TaxTMI 
TaxTMI 
2023 (3) TMI 1043
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....entures issued by M/s NTPC Whether considering the facts and circumstances of the case, L. CITIA) is correct in holding that debentures issued by NTPC will not be covered by the provision of section SS2Naan) of the IT Act 1961 even though the assessee was issued these debentures on account of it being an existing shareholder in the company and wherein the assessee incurred no cost in acquiring the debentures. Whether considering the facts and circumstances of the case, the Ld. CITA) is correct in holding that the set-off of Short-Term Capital Losses can be carried out against income/gain not arrived from similar computation and which are taxable at different rates of taxes. The Appellant prays that the order of the Ld.CMA) on the above ground(s) be set aside and that of the Assessing Officer be restored. The Appellant craves leave to amend or alter any ground or add a new ground which may be necessary. 3. We have heard rival submissions and perused the materials available on record. The assessee is a non-resident entity registered with Securities and Exchange Board of India (SEBI) as a Foreign Institutional Investor (FII) for carrying out investment ac....
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............................................................................................... (ii) ............................................................................................. (iii) ............................................................................................. (iiia) in relation to the financial asset allotted to the assessee without any payment and on the basis of holding of any other financial asset, shall be taken to be nil in the case of such assessee ;" 3.1. We find during the financial year ended 31/03/2015, a total of 8245464400 debentures were issued by NTPC Ltd to the shareholders for the company under the scheme of arrangement approved by the Ministry of Corporate Affairs and approved by the shareholders on 10/02/2015, out of which 19491492 debentures were allotted to the assessee. On 01/04/2015, the assessee sold 19483893 debentures for Rs.24,76,68,038.34. The assessee pleaded that given that the amount of dividend which was subjected to Dividend Distribution Tax (DDT) was re-invested towards cost of debentures and hence, the same represent the cost of acquisition of debentures for the assessee. The computation ....
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....nts by the assessee in the Indian capital markets resulted in net short-term capital loss of Rs. 98,24,23,558/-. The detailed break-up of which is tabulated below: Particulars Amount (INR) Short-term capital gains arising from transaction chargeable to Securities Transaction Tax (STT) i.e taxable at the rate of 15% 45 94,68,698 Add. Short-term capital gains arising from transaction not chargeable to STT Le taxable at the rate of 30% 73,36,251 Less Short-term capital loss (after disallowing loss as per section 94(7) of the Income-tax Act 1961 (Act)] (1,44,92,28,507) Net Short-term capital loss (98,24,23,558) 4.1. Given the above and in the absence of any specific provisions under the Act in relation to the manner of set-off of loss against the gains earned by the assessee during the financial year under consideration, the assessee has set-off its short-term capital loss first against the short-term capital gains chargeable to tax at the rate of 30%, amounting to Rs.73,36,251/-, and the balance has been then set-off against the short-term capital gains chargeable to tax at the rate of 15%. Further, the balance short-term capital loss after set-off aga....
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....Assessing Officer is dealt in by the provisions of law contained in section 71. Therefore, the distinction drawn by the assessing authority between inter-head and intra-head set off in the context of section 70 does not arise at all. In the amended provisions of law contained in section 70, the option is given to an assessee to set off any loss arising from any source falling under any head of income against his income from any other source under the same head. As argued by the learned senior counsel, the most important issue to be considered is „what is source of income‟? Long term capital gains as well as short term capital gains and the losses also are considered for taxation under a common head "capital gains". The law states that under a particular head, there could be a number of sources of income out of which assessee may incur loss in respect of some source and assessee may earn income from other source. There can be a bundle of sources under a particular head of income. Out of that particular head of income, the assessee is free to set off loss against income from another source. There is no distinction between short term capital asset or long term capital asse....
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....e financial year for a particular source of income, it will not change with the change of head under which income from the said source is assessed. Section 14 of the Act classifies the income of the assessee under different heads only for the purpose of charge of income-tax and computation of total income. Income falling under the same head may be derived from various sources and even in respect of income from different source falling under the same head, subject to provisions of section 3, an assessee may have different previous years. It is thus clear that the source of income is different from head of income. Source means the real source of income. Every income must have a source which cannot change. In a given case, there may be a controversy about the head under which income from a particular source would be assessable. Determination of that controversy will affect the charge of tax and the computation of income. It will in no way affect the previous year in which income from such source is assessable. .....In the instant case, the source of income is the transfer of the property....." 43. When we consider the relevant decisions of the courts of law rendered in Seth S....
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.... 45. We, therefore, find that there is no basis in grouping short term capital assets as a separate source of income and long term capital assets as a separate source of income. Not only short term and long term assets are different sources of income, but even the different short term assets and different long term assets involved in the respective transactions are again different sources of income. When section 70 provides that a loss falling under a source of income can be set off against income from any other source under the same head, it means that the long term capital loss being a separate source can be set off against short term capital gains, which is another separate source of income. Within the provisions of law contained in section 70, there is no further identification of sources of income against which alone loss of a particular source can be set off. What is mentioned in the law is only source of income. As far as the head of income "capital gains" is concerned, the sources could be transfer of short-term capital asset as well as transfer of long term capital assets and transfer of different assets will be different sources of income. There is no further ide....
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..... Though this Special Bench judgment referred to supra has been rendered in the context of pre-Securities Transaction Tax (STT) era, still the analogy drawn thereon would be applicable to the facts of the instant case. In fact post STT regime, we find that this Tribunal in the case of ADIT(International Taxation)-4(1) vs. Legg Mason Asia (Ex Japan) Analyst Fund reported in 38 taxmann.com 12 had addressed the very same issue wherein the arguments advanced by the ld. DR before us is also addressed. The relative operative portion of the said order is reproduced hereunder:- "4. We have heard the parties, and perused the material on record. The issue that basically arises is as to whether the assessee has an option to adjust the loss arising on a STCA against the income arising from such assets for the same year, irrespective of whether the transactions are categorized as 'off market transactions' or 'on market transactions'. This, to our mind, would be so as 'loss' is only negative 'income', and is, in any case, assessable under the same head of income; any taxable income under the Act being required to be classified and assessed to tax....