The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has held that the disallowance of setoff of short-term capital loss is allowable to set-off against short-term capital gain under Section 70 and 71 of Income Tax Act 1961.
The assessee, Prem Naraindas Raney was an individual and partner in the firm Raney and Co. For the year under consideration, the assessee filed its return of income on 15/10/2018 declaring a total income. The return filed by the assessee was processed vide intimation dated 17/05/2019, issued under Section 143(1) of the Income Tax Act computing the total income of the assessee, interalia, after disallowing short-term capital loss and after making intra head adjustment short-term capital gains was determined as against declared by the assessee.
The Commissioner of Income Tax Appeals (CIT(A)), by impugned order, dismissed the appeal filed by the assessee on the basis that pursuant to the rectification order dated 22/11/2019 passed under Section 154 of the Income Tax Act, there was no subsisting demand against the assessee and therefore the appeal had become infructuous.
H.M. Bhatt, appeared on behalf of the revenue.
The said gain was set off against the brought forward short-term capital loss and accordingly short-term capital gains was offered to tax by the assessee. However, by intimation issued under Section 143(1) of the Income Tax Act, the short-term capital loss on which STT was not paid, was disallowed and accordingly, the brought forward short-term capital loss was set off against short-term capital gains on which STT was paid, and thus the total short-term capital gains were computed.
The assessee submitted that it had rightly claimed a set off of short-term capital loss (on which STT was not paid) from short-term capital gains (on which STT was paid) under the same head of income, in view of provisions contained under Section 70 of the Income Tax Act.
The two-member Bench of G.S. Pannu, (President) Sandeep Singh Karhail, (Judicial Member) allowed the appeal filed by the assessee holding that, “Since the rectification application filed by the assessee under section 154 of the Act on a similar issue is currently pending consideration, therefore, we deem it appropriate to restore this issue to the file of the jurisdictional Assessing Officer for de novo adjudication as per law, after necessary verification”.
The Bench also held that the disallowance of set-off of short-term capital loss (non STT) suffered be allowed to be set-off against short-term capital gain (STT) in view of provisions of Section 70 and 71 of the Income Tax Act, 1961.
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