TMI Blog2021 (9) TMI 708X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee is mixing up heterogeneous heads as homogeneous heads and claiming the set-off? - HELD THAT:- The literal meaning of Section 70(3) clearly shows that both for including the loss against set-off and setting of loss against income the computation must have been made under Sections 48 to 55 of the Act. The language of Section 70(3) is clear and unambiguous. In the understanding of this Court, the Parliament intended homogeneous entries to adjust the loss or profit against one another and not introduce heterogeneous elements or entries. Hence, the interpretation adopted by the assessee would give benefits not otherwise intended by the Section. The effort of the assessee, in our view, includes an excluded claim, i.e., a heterogeneous claim under Section 70(3) of the Act, by claiming that the homogeneity of long term capital gain is satisfied by the assessee. We are of the view that the application of Section 70(3) by the assessee is incorrect and illegal. AO has very clearly appreciated the objection, applied the law to the circumstances of the case, and recorded the findings. As we have noted supra the CIT (Appeals) and the Tribunal have merely adopted the conclusions recorded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f advances written off by the assessee. The Counsel appearing for the parties state that the same reason could be adopted for answering the instant question as well. For the reasons recorded in ITA No.26/2013 in question no.4 therein, the instant question is answered in favour of the Revenue and against the Assessee. 4. Substantial question no.2 deals with the claim of the assessee in setting off long term capital loss on sale of shares and units of mutual funds against the long term capital gain earned on the sale of land. The question presents the application of Section 10(38) of the Income Tax Act, 1961 (for short the Act ) on one hand and on another the extent to which set-off under Section 70(3) read with Sections 48 to 55 of the Act could be claimed by the assessee. The circumstances relevant for examining the question are very briefly stated thus: 4.1 In the previous year, corresponding to Assessment Year 2005-06, the assessee has sold shares and units of mutual funds and paid STT (Securities Transaction Tax). In the same previous year, the assessee sold land. In the computation filed by the assessee, the assessee has set off the loss on the sale of shares and mutual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enior Advocate Mr Joseph Markos, while reiterating the arguments put forward by the assessee before the statutory authorities and the Tribunal, expanded the contention by arguing that the view taken by the Tribunal and the authorities could negate the statutory deduction allowed to the assessee. According to him, the criteria for attracting Section 10(38) is that income arising from the transfer of a long term capital asset, being an equity share in a company or a unit of an equityoriented fund, the transaction is chargeable to STT. In the case on hand, the twin requirements are attracted, however, instead of earning income, the transaction resulted in a loss to the assessee. The loss is from a long term asset, and, hence, could be set off in terms of Section 70(3) of the Act. Therefore, the income derived from the sale of shares even is exempt from the computation of the total income of the assessee, the loss from the sale of a long term share is set off against income from the sale of a long term asset. According to him, Section 70(3), if plainly read, does not prohibit the assessee from availing the loss otherwise incurred by the assessee in respect of the sale of a long term ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profits are of a revenue character. Both must enter into computation wherever it becomes material in the same mode of the taxable income of the assessee. Therefore, the effect from the perspective of the Act is that both the income and the loss are excluded from computation under Sections 48 to 55 of the Act. 6.2 By inviting our attention to the view taken by the Supreme Court in Harprasad Co. case it is argued that income includes profit as well as loss. In one sense, profits and gains represent plus income whereas losses represent minus income. According to him, what is important in all these cases is loss is negative profit. Both positive and negative profits are of a revenue character and enter into computation wherever it becomes material in the same mode of the taxable income of the assessee. By laying emphasis on the above view of the apex Court, he argues that what is excluded by Section 10(38) of the Act, does not come within the mode of computation under Sections 48 to 55 of the Act. The inclusion of an excluded income, as well as loss for set-off under Section 10(38), would completely change the meaning of Section 70(3) of the Act. He argues that the substantia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hares and units of mutual funds sold by the assessee would come under Section 10(38) of the Act. Thus had there been income such income is excluded from the computation of income of the assessee. Sections 48 to 55 deal with the computation of long term capital gains by the assessee. The principle laid down by the Supreme Court in Harprasad Co. case is to the effect that income is inclusive of profit and loss i.e., both positive and negative effects of the transaction. Hence, it is legal and correct not to introduce the entry of sale of shares in the computation of income under Sections 48 to 55. The setoff of loss etc is dealt with by Section 70(3) of the Act. 7.3 Let us understand Sec 70 (3) as follows: Set-off of loss from one source against income from another source, important words are under the same head of income. Next, Section 70(3) is applicable or attracted, viz:- (a) the result of the computation made for the assessment year, important words are viz. under Sections 48 to 55 in respect of any capital asset, being a short term capital asset, in a loss; (b) enables the assessee to have the amount of such loss set off against the income if any; (c) as arrive ..... 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