Tribunal allows carry forward of capital loss on shares, directs separate computation of capital gains.

The Tribunal set aside the lower authorities' orders disallowing the carry forward of long term capital loss on shares for the current year. The AO was directed to compute capital gain from the commercial property sale without intra-head adjustments for the share sale loss. The Tribunal emphasized that capital gains should be computed before applying set off provisions, allowing the carry forward of the capital loss. As a result, the appeal was allowed in favor of the assessee.

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Issues:
1. Disallowance of benefit of carry forward of long term capital loss on sale of shares for the current year.
2. Computation of capital gain after intra-head adjustments and allowance of deductions under section 54F.

Analysis:
1. The appeal was filed against the order of the ld. CIT(A) regarding the disallowance of the benefit of carry forward of long term capital loss on the sale of shares for the current year. The AO had set off the long term capital loss suffered from shares against the long term capital gain from the sale of a commercial property, resulting in a net long term capital gain. The AO disallowed the carry forward of the long term capital loss on the sale of shares. The ld. CIT(A) confirmed this action. The main issue was whether it is lawful to compute capital gain after intra-head adjustments and whether deductions under section 54F should be allowed from the net income computed after intra-head adjustments.

2. The relevant provisions of Sections 45(1), 54F, and 70 of the Income-tax Act were considered. Section 45(1) deals with capital gains, while Section 54F provides for exemptions on the transfer of long-term capital assets. Section 70 pertains to the set off of losses from one source against income from another source under the same head of income. The Tribunal noted that capital gains should be computed first according to the provisions from Sections 45 to 55A before applying Section 70. The Tribunal cited a decision of the Hon’ble High Court of Madras, emphasizing that capital gains should be computed before applying provisions for the set off of capital loss.

3. Considering the above discussions and legal principles, the Tribunal set aside the orders of the lower authorities. The AO was directed to compute the capital gain from the sale of the commercial property without doing intra-head adjustment for the loss suffered from the sale of shares. The Tribunal allowed the carry forward of the long term capital loss on the sale of shares for the current year. Consequently, the appeal of the assessee was allowed, and the order was pronounced in the open court on 11/08/2020.

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