Long term capital loss against gain

[anil kalia]

A is having long term capital loss on transactions of sale shares not covered under the provisions of section 10(38) and he is also having long term capital gain from transactions of sale of shares covered under the provisions of section 10(38) of the Income Tax. Please advice : Whether the long term capital loss incurred on sale of shares transactions not covered u/s 10(38) will be set off aganist long term capital gain from transactions covered u/s 10(38) or will be allowed to be carried forward as per the provsions of Income Tax.

[DEV KUMAR KOTHARI]

Refer to S. 70 (3). The income which is exempt u/s 10 (38) is kept apart and does not go into computation of GTI. Therefore, there is no question of allowabel LTC loss to be set off against tax free LTCG. Besides in S. 70 words used are 'assessee shall be entitled..', therefore, there is an entitlement which the assessee may or may not avail.

AI Summary

Exempt capital gains cannot be offset against taxable long term capital losses; set off entitlement remains optional.
Exempt income under section 10(38) is excluded from computation of gross total income; accordingly an allowable long term capital loss from shares not covered by that provision cannot be set off against tax free long term capital gains. The wording 'assessee shall be entitled' in the set off provision indicates an option the assessee may elect to use rather than an obligation to treat exempt gains as available for adjustment.