Income Tax Appellate Tribunal - Kolkata
Income-Tax Officer vs Ram Kumar Agarwal on 18 May, 1992
Equivalent citations: [1992]42ITD270(KOL)
ORDER
D.S. Meenakshisundaram, Vice President
1. These two appeals by the Revenue arise out of the Income-tax assessments of Ram Kumar Agarwal, the assessee herein. The assessment years are 1982-83 and 1983-84 for which the previous years ended on 31-3-1982 and 31-3-1983 respectively. During these two years, the assessee had long-term capital gains from sale of shares and also short-term capital loss on the sale of shares. While completing the assessments for these two years, the ITO set off the short-term capital loss against the long-term capital gains and allowed relief to the assessee on the balance of the long-term capital gains under Sections 80T of the Act. This was objected to by the assessee in the appeals filed against these assessments. The assessee contended that he would be entitled to relief under Sections 80T in respect of the entire amount of long-term capital gains without any set off of the short-term capital loss against such long-term capital gains. For this, he relied on the decision of the Madras High Court in the case of Addl. CIT v. K.AL.KR. Ramaswami Chettiar [1979] 120 ITR 694 wherein it had been held that the long-term capital gains after deduction of the initial expenses of Rs. 5,000 should have been taken into account for applying Sections 80T and not after adjusting the short-term capital loss. The Dy. Commissioner (Appeals) accepted these contentions of the assessee and held that the ITO should have first allowed deduction under Sections 80T from the income from long-term capital gains and only the balance, if any, should have been adjusted against the loss under the head "short-term capital loss". Accordingly, he directed the ITO to recompute the capital gains income on the above basis for these two years. This is being objected to by the Revenue in the present appeals.
2. Shri S.C. Chatterjee, the learned Departmental Representative argued that under Section 70(2)(i) of the Act as it stood during the assessment years in question, the short-term capital loss has to be set off first against long-term capital gains and this was what the ITO had done while completing the assessments for these two years, that the decision of the Madras High Court in K. AL. KR. Ramaswami Chettiar's case (supra) was rendered at a time when there was no Sections 80AB which was inserted by the Finance (No. 2) Act of 1980 with effect from 1-4-1981 and that, therefore, the said decision would be of no assistance to the assessee. He, therefore, contended that the Dy. Commissioner (Appeals) erred in accepting the assessee's contentions and in directing the ITO to allow deduction under Sections 80T in respect of the gross amount of long-term capital gains on the sale of shares.
3. The assessee has sent a letter stating that all the relevant facts are already on the record placed before the ITO and the Dy. Commissioner (Appeals) and that the appeals may be disposed of pn merits without requiring his presence. Accordingly, I have perusetl the orders of the departmental authorities as well as the statement of facts and grounds of appeal filed by the assessee before the Dy. Commissioner (Appeals) and proceed to dispose of the same on merits after considering the same and the contentions urged on behalf of the Revenue.
4. In the present case, the assessee has realised long-term capital gains on sale of shares amounting to Rs. 4,992 during the previous year ended 31-3-1982 relevant for the assessment year 1982-83. During this year, he had suffered short-term capital loss also on sale of shares amounting to Rs. 2,970. The ITO had restricted the assessee's claim for relief under Sections 80T to a sum of Rs. 2,075 by adjusting this short-term capital loss against the long-term capital gains, referred to above.
5. In the next year 1983-84 the long-term capital gains from sale of shares amounted to Rs. 4,219 while the short-term capital loss suffered by the assessee from the sale of shares amounted to Rs. 3,556. The ITO had restricted the relief under Sections 80T to Rs. 693 by adjusting the short-term capital loss against the long-term capital gains.
6. The assessee's contention before the departmental authorities was that such short-term capital loss should not be set off against the long-term capital gains but should be adjusted against other income under other heads, such as income from other sources and salaries and not against long-term capital gains. For this, the assessee had relied on the provisions of Section 71(3) of the Act in the grounds of appeal before the Dy. Commissioner (Appeals).
7. On a perusal of the provisions contained in Section 70(2)(i) and (ii) and Section 71(3) of the Act, I am inclined to agree with the assessee's contentions. The agrument of Shri Chatterjee that Section 70(2)(i) requires the short-term capital loss to be set off against the long-term capital gains, Is clearly untenable as what Section 70(2)(i) requires is set off of short-term capital loss against short-term capital gains arising on the sale of any other capital asset. This will be clear from Section 70(2)(ii) which specifically provides for set off of long-term capital loss against long-term capital gains arising on the sale of any other long-term capital asset. The words used in Section 70(2)(i) "against the income, if any, as arrived at under a similar computation made for the assessment year in respect of any other capital asset', can only refer to short-term capital gains arising in the same assessment year on the sale of any other short-term capital asset. This expression cannot refer to long-term capital gains arising on the sale of long-term capital asset. The words "any other capital asset" in this provision of law refers only to any other short-term capital asset. This is clear from Section 70(2)(ii) where the words "any other capital asset not being a short-term capital asset", are specifically mentioned. In fact, the legal position is made very clear from the provisions of Section 71 (3) which enables the assessee to have set off of loss from one head against income from another. Section , 1(3) specifically provides for short-term capital loss in a particular year to be set off against income under other heads, such as, business, other sources etc. This is precisely what the assessee wanted the ITO to do under Section 71(3) of the Act while making the assessments as the assessee had sufficient income under the other heads, such as, salary and other sources, which would absorb in full this short-term capital loss suffered by him in both these years, leaving in tact the long-term capital gains made by him. The assessee was, therefore, right in his submission that he is entitled to the relief under Sections 80T of the Act in respect of the entire amount of long-term capital gains of Rs. 4,992 in 1982-83 and Rs. 4,219 in the assessment year 1983-84 without any adjustment of the short-term capital loss against such long-term capital gains. The provisions of Sections 80AB would make no difference to this legal position. The decision of the Madras High Court in K. AL. KR. Ramaswami Chetttar's case [supra) certainly supports the assessee's case. In fact, this position is made more explicit by the following passage in the case of CIT v. V. Venkatachalam [1979] 120 ITR 688 (Mad.) at pages 691 and 692 :
In Sections 80T, the language of the statute is "where the gross total income of an assessee, not being a company includes any income chargeable under the head 'capital gains'...". We have to see what is the income chargeable under the head "capital gains" under the Act. Section 45 provides that any profits or gains arising from the transfer of a capital asset effected in the previous year shall be chargeable to income-tax under the head "capital gains". How this capital gain is to be computed is provided in Section 48. The language of Section 48 is: "The income chargeable under the head 'capital gain' shall be computed by deducting from the full value of the consideration...the following amounts." Having regard to the language of Sections 80T and reading it along with the language employed in Sections 45 and 48, it is clear that the amount chargeable under the head "Capital gains" would only be the amount computed in accordance with the provisions of Sections 45 and 48. These two provisions do not envisage adjustment of any other loss, either of the same year or of a different year. Therefore, on the plain language of the provisions, it would be clear that, in the present case, the whole of the amount of capital gains would have to be taken into account even without reference to any other authority.
8. Respectfully following these decisions of the Madras High Court, I hold that the Dy. Commissioner (Appeals) was right in accepting the assessee's contentions and in directing the ITO to allow relief to the assessee under Sections 80T of the Act in respect of the entire amount of long-term capital gains made by the assessee from the sale of shares without making any adjustment of the short-term capital loss against the same. I therefore, confirm the orders of the Dy. Commissioner (Appeals).
9. In the result, the appeals are dismissed.