TMI Blog1988 (7) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... rm capital loss of Rs. 7,792 ?" The facts leading to this reference are that for the year under reference, the assessee suffered loss of Rs. 7,792 under the head "Capital gains - short-term" and made profit of Rs 5,864 under the head "Capital gains-long-term". In his return of income as well as during the course of assessment proceedings, the assessee claimed that he should be granted deduction of Rs. 5,000 as contemplated under section 80T of the Act in respect of "long-term capital gains" without setting it off first against "short-term capital loss" of Rs. 7,792. The Income-tax Officer, however, first set off the "long-term capital gains" against "short-term capital loss" and determined the loss under the head "Capital gains" at Rs. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that in the gross total income of the assessee, income chargeable under the head "Capital gains" was included and, therefore, the assessee was entitled to claim deduction of Rs. 5,000 as contemplated under section 80T(b) of the Act. He, therefore, submitted that the order of the Appellate Assistant Commissioner was in accordance with the aforesaid section of the Act and, therefore, should be upheld. The Tribunal upheld the order of the Appellate Assistant Commissioner holding that "long-term capital gains" of Rs. 5,864 was included in the gross total income of the assessee as contemplated under sub-section (5) of section 80B of the 1961 Act and that the mere fact that the same was adjusted against "short-term capital loss" of Rs. 7, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n short-term capital assets, has to set off first the short-term capital loss against long-term capital gains. The Income-tax Officer deducted the loss on account of short-term capital assets against the gains in respect of other capital assets in the first instance and thereafter the balance was set off against the income of the assessee from other heads. The assessee preferred an appeal contending, inter alia, that the loss relating to short-term capital assets should have been set off first against other heads of income and not against gains in respect of assets other than short-term capital assets. This contention was rejected by the Appellate Assistant Commissioner. The assessee preferred a further appeal before the Income-tax Appellat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act held that (at p. 380) : "From the said sections, it appears that the Legislature intended to draw a distinction between short-term capital assets and other capital assets and income or loss arising out of the two types of capital assets have been treated as if falling under different heads. Under section 70(2)(i) of the Act, on a computation made under sections 48 to 55 in respect of any short-term capital asset resulting in loss, the assessee becomes entitled to set off such loss against the income arising out of any other capital asset on a similar computation. Under section 71(3) of the Act, where the net result of computation under sections 48 to 55 of the Act relating to short-term capital assets is a loss, the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... long-term capital gains and the resultant loss was set off against the positive income from other heads. The Income-tax Officer, therefore, did not allow the relief under section 80T as there were no long-term capital gains after adjustment of short-term capital loss. Where the gross total income of an assessee is a positive figure and even after set off of the short-term capital loss against other income, there would be still a positive income, in such a case, loss on short-term capital assets should not be set off first against the long-term capital gains so as to deprive the assessee of the relief available under section 80T(b). The position would be different when the gross total income is a negative figure. In our view, the Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X
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