AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2016 (12) TMI 1350
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....TCL) of Rs. 23,28,41,984/- arising on sale of 19,98,241 shares of NOCIL in August, 2004 which had been pledged with Bajaj Auto Ltd. against non-convertible preference shares issued by Sushmita Holdings Ltd. 2.2 Aggrieved by the order of assessment for A.Y. 2005-06 dated 31.12.2007, the assessee preferred an appeal before the CIT(A)-7, Mumbai. The learned CIT(A) disposed off the assessee's appeal vide the impugned order dated 05.03.2012 allowing the assessee partial relief. The learned CIT(A), however, dismissed the assessee's grounds raised in respect of its claim of carry forward for future set off of its LTCL of Rs. 23,28,41,984/- arising on account of sale of 19,98,241 shares of NOCIL pledged with Bajaj Auto Ltd. against the non-convertible preference shares issued by Sushmita Holding Ltd. 3. Aggrieved by the order of the CIT(A)-7, Mumbai dated 05.03.2012 for A.Y. 2005-06, the assessee has preferred this appeal raising the following grounds: - "1.1 The Learned Commissioner of Income Tax (Appeals) in the facts and circumstances of the case and in law, erred in holding that long term capital loss sustained on sale of equity shares of NOCIL Ltd., is not allowed to be carried for....
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....he Coordinate Bench of this Tribunal in the case of Raptakos Brett & Co. Ltd. in ITA Nos 3317/Mum/2009 and 1692/Mum/2010 dated 10.06.2015, relied upon by the assessee. We find that the issue of the allowability or otherwise of the carry forward and/or set off of LTCL on sale of shares, as in the similar issue in the case on hand also, has been considered and adjudicated at paras 3 to 10 thereof as under; holding that assessee is to be allowed to claim set off of LTCL on sale of shares: - "3. The brief facts of the case, qua the issue raised in ground no.1 are that the assessee is a pharmaceutical company, engaged in manufacturing and sale of pharmaceuticals, formulations, dietetic specialities and animal husbandry. The assessee in the computation of income had shown Long term capital loss on sale of shares amounting to Rs. 57,32,835/- and loss on sale of mutual funds units amounting to Rs. 2,61,655/-. The said Long term capital loss has been set off against the Long term capital gains of Rs. 94,12,00,000/- arising from sale of land at Chennai. The Assessing Officer held that the losses claimed cannot be allowed since the income from Long term capital gain on sale of shares and mut....
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.... 709 (Cal). In this decision he submitted that similar issue with regard to the losses on account of breeding horses and pigs which are exempt u/s. 10(27) whether can be set off against its income of other source under the head "business". The Hon'ble High Court after considering the relevant provisions of section 10(27) and section 70, held that section 10(27) excludes in expressed terms only any income derived from business of livestock breeding, poultry or dairy farming. It does not exclude the business of livestock breeding, poultry or dairy farming from the operation of the Act. The losses suffered by the assessee in respect of livestock, breeding were held to be admissible for deduction and were allowed to be set off against other business income. He drew our attention to the various observations and findings of the Hon'ble High Court and also the reliance placed by their Lordships to various decisions of Hon'ble Supreme Court, especially in the case of CIT vs. Karamchand Premchand Ltd. (1960) 40 ITR 106. He also referred to various observations of Hon'ble Supreme Court from the said decision. Thus, he submitted that the losses on account of sale of shares should be allowed t....
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....exceptions and exclusions have been provided which are not treated as capital asset. Section 45 is the charging section for any profits or gain arising from a transfer of a capital asset in the previous year i.e. taxability of capital gains. Section 47 enlists various exceptions and transactions which are not treated as transfer for the purpose of capital gain u/s. 45. The mode of computation to arrive at capital gain or loss has been enumerated from sections 48 to 55. Further sub section (3) of section 70 and section 71 provides for set off of loss in respect of capital gain. 8. From the conjoint reading and plain understanding of all these sections it can be seen that, firstly, shares in the company are treated as capital asset and no exception has been carved out in section 2(14), for excluding the equity shares and unit of equity oriented funds that they are not treated as capital asset. Secondly, any gains arising from transfer of Long term capital asset is treated as capital gain which is chargeable u/s. 45; thirdly, section 47 does not enlist any such exception that transfer of long term equity shares/funds are not treated as transfer for the purpose of section 45 and sect....
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....ection 10 provides that certain income are not to be included while computing the total income of the assessee and in such a case the profit or loss resulting from such a source of income do not enter into computation at all. However, a distinction has been drawn where the entire source of income is exempt or only a part of source is exempt. Here it needs to be seen whether section 10(38) is source of income which does not enter into computation at all or is a part of the source, the income in respect of which is excluded in the computation of total income. For instance, if the assessee has income from Short term capital gain on sale of shares; Long term capital gain on debt funds; and Long term capital gain from sale of equity shares, then while computing the taxable income, the whole of income would be computed in the total income and only the portion of Long term capital gain on sale of equity shares would be removed from the taxable income as the same is exempt u/s 10(38). This precise issue had come up for consideration before the Hon'ble Calcutta High Court in Royal Turf Club, wherein the Hon'ble High Court observed that "under the Income tax Act 1961 there are certain income....
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....s of the 1961 Act in respect of the total income of the previous year or years or whatever the case may be. The scheme of " total income " has been explained by s. 5 of the Act which provides that subject to the provisions of the Act, the total income of the previous year of a person who is a resident includes all income from whatever source it is derived. In computing the total income, certain incomes are not included under s. 10 of the Act. It depends on the particular case where certain income, in respect of which the Act is made inapplicable to the scheme of the Act, and in such a case, the profit and loss resulting from such a source do not enter into the computation at all. But there are other sources which for certain economic reasons are not included or excluded by the will of the Legislature. In such a case we must look to the specific exclusion that has been made. The question is in this case whether s. 10(27) is a source which does not enter into the computation at all or is a source the income in respect of which is excluded in the computation of total income. How this question will have to be viewed, has been looked into by the Supreme Court in several decisions to som....
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....rofits and gains referred to in Section 4(1)'. Secondly, it must be 'computed in the manner laid down in the Act'. If either of these conditions fails, the income will not be a part of the total income that can be brought to charge." While concluding the issue their Lordships observed that "it may be remembered that the concept of carry forward of loss does not stand in vacuo. It involves the notion of set- off. Its sole purpose is to set off the loss against the profits of a subsequent year. It pre-supposes the permissibility and possibility of the carried-forward loss being absorbed or set off against the profits and gains, if any, of the subsequent year. Set off implies that the tax is exigible and the assessee wants to adjust the loss against profit to reduce the tax demand. It follows that if such set-off is not permissible or possible owing to the income or profits of the subsequent year being from a non-taxable source, there would be no point in allowing the loss to be "carried forward". Conversely, if the loss arising in the previous year was under a head not chargeable to tax, it could not be allowed to be carried forward and absorbed against income in a subs....