1997 (9) TMI 99 - HC - Income Tax

Court: Relief under section 80T should be based on long-term capital gains only. Short-term losses not considered.

The High Court ruled in favor of the assessee, determining that the relief under section 80T should be calculated on the entire long-term capital gains ... Capital Gains, Capital Loss, Set Off, Special Deduction Issues:1. Whether the assessee is entitled to set off the short-term capital loss against income under any head other than 'capital gains' and is also entitled to the relief under section 80T on the gross long-term capital gains before adjustment of the short-term capital lossRs.Detailed Analysis:The case involved a reference under section 256(1) of the Income-tax Act, 1961, regarding the entitlement of the assessee to set off a short-term capital loss against income under any head other than 'capital gains' and the relief under section 80T on gross long-term capital gains before adjusting the short-term capital loss. The assessee, an individual, had a short-term capital loss of Rs. 17,750 and a long-term capital gain of Rs. 34,454 during the relevant assessment year. The Income-tax Officer set off the short-term capital loss against income under other heads, including long-term capital gains, resulting in a total income of Rs. 46,411. The Commissioner later found this assessment erroneous and directed that the deduction under section 80T should be calculated on the net long-term capital gains after adjusting the short-term capital loss. The Tribunal, however, accepted the assessee's contention that the relief under section 80T should be on the entire long-term capital gains without adjusting the short-term losses, canceling the Commissioner's revisional order.Section 80T of the Income-tax Act, applicable at the time, provided for deductions from long-term capital gains for non-company assesses. The section explicitly stated that the deduction was only available for long-term capital gains and not for short-term capital gains. The deduction was to be made from the long-term capital gains included in the total income of the assessee, excluding short-term capital gains or losses. The Tribunal's decision was supported by the Supreme Court's ruling in CIT v. V. Venkatachalam [1993] 201 ITR 737, emphasizing that the deduction under section 80T should be based on long-term capital gains without considering short-term capital losses.Regarding the set off of short-term capital loss against income under any head other than 'capital gains,' sections 70 and 71 of the Act allowed such adjustments without any restrictions. The High Court concluded that for the computation of deduction under section 80T, short-term capital loss should not be deducted from long-term capital gains. Therefore, the Tribunal's decision was deemed justified, and the question was answered in favor of the assessee.In conclusion, the High Court disposed of the reference accordingly, with no order as to costs.