TaxTMI 
TaxTMI 
2010 (4) TMI 211
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...., other than the bonus shares of Infosys Technologies, after giving the benefit of indexation is in consonance with the proviso to Section 112(1) and the other provisions of the Act?" 2. The question of law has been reframed during the course of the hearing of the appeal since the question as formulated by the Revenue was lacking in clarity. 3. The appeal arises out of an order passed by the Income Tax Appellate Tribunal on 5th September, 2008. The Assessment Year is 200102. In the present case the assessee entered into eight sale transactions involving the shares of four companies. Of the sale transactions, the shares of Infosys Technologies comprised entirely of bonus shares where the cost of acquisition was nil. The bonus shares....
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..... The conclusion of the Tribunal was that the assessee's claim of computation of long term capital gains on the sale of shares, other than the bonus shares of Infosys Technologies, after giving the benefit of indexation was in consonance with the proviso to Section 112(1) and the other provisions of the Act and that accordingly the assessee was assessable to net long term capital gains computed at Rs.3.45 Crores as returned. The appeal filed by the assessee on the aforesaid ground was allowed. 5. Counsel appearing on behalf of the Revenue has assailed the finding of the Tribunal by submitting that the Assessing Officer was justified in denying to the assessee the benefit of indexation and in computing the long term capital gain by deduct....
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.... company) the provisions of Clause (ii) shall have effect as if for the words "cost of acquisition" and "cost of any improvement", the words "indexed cost of acquisition" and "indexed cost of any improvement" have respectively been substituted. The indexed cost of acquisition is computed so as to bring the actual cost of acquisition in line with the cost of inflation index. Section 70 provides for the set off of loss from one source against income from another source under the same head of income. Prior to its substitution with effect from 1st April, 2003 by the Finance Act of 2002, Section 70 provided that save as otherwise provided in the Act, where the net result for any Assessment Year in respect of any source falling under any head of ....
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.... Section 48, then such excess shall be ignored for the purpose of computing the tax payable by the assessee. Section 112 forms a part of Chapter 12 of the Act which deals with the determination of tax in certain special cases. Section 112 provides for a tax on long term capital gains. Ordinarily, under clause (a) of sub section (1) of Section 112 the income tax calculated on long term capital gains is 20%. 9. The opening words of sub section (1) of Section 112 contemplate a situation where "the total income of an assessee includes any income arising from the transfer of a long term capital asset". This would be indicative of the fact that in computing income for the purposes of capital gains, the assessee would be entitled to the benefit....
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....ns and the profit sustained in one of the other transactions the assessee sought indexation. For the purposes of working out the application of the proviso to Section 112, there is nothing in the section which would deprive the assessee of the indexation claimed on the sale of shares where there was a resultant loss. What the proviso to Section 112 essentially requires is that where the tax payable in respect of income arising from a listed security, being a long term capital asset, exceeds 10% of the capital gains before indexation, then such excess beyond 10% is liable to be ignored. The assessee reported a net capital gain of Rs.3.45 Crores which was computed after setting off the loss sustained in the sale of shares in certain transacti....
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....ares is clarified in a circular issued by the Central Board of Direct Taxes on 13th September, 1995 (Circular 721). The circular notes that Section 112 includes two significant expressions viz. "total income" and "includes any income". The circular states that the total income is to be computed in the manner prescribed by the Act and the set off of a loss, in accordance with the provisions of Sections 70 to 80, is a stage which is part of this procedure. The circular then states that when this procedure is adopted for computing the gross total income or total income, only the amount of income after set off remains under the head as part of the gross total income or total income. Consequently, only that amount of long term capital gains whic....