TaxTMI 
TaxTMI 
2022 (4) TMI 684
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....ngly exempt under section 10(38) of the Income Tax Act, 1961 the conclusion arrived at by the learned lower authorities is contrary to law. 2) The learned Commissioner of income tax erred to upholding the order of the Assessing Officer setting of the short term capital loss amounting to Rs. 2,46,64,662/- arising on sale of shares not subjected to STT against long term capital gains subjected to STT and accordingly exempt from tax under section 10(38) of the Act, 1961 the conclusion arrived at by the learned lower authorities is contrary to law. 3) The appellant reserve the right to add, to alter or amend the Grounds of Appeal." 3. Precisely stated the facts are such that the assessee submitted Return of Income on 26.07.2016, declaring a total income of Rs. 17,25,67,630/- alongwith the following incomes: Long-Term Capital Gain (STT Paid) and exempt u/s 10(38) - Rs. 2,62,06,472/- Long-Term Capital Loss (STT not paid) - Rs. 15,41,625/- Short-Term Capital Loss -- Rs. 5,06,74,578/- As the Long-Term Capital Gain (STT paid)of Rs. 2,62,06,472/- is exempted u/s 10(38), the assessee claimed carry forward of Long-Term Capital Loss (STT ....
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....ncome at all, the assessee was legally entitled to carry forward the full amount of losses suffered by him without setting off against the aforesaid exempted Long-Term Capital Gain of Rs. 2,62,06,472/-. The Ld. A/R relied upon the following decisions: (i) G.K. Ramaswamy 37 SOT 345 (ITAT Mumbai) (ii) NikilSawhney 119 taxmann.com 372 (Delhi High Court) (iii) KishorebhaiBhikhbhai Virani 367 ITR 261 (Gujrat High Court) (iv) ANG Securities Ltd. 37 taxmann.com 210 (P&H High Court) (v) Apollo Tyres Ltd. 130 taxmann.com 295 (Kerala High Court) (vi) Inductotherm (India) Pvt. Ltd. 83 taxmann.com (ITAT Ahmedabad) With this submission, the Ld. A/R claimed that both the Ld. AO and Ld. CIT(A) are wrong in setting off losses against the exempted Long-term Capital Gain and thereby reduce the losses available for carry forward. 7. Per contra, the Ld. D/R supported the orders of lower authorities. 8. The short and exact controversy before us is whether the assessee was legally correct in claiming carry forward of full amount of losses without setting of such losses against the Long-Term Capital Gain exempted u/s 10(38)? To resolve this, ....
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....fication of incomes under various heads for the purposes of charge of income-tax and "computation of Total Income". The clear effect of section 14 is that only those incomes which form part of Total Income, can only be classified and computed under various heads. In other words, the incomes which do not form of Total Income (obviously such incomes are the incomes covered under Chapter-III, practically called "exempted incomes"), are out of consideration of section 14 as well as the computational scheme of various heads prescribed in section 15 to 59. Thereafter the scheme of set-off and carry-forward of losses prescribed in section 70 to 80 trigger only for those losses or incomes which have been computed under various heads as prescribed. From this scheme as prescribed in Income-tax Act, it is very much clear that the exempted incomes falling under Chapter-III do not enter into the computation of Total Income itself and hence such incomes are not available for set-off of any loss under section 70 to 80. This understanding of law is well-established and well-understood over the years and this is the essence of submissions made by Ld. A/R. 9. Having understood the scheme of the A....
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....or exempted loss can be set off against taxable income. 10. Now we turn to the decision of Hon'ble Jurisdictional High Court of Gujrat in Kishorbhai Bhikhabhai Virani Vs. ACIT (2014) 367 ITR 261. In this case, the assessee was having exempted long-term capital loss u/s 10(38) and claimed set off of the same against the taxable capital gain. On appeal by assessee, the Hon'ble Jurisdictional High Court of Gujrat did not allow the claim of assessee holding as under: "6. In this context, section 10(38) of the Act becomes relevant. As is well-known, section 10 pertains to income not included in the total income. Sub-section (38) thereof reads as under: "10. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included: xxxxxxxxx (38): any income arising from the transfer of along term capital asset, being an equity share in a company or a unit of equity oriented fund where: (a) the transaction of sale of such equity share or unit is entered into on or after the date on which Chapter VII of the Finance (No. 2) Act, 2004 comes into force; and (b) such tra....
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.... In a way, this decision supports the revenue's contention that the loss from taxable source can be set off against exempted long-term capital gain u/s 10(38) and only remaining loss shall be carried forward. But if we look deeply into this decision, we observe that Hon'ble co-ordinate bench of ITAT has taken such a view by observing as under: "10. ...... Lastly, coming to the decision of Hon'ble Gujarat High Court in the case of KishorebhaiBhikhabhai Virani (supra), we find that the issue involved in the present case was almost the same, wherein the Hon'ble High Court after following the decision of Hon'ble Supreme Court in the case of Harprasad& Company Pvt. Ltd. (supra), had decided the issue against the assessee. Since we have already noted down the ratio of Hon'ble Calcutta High Court, wherein the Hon'ble High Court has discussed this issue in detail after relying upon series of decisions of Hon'ble Supreme Court and have reached to a conclusion as discussed above, and, therefore, we are respectfully following the ratio of the decision of the Calcutta High Court. Further the said decision have not been referred or distinguished by the Hon'b....