74(1)(a) deals with set off of brought forward loss incurred on transfer of short-term capital asset against the capital gain s earned during the year. The Ld. Counsel of the assessee company relied upon the decision of the Tribunal in the case of Capital International Emerging Market Fund v. DDIT(IT) (2013) 145 ITD 491(Mum. Trib.) to contend that merely because two set of transaction are liable for different rate of .....

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transfer of long-term capital asset can be set off only against long-term capital gains. 8. The ld. D.R., on the other hand, relied on the orders of authorities below and submitted that capital losses can be set off against the income if any arrived at under the similar computation made for the assessment year in respect of any other capital asset. He submitted that section 70(3) of the Act is applicable and Section 74 of the Act is not applicable in the instant case. 6. We have considered the r .....

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asset, it shall be set off against income, if any, under the head Capital gains assessable for that assessment year in respect of any other capital assets. While the A.O. disallowed the loss by referring to section 70(3) of the Act which reads as under:- Set off of loss from one source against income from another source under the same head of income Section 70(3) 70(3) where the result of the computation made for any assessment year under section 48 to 55 in respect of any capital asset (other t .....

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g the same assessment year under the same head of income. While section 74 of the Act deals with the losses under the head Capital gains and deals with the carry forward of capital losses and set off against the income of the subsequent financial year and section 74(1)(a) of the Act clearly stipulates that loss arising from transfer of short-term capital asset which are brought forward from earlier years can be set off against the capital gain assessable for the assessment year in respect of any .....

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ovision contained in section 70 of the Income-tax Act provides that where the net result for any assessment year in respect of any source falling under any head of income 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. Further, section 74 of the Income-tax Act provides that a loss under the head Capital gains can be carried forward and set off against capital gain in the following eight assessment yea .....

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forward separately for eight years to 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 . Thus, as could be seen above from the explanatory notes to Finance Act, 2002 , the loss arising from transfer of short-term capital asset can be set off against any capital gains, whether short-term capital gains or long-term capital gains . It further stipulated that the anomaly existing d .....

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t carried forward losses arising from transfer of shortterm capital asset can be set off against income from capital gains assessable for the assessment year in respect of any other capital asset and the decision of the Tribunal in the case of Capital International Emerging Markets Fund v. DDIT (2013) 145 ITD 491(Mum.-Trib.) supports the contention of the assessee company , whereby the Tribunal held as under: 3.2. We have heard the rival submissions and perused the material. We find that identic .....

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curred short term capital loss of ₹ 1,26,45,10,006/- from STT paid transactions. The issue is whether short term capital loss can be set off against short term capital gain mentioned above. Under the provisions of section 70(2), short term capital loss arising from any asset can be set off against Short term capital gain arising from any other asset under a similar computation made. The AO held that since gain was from shares on which no STT was paid and loss from STT paid transactions, th .....

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