2013 (5) TMI 1043 - AT - Income Tax

Tribunal allows set off of short-term capital loss at lower tax rate

The tribunal upheld the CIT(A)'s decision to allow the set off of short term capital loss chargeable to tax at 10% instead of the normal rate of 30%. The ... - Issues involved: The appeal concerns the correctness of allowing set off of short term capital loss chargeable to tax u/s 111A at 10% instead of the normal rate of 30%. Issue 1 - Set off of Short Term Capital Loss: The issue before the tribunal was whether the CIT(A) correctly allowed the set off of short term capital loss chargeable to tax u/s 111A at 10% instead of the normal rate of 30%. The AR cited relevant decisions supporting the assessee's claim, including First State Investment (Hong Kong) Ltd., Fidelity Investment Trust Fidelity Overseas Fund, and American Century Twentieth Century International Discovery Fund. The tribunal examined the language of sub-section (2) of section 70 and held that the choice of setting off short-term capital loss against short-term capital gain is with the assessee. The tribunal emphasized that the computation of income precedes the application of the tax rate. Based on the cited cases and the analysis of the provisions, the tribunal overturned the CIT(A)'s order and allowed the set off of short term capital loss as claimed by the assessee. Issue 2 - Similar Judgments Supporting Assessee's Claim: The tribunal considered the decision in the case of DWS India Equity Fund, where the Mumbai Bench held that short term capital loss arising from STT paid transactions can be set off against short term capital gain arising from non STT transactions. The tribunal found that the computation of income under similar provisions allows for the set off, even if the transactions are liable for different tax rates. In line with the decision of the Mumbai Bench, the tribunal upheld the CIT(A)'s order allowing the set off of short term capital loss against short term capital gain. Conclusion: Considering the identical nature of the cases cited and the decisions relied upon, the tribunal dismissed the department's appeal and upheld the CIT(A)'s order.