Bona fide capital loss supported by valuation evidence upheld, while section 80M deduction remained denied under settled Tribunal view.

Deduction under section 80M was denied without reducing relief under section 80K because the issue was treated as covered against the assessee by a Special Bench decision. The claimed long-term capital loss on sale of shares was accepted as genuine and allowable because the shares had not yielded dividends for years, the sale price was supported by a registered valuer's report, and the surrounding facts did not support an inference of tax evasion or a colourable device. The appeal therefore succeeded only on the capital loss issue.

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Issues: (i) Whether the assessee was entitled to deduction under section 80M without taking into account relief granted under section 80K. (ii) Whether the long-term capital loss claimed on sale of shares was a genuine loss allowable in law.

Issue (i): Whether the assessee was entitled to deduction under section 80M without taking into account relief granted under section 80K.

Analysis: The issue was stated to be covered against the assessee by a Special Bench decision of the Tribunal. In view of that accepted position, no separate reason was found to interfere with the appellate authority's view.

Conclusion: The issue was decided against the assessee.

Issue (ii): Whether the long-term capital loss claimed on sale of shares was a genuine loss allowable in law.

Analysis: The shares had not yielded any dividend for several years, the sale price was supported by a registered valuer's report, and the mere absence of stated reasons for sale did not justify rejection of the claim. The inference of tax evasion was also not accepted, particularly when the surrounding facts did not support a colourable device and the assessee's conduct was consistent with a bona fide business decision.

Conclusion: The loss was held to be genuine and allowable, and the issue was decided in favour of the assessee.

Final Conclusion: The appeal succeeded only in part, with the capital loss claim allowed but the challenge on the deduction issue rejected.

Ratio Decidendi: A claimed capital loss cannot be disallowed merely on suspicion of tax avoidance where the surrounding circumstances show a bona fide sale supported by valuation evidence and commercial justification.

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