In a significant ruling, the Income Tax Appellate Tribunal (ITAT), Jaipur bench has held that the income tax law does not permit the assessee to set off the amount of loss from the sale of share transactions from the capital gain received from the sale of commercial property.
During the relevant year, the assesseeclaimed deduction of Rs. 1,03,01,192/- under section 54F of the Income Tax Act, 1961 after the amount of sale consideration so received was transferred to capital gain account. He also suffered long term capital loss of Rs. 14,76,730/- on sale of shares which the assessee claimed carried forward as long term capital loss for the year.
While completing the assessment proceedings, the AO firstly set off the long term capital loss suffered from shares from the long term capital gain from the sale of commercial property and after intra-head adjustment the AO computed net long term capital gain at Rs. 88,24,461/- and from this amount, he allowed deduction U/s 54F and disallowed the carry forward the long term capital loss of Rs. 14,76,729/- for the current year on the sale of shares.
The Tribunal, after perusing the relevant provisions, observed that as per provisions of section 54F (1) on fulfilment of certain conditions the capital gain arose on sales of such assets will not be chargeable to capital gain under the section 45 of the Act.
“The scheme of Sections 45 to 55A provide for the computation of capital gains, and the effect has to be given first to the provision of capital gains as given under the above scheme and then apply the provisions of Section 70. Section 70 would come into play only when the capital gains have been computed in accordance with the provisions contained in Sections 45 to 55A. Thus, if, after work out of deduction u/s 54F if the capital gain arising on sale of certain assets is not chargeable to capital gain than the loss arose to the assessee on sales of other assets cannot set off from gain of such assets. It is not necessary that one should first apply Section 70(3) and thereafter only, the assessee could invest the capital gain arising from the long term capital asset.”
Based on the above, the Tribunal directed the AO to compute the capital gain from sale of commercial property by not doing intra-head adjustment for the loss suffered from sale of shares and allow to carry forward the long term capital loss of Rs. 14,76,729/- for the current year on sale of shares.Subscribe Taxscan AdFree to view the Judgment