Capital gains computation under Section 17(6): losses under other heads may absorb gains before tax is charged.

Section 17(6) of the Income-tax Act, 1922 was treated as a special provision for cases where an assessee's total income includes capital gains. The court rejected a purely algebraic reading that would eliminate tax where losses under other heads absorbed the capital gains, holding that such an interpretation would defeat the statutory object of taxing income and capital gains liable to tax. The provision was construed harmoniously so that only the capital gains actually remaining after absorption by the loss were brought to tax, and the Income-tax Officer's computation was upheld.

---

---

Issues: Whether, under section 17(6) of the Income-tax Act, 1922, the capital gains included in an assessee's income must be computed by treating the assessee's loss under other heads as an absorption of the capital gains, so that tax is chargeable only on the net capital gains remaining after such adjustment.

Analysis: Section 17(6) was held to be a special provision governing cases where an assessee's total income includes capital gains. The expression "the whole amount of such inclusion" was construed in the context of an assessee whose income under other heads resulted in a loss. A purely algebraic reading that would yield no taxable amount was rejected as contrary to the statutory object of taxing income and capital gains liable to tax. The provision was interpreted harmoniously so that the capital gains actually remaining after absorption by the loss were brought to tax.

Conclusion: The computation made by the Income-tax Officer was upheld, and the petitioner's construction of section 17(6) was rejected.

---