TaxTMI 
TaxTMI 
TaxTMI 
2011 (4) TMI 721
X X X X Extracts X X X X
X X X X Extracts X X X X
....r Statement No. 3 attached 69,86,923 63,11,933 Add: Short term Capital Gain 59,35,818 (As per statement attached) 1,22,47,751 Section 48 of the Income-tax Act, 1961 (the Act) provides for the mode of computing Capital gains. "48. Mode of computation. - The income chargeable under the head "Capital gains" shall be computed, by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely:- (i) expenditure incurred wholly and exclusively in connection with such transfer; (ii) the cost of acquisition of the asset and the cost of any improvement thereto: Provided that in the case of an assessee, who is a non-resident, capital gains arising from the transfer of a capital asset being shares in, or debentures of, an Indian company shall be computed by converting the cost of acquisition, expenditure incurred wholly and exclusively in connection with such transfer and the full value of the consideration received or accruing as a result of the transfer of the capital asset into the same foreign currency as was initially utilised ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....held by the assessee or for the year beginning on the 1st day of April, 1981, whichever is later; (iv) "indexed cost of any improvement" means an amount which bears to the cost of improvement the same proportion as Cost Inflation Index for the year in which the asset is transferred bears to the Cost Inflation Index for the year in which the improvement to the asset took place; (v) "Cost Inflation Index", in relation to a previous year, means such Index as the Central Government may, having regard to seventy-five per cent of average rise in the Consumer Price Index for urban non-manual employees for the immediately preceding previous year to such previous year, by notification in the Official Gazette, specify, in this behalf." 4. The mode of computation of capital gain is to reduce from the full value of consideration received or accruing as a result of the transfer of the capital asset, the cost of acquisition of the capital asset and its improvement and expenses connected with transfer of the capital asset. While reducing the cost of acquisition of capital asset, under the second proviso the assessee has the option to increase the cost of acquisition by applyi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erm capital gains at the rate of twenty per cent; (d) in any other case of a resident,- (i) the amount of income-tax payable on the total income as reduced by the amount of long-term capital gains, had the total income as so reduced been its total income; and (ii) the amount of income-tax calculated on such long-term capital gains at the rate of twenty per cent. Explanation.-Provided that where the tax payable in respect of any income arising from the transfer of a long-term capital asset, being listed securities or unit or zero coupon bond, exceeds ten per cent of the amount of capital gains before giving effect to the provisions of the second proviso to section 48, then, such excess shall be ignored for the purpose of computing the tax payable by the assessee. Explanation.-For the purposes of this sub-section,- (a) "listed securities" means the securities- (i) as defined in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (32 of 1956); and (ii) listed in any recognised stock exchange in India; (b) "unit" shall have the meaning assigned to it in clause (b) of Ex....
X X X X Extracts X X X X
X X X X Extracts X X X X
....1) Save as otherwise provided in this Act, where the net result for any assessment year in respect of any source falling under any head of income, other than "Capital gains", is a loss, the assessee shall be entitled to have the amount of such loss set off against his income from any other source under the same head. (2) Where the result of the 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 the assessment year in respect of any other capital asset. (3) Where the result of the computation made for any assessment year under sections 48 to 55 in respect of any capital asset (other than a 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 the assessment year in respect of any other capital asset not being a short-term capital asset." 8. A bare perusal of the provisions of section 70(3) of the Act would show that long term capital l....
X X X X Extracts X X X X
X X X X Extracts X X X X
....consider the issue afresh in the light of the provisions of section 70(3) of the Act and the decision of the Mumbai ITAT in the case of Mohanlal N. Shah (HUF) v. Asstt. CIT [2008] 26 SOT 380. The CIT(A) by the impugned order upheld the order the Assessing Officer for the following reasons: "3. I have considered the submission of the representative and the stand taken by the Assessing Officer. Admittedly, the appellant worked out the long term capital gains without indexation but worked out the long term capital loss with indexation and set off the same against the long term capital gains. It is true that the appellant is having the option to compute long term capital gains with or without indexation and the tax rate would accordingly vary. However, while setting off long term capital loss against capital gains, the provisions of section 70(3) are applicable. As per section 70(3), the assessee is entitled to have the amount of such loss set off against the income, if any, as arrived at under a similar computation made for the assessment year in respect of any other capital asset not being a short term capital asset. As rightly held by the Assessing Officer the important words in se....
X X X X Extracts X X X X
X X X X Extracts X X X X
....long term capital gain referred to in sections 48 to 55 of the Act. According to him in the earlier part of section 70(3) the expression used is "Where the result of the computation made for any assessment year under sections 48 to 55 in respect of any capital asset (other than a short-term capital asset) is a "loss" and it is this expression that is referred to in the later part of section 70(3) as similar computation. In this regard he pointed out that proviso to section 112(1) of the Act came into the statute books much later in point of time to the provisions of section 70(3) of the Act and therefore the Legislature would not have intended that the expression "similar computation" used in section 70(3) of the Act would mean a computation by applying either the provisions of second proviso to section 48 of the Act or a computation by applying the provisions of proviso to section 112(1) of the Act and in case the two modes of computation are employed than that would not be "similar computation" envisaged by section 70(3) of the Act. In this regard, the learned counsel for the assessee also submitted that when long term capital loss is carried forward, the same is allowed to be se....