Intra-head set-off of long-term capital losses against long-term capital gains must be allowed before computing section 54F exemption.

Long-term capital losses may be set off against long-term capital gains within the same head while computing capital gains, and the resulting computation can affect the availability of exemption under section 54F. Where the assessee's working correctly applies intra-head adjustment, a computation that clubs gains without giving effect to the permissible set-off is erroneous. The income computation must reflect the net capital gains after allowing the intra-head adjustment, and the exemption calculation should then follow that corrected figure.

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Issues: Whether the assessee was entitled to intra-head adjustment of long-term capital losses against long-term capital gains while computing capital gains and the resulting exemption under section 54F.

Analysis: The assessee had sold multiple properties during the year, resulting in long-term capital gains as well as long-term capital losses. The adjustment of losses against gains within the same head was held to be permissible under the extant provisions governing intra-head set-off. The restriction made by the CPC by clubbing the gains and limiting the exemption under section 54F was found to be erroneous, and the income computation was required to be aligned with the assessee's working.

Conclusion: The intra-head adjustment claimed by the assessee was allowed and the computation made by the CPC was rejected.

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