Exempt share-sale gains outside total income cannot be set off against share-sale losses under the Income-tax Act.

Income exempt under section 10(38) of the Income-tax Act, 1961 falls outside total income under Chapter III and is not available for adjustment against brought-forward loss from sale of shares. On that basis, loss on sale of shares cannot be set off against exempt gains from sale of shares. The note records that the assessee's position was rejected and the Tribunal's view was left undisturbed.

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Issues: Whether loss on sale of shares can be set off against income from sale of shares exempt under section 10(38) of the Income-tax Act, 1961.

Analysis: Section 10 falls in Chapter III of the Income-tax Act, 1961 and deals with incomes not included in total income. Income arising from transfer of long-term capital assets under section 10(38) is excluded from total income. On that footing, exempt gains from sale of shares cannot be treated as income available for adjustment against brought-forward loss from sale of shares.

Conclusion: The loss on sale of shares could not be set off against the exempt income under section 10(38); the assessee's position was rejected and the Tribunal's view called for no interference.

Ratio Decidendi: Income exempt under section 10(38) of the Income-tax Act, 1961, being outside total income, is not available for set-off against losses from sale of shares.

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