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AI Drafter - (New and Powerful) ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: Whether a capital loss sustained during the period when capital gains were not chargeable to tax under section 12B of the Indian Income-tax Act, 1922 could nevertheless be carried forward and set off against future capital gains under section 24.
Analysis: The scheme of the Act treats income, profits and gains as part of total income only when they are chargeable under the charging and computation provisions. During the relevant period, section 12B did not make capital gains chargeable, and capital gains or capital losses from that period did not enter the computation of total income. The carry-forward provisions in section 24 presuppose a loss capable of set-off against taxable profits in a later year. A loss falling under a head that was not chargeable to tax and not required to be computed under the Act could not be treated as a loss eligible for carry forward merely because the head "capital gains" appeared in section 6.
Conclusion: The capital loss could not be carried forward or set off, and the answer to the referred question was against the assessee and in favour of the Revenue.
Ratio Decidendi: Losses can be carried forward only where the relevant head of income is chargeable and the loss is capable of computation and set-off under the Act; a loss under a head not chargeable to tax cannot be carried forward merely because that head is recognised in the charging schedule.
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