TaxTMI 
TaxTMI 
2016 (1) TMI 80
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.... Rs. 39,89,235/-. 3. The Brief facts of the case are that the assessee company is a member of the Bombay Stock Exchange and engaged in the business of share broking, trading and dealing in shares and securities. 4. During the course of assessment proceedings u/s 143(3) read with Section 143(2) of the Income Tax Act,1961(hereinafter called "the Act") , it was seen by the learned assessing officer( Hereinafter called "the AO") that the assessee company has claimed set off of brought forward loss arisen from transfer of short-term capital asset Rs. 19,21,095/- during the previous year relevant to the assessment year 2009-10 against the gains arising from transfer of long-term capital asset of Rs. 39,89,236/- earned by the assessee company during the previous year relevant to the assessment year 2010-11 which, in the opinion of A.O. is not allowable due to difference in the tax rate. The assessee company submitted that the said set off of loss be allowed u/s 74(1) of the Act which reads as under:- Losses under the head "Capital gains" , Section 74(1)(a) "74(1) where in respect of any assessment year, the net result of the computation under the head "capital gains" ....
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....ovisions of section 70(3) of the Act. The assessee company , inter-alia submitted before the CIT(A) that the assessee company has rightly claimed set off of brought forward loss arisen from transfer of short-term capital asset during the previous year relevant to the assessment year 2009-10 against the gains arisen from transfer of longterm capital assets earned during the previous year relevant to the assessment year 2010-11in view of Section 74(1)(a) of the Act and the AO has wrongly invoked provisions of Section 70(3) of the Act whereas set off of the said loss is governed by Section 74(1)(a) of the Act . The assessee company , inter-alia , submitted as under: "Section 74 was amended by the Finance Act, 2002 made effective from 1-4-2003 and accordingly, it is being made applicable from A.Y. 2003-04 onwards. Memorandum explaining relevant Clause no. 28 of the Finance Bill of 2002 in respect of Amendment proposed and carried out in Sec: 74 is enclosed herewith. The object of the said amendment was to rectify the anomaly by amending the said Section to provide that "where in respect of any A. Y., the net result of computation under the head 'capital gain' is a loss....
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....been made before the lower authorities and submitted that Section 74(1)(a) of the Act is applicable and section 70 of the Act is not applicable to the issue in appeal as it deals with intra-head adjustment of losses incurred during the year while section 74(1)(a) deals with set off of brought forward loss incurred on transfer of short-term capital asset against the capital gain's earned during the year. The Ld. Counsel of the assessee company relied upon the decision of the Tribunal in the case of Capital International Emerging Market Fund v. DDIT(IT) (2013) 145 ITD 491(Mum. Trib.) to contend that merely because two set of transaction are liable for different rate of tax, it does not mean that these transaction does not arise from similar computation as contended by the authorities below. The Ld. Counsel also drew our attention to circular no 8 of 2002, dated 27-08-2002 issued by CBDT which is explanatory notes on provisions relating to direct taxes to contend that the amendment were made by Finance Act, 2002 to rectify the anomaly and now loss arising from transfer of short-term capital asset can be set off against any capital gains while loss arising from transfer of long-term ca....
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.... of short-term capital asset which are brought forward from earlier years can be set off against the capital gain assessable for the assessment year in respect of any other capital asset which could be either long-term capital gain and short-term capital gain. The amendment made by Finance Act, 2002 has rectified the anomaly as existed which was explained by circular no 8 of 2002, dated 27-08-2002 issued by CBDT which is explanatory notes on provisions relating to direct taxes referring to the amendment made by Finance Act, 2002 to rectify the anomaly as under: "40. Modifications of provisions relating to set off of long term capital loss 40.1 The existing provision contained in section 70 of the Income-tax Act provides that where the net result for any assessment year in respect of any source falling under any head of income 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. Further, section 74 of the Income-tax Act provides that a loss under the head "Capital gains" can be carried forward and set off against capital gain in the following eight assessment years. ....
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....ns. The assessee had earned short term capital gain of Rs. 40,25,93,717/- from non STT transactions and it had incurred short term capital loss of Rs. 1,26,45,10,006/- from STT paid transactions. The issue is whether short term capital loss can be set off against short term capital gain mentioned above. Under the provisions of section 70(2), short term capital loss arising from any asset can be set off against Short term capital gain arising from any other asset under a similar computation made. The AO held that since gain was from shares on which no STT was paid and loss from STT paid transactions, these fell in different categories and could not be set off against each other. We find that this aspect has already been examined by the Mumbai bench of the Tribunal in the case of First State Investments (Hong Kong) Ltd. v. ADIT(supra), in which it has been held that the phrase "under similar computation made" refers to computation of income, the provisions for which are contained under sections 45 to 55A of the Act. The Tribunal also held that the matter of computation of income was a subject which came anterior to the application of rate of tax which are contained in section 110 to ....