Income Tax Appellate Tribunal - Mumbai
Income-Tax Officer vs V.R. Nimbkar on 28 August, 1986
Equivalent citations: [1986]19ITD714(MUM)
ORDER
I.S. Nigam, Accountant Member
1. This is an appeal filed by the revenue against the order of the AAC.
2. The assessee is a HUF and the appeal relates to the assessment year 1977-78. For this assessment year, the assessee incurred a loss of Rs. 3,750 on sale of Poona Industrial Hotel, which was a short-term capital asset. This loss under the head 'Capital gains' arising from the transfer of a short-term capital asset (short-term capital loss) was sought by the assessee to be set off against income from dividend, etc., instead of against the income arising from sale of long-term capital assets (long-term capital gains) amounting to Rs. 27,295. The ITO, however, set off the short-term capital loss of Rs. 3,750 against the long-term capital gains of Rs. 27,295 instead of against the income from dividends, etc., while completing the assessment. On appeal, the AAC directed that the assessee should not be denied the option to set off the short-term capital loss of Rs. 3,750 against the income from sources other than long-term capital gains, i.e., dividends, etc. The result was that the income from dividends, etc., the total of which amounted to Rs. 49,958, was reduced by the short-term capital loss of Rs. 3,750, while the entire amount of long-term capital gains of Rs. 27,295 was held liable to assessment, subject to the deductions as laid down under Section 8OT of the Income-tax Act, 1961 ('the Act'). The revenue is aggrieved and has, therefore, come up in the present appeal before us.
3. The learned departmental representative, Shri Iyer, referred to Clause (i) of Sub-section (2) of Section 70 of the Act which provides for the set off of the short-term capital loss against the capital gains whether short-term capital gains or long-term capital gains. He, therefore, vehemently argued before us that the ITO rightly set off the short-term capital loss of Rs. 3,750 against the long-term capital gains of Rs. 27,295 as laid down by Clause (i) of Sub-section (2) of Section 70 and the AAC wrongly directed that the short-term capital loss of Rs. 3,750 should be set off not against long-term capital gains but against the other incomes.
4. On the other hand, no one turned up on behalf of the assessee when the appeal came up for hearing on 24-7-1986, There was also no application for adjournment of the date fixed for hearing. The appeal has, therefore, to be decided on the basis of the material on the record and the submissions of the learned departmental representative, Shri Iyer.
5. We have carefully considered the submissions of the learned departmental representative, Shri Iyer, and the material on the record. The provisions of Clause (i) of Sub-section (2) of Section 70 relied upon by the learned departmental representative, Shri Iyer, and the provisions of Sub-section (3) of Section 71 of the Act, are as follows :
70. (2)(i) Where the result of the computation made for any assessment year under Sections 48 to 55 in respect of any short-term capital asset is a loss, the assessee shall be entitled to have the amount of such loss set off against the income, if any, as arrived at under a similar computation made for the assessment year in respect of any other capital asset.
71. (3) Where in respect of any assessment year the net result of the computation under Sections 48 to 55 in respect of capital gains relating to short-term capital assets is a loss and the assessee has income assessable under any head of income other than 'Capital gains', the assessee shall, subject to the provisions of this Chapter, be entitled to have such loss set off against the income aforesaid.
A combined reading of these two provisions clearly shows that an assessee who incurs a short-term capital loss is entitled to have the amount of such loss set off either against the income under the head 'Capital gains' whether arising from the transfer of a long-term or a short-term capital asset or against the income under any head other than capital gains. Where the assessee has been given two options without any restrictions, it is open to the assessee to exercise the option of his choice. In these circumstances, if the assessee claimed before the ITO that he should be allowed to set off the short-term capital loss against the heads of income other than capital gains as laid down under Sub-section (3) of Section 71 instead of against the long-term capital gains as provided by Clause (i) of Sub-section (2) of Section 70, the assessee's claim was justified and was rightly allowed by the AAC.
6. The appeal filed by the revenue, therefore, fails and is hereby dismissed.