Query about short term gain
This query is : Resolved
16 June 2008
can short term capital loss is set off againts long term capital gain yes or no if yes then why if no then why tell me with specific reason ???????????????????????
16 June 2008
Sec 70. (1) Save as otherwise provided in this Act, where the net result for any assessment year in respect of any source falling under any head of income, other than Capital gains, is a loss, the assessee shall be entitled to have the amount of such loss set off against his income from any other source under the same head.
(2) 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.
(3) Where the result of the computation made for any assessment year under sections 48 to 55 in respect of any capital asset (other than a 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 not being a short-term capital asset"
From the plain reading of subsection 2 of section 70 that short term capital loss is first to be adjusted with any gain from other short term capital asset "arrived at under a similar computation".
The adjustment with long term capital gains of any short term capital loss is not in accordance with the letter and spirit of the provision under subsection 2 & 3 of section 70 of the I T Act.
Therefore, in my opinion while there is no dispute that short term capital loss can be adjusted with long term capital gains of same assessment year, the only point is to keep in mind that
short term capital loss(STCL) has to be first has to be adjusted with any short term capital gains FIRST and then if there is any STCL left , should be adjusted with LTCG if any.
(2) 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.
(3) Where the result of the computation made for any assessment year under sections 48 to 55 in respect of any capital asset (other than a 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 not being a short-term capital asset"
From the plain reading of subsection 2 of section 70 that short term capital loss is first to be adjusted with any gain from other short term capital asset "arrived at under a similar computation".
The adjustment with long term capital gains of any short term capital loss is not in accordance with the letter and spirit of the provision under subsection 2 & 3 of section 70 of the I T Act.
Therefore, in my opinion while there is no dispute that short term capital loss can be adjusted with long term capital gains of same assessment year, the only point is to keep in mind that
short term capital loss(STCL) has to be first has to be adjusted with any short term capital gains FIRST and then if there is any STCL left , should be adjusted with LTCG if any.
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