TaxTMI 
TaxTMI 
2006 (1) TMI 228
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....r the head 'Business' should be set off against the 'Income from other sources', in the first instance, and only the surviving loss should be set off against 'Income from capital gains'." A short and interesting issue has been raised in this appeal that whether a business loss of the year has to be first set off against the income under the head "Other sources" or against the income under the head "Capital gains". The claim of the appellant is that the business loss should be first set off against interest income, i.e., income from other sources and thereafter if any balance is left, the same is to be set off against the capital gains of the year. Factual position as stated before us in the light of statement of i....
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....ing the head "Capital gains"(whether relating to short-term capital assets or any other capital assets)." As the heading of the section indicates i.e., "set off of loss from one head against income from another", the option is left open as far as sub-section (2) is concerned. Contrary to this, the heading of section 70 is restrictive in nature i.e., "set off of loss from one source against income from another source under the same head of income". So, the first thing is, if the losses from one source can be set off against income from another source under the same head of income for the same assessment year, the set off is to be made as prescribed under section 70 of Income-tax Act. If, however, such losses cannot be so set off, then sec....
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....arent that there is no such restriction imposed on exercising the option of setting of business loss against income under any other head other than income under the head "Capital gains". The expression used in sub-section (2) simply enables an assessee to set off business loss under any head of income including the head "Capital gains". So, it appears that the Legislature has given a choice to a tax payer p in respect of loss arising from any other head except capital gain to set off the same either against the income under any head of the income or against the income under the head "Capital gains" whether relating to short-term capital asset or any other capital asset. If we further compare another sub-section of section 71 i.e., sub-secti....
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....ticular mode of set-off shall be followed. [In the absence of any such indication, the general rule to be followed in all fiscal enactments is that where words used are neutral in import, a construction most beneficial to the assessee should be adopted]. The words "he shall be entitled to have the amount of loss set-off" occurring in section 24(1), would seem to be consistent with the conferment of a benefit on the assessee which he can claim as of right. Hence, in the above illustration, the assessee's contention should prevail and the department should adopt that mode which will give the assessce the maximum benefit." 2.2 Further, our view is strengthened by a decision of ITAT Bombay Bench in the case of XYZ v. ITO [1982] 13 TTJ 93....