1990 (11) TMI 209

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.... capital gain amounting to Rs. 17,178. The assessee's income from "other sources" amounted to Rs. 1,77,618. The question arose before the Income-tax Officer as to how the short term capital loss was to be set off. The assessee wanted it to be set off against "income from other source" by applying section 71(3) of the Income-tax Act, 1961 and claiming that so far as long term capital gains of Rs. 17,178 were concerned, it was entitled to pay tax thereon at the concessional rate of 40% under section 115 of the Act. However, the Income-tax Officer did not accept the same. What the Income-tax Officer did, purporting to do so under section 70(2)(i), was that short term capital loss was to be set off against the long term capital gain. 3. Being ....

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....erned in the present case with the set off of short term capital loss. Therefore, section 70(2)(i) is directly relevant for our purpose. Another provision which deals with the set off of short term capital loss is section 71(3). So far as section 70(2)(1) is concerned, it is in the following terms : " Whether the result of computation made for any assessment year under sections 48 to 55 in respect of any short-term capital asset is a loss, the assessee shall be entitled to have the amount of such loss set off against the income, if any, as arrived at under a similar computation made for assessment year in respect of any other capital asset. " There could be two possible interpretations on this language. One interpretation could be that sh....

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....se or source-wise, whereas the set off of the loss under section 71 appears to be head-wise. It was also held that short term capital loss should not be set off first against the long term capital gains of the same year under section 70(2)(i). Section 71(3) is to the following effect : " Where in respect of any assessment year the net result of the computation under sections 48 to 55 in respect of capital gains relating to short-term capital assets is a loss and the assessee has income assessable under any head of income other than "Capital gains", the assessee shall, subject to the provisions of this Chapter, be entitled to have such loss set off against the income aforesaid. " Here also there could be two possible interpretations of the....