Long Term Capital Gain

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

01 October 2010 I have a case wherein, Long Term Capital Loss from Equity is brought forward and Set-off against Long Term Capital Gains from Off-Market Equity transaction (STT not paid) in AY 2009-10. IT department has rejected this Set-off claiming that the Transaction is Off Market. Is this arguable ? and is it correct to Set-off ? if so then under which section ?

Aditya Maheshwari

Aditya Maheshwari (Expert)
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01 October 2010 It should be allowed if the earlier LTC Loss from equity was not the one on which STT was paid i. e. before the STT regime.

If gain is exempt the loss cannot be set off or carried forward.

Loss from exempt source cannot be carried forward - If the loss arising in the previous year was under a head not chargeable to tax, it could not be allowed to be carried forward and absorbed against income in a subsequent year from a taxable source. In such cases, neither the assessee is required to show the same in the return nor is the ITO under any obligation to compute or assess it, much less for the purpose of ‘carry forward’ - CIT v. Harprasad & Co. (P.) Ltd. [1975] 99 ITR 118 (SC).

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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02 October 2010 Absolute value of the transaction is exempt under section 10(38) and ,therefore, loss of previous year cannot be carried forward and set off against subsequent year's income. Ultimately,the view of ITO is backed by judicial support, no doubt,the client will lose the case.

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