Loss on sale of shares on Stock Exchange can be set off against LTCG from sale of unlisted shares if STT is paid on quoted shares even if LTCG on shares Exempt U/s 10(38): ITAT Kolkata

 

ITAT in the case of Rita Gupta vs DCIT [ITA No. 46/Kol/2014; AY 2014-15; Order dt. 6/6/2024 has held that loss on sale of shares on Stock Exchange can be set off against LTCG from sale of unlisted shares if STT is paid on quoted shares.

The KolkataTribunal allowed set off the loss against the long-term capital gain. It was held that loss on sale of shares on the stock exchange could be set off against the long-term capital gain from sale of unlisted shares if STT duly paid.

The assessee filed a return of income declaring a total income of Rs.18.32 lakhs on 31.07.2014. A search was conducted at the IRC group’s premises including the location of the assessee on 13.03.2014 under sec 132.

The assessment added Rs. 47,90,616/- due to non-allowance of a set-off of loss from the sale of equity shares on a recognized stock exchange with STT paid against the profit from the sale of unquoted equity shares. The AO rejected the set-off as the LTCG on the sale of quoted shares is exempt under sec 10(38), and the incurred loss could not be set off against other taxable income. The CIT(A) upheld the AO’s decision referring to a series of decisions namely Harprasad & Co. Pvt. Ltd 99 ITR 128; CIT vs. J. H Gotla 156 ITR 323 , CIT vs. Coin Health Food Pvt. Ltd. 304 ITR 308; 367 ITR 261 and 55 taxmann.com 33.

The Tribunal after considering the facts of the case found out that the assessee sustained a long-term capital loss of Rs. 47.91 lakhs from selling quoted equity shares on a registered stock exchange with STT paid and earned a long-term capital gain of Rs. 50 lakhs from selling unquoted shares of IRC Infra and Realty Pvt. Ltd.

The Tribunal held that there is no exclusion or exception provided for LTCG from sale of equity shares. Only the LTCG from sale of shares/securities are exempt under Sec 10(38), subject to certain conditions, not the entire source. Therefore, when only a specific type of income is excluded from taxation and not the entire source, the law must be interpreted strictly. It cannot be assumed to include any other income or loss from the same source.

The Tribunal noted that the assessee’s case is directly supported by the decision in Royal Calcutta Turf Club vs. CIT 144 ITR 709, where S. 10(27) of the Act excluded only the income from livestock breeding, poultry, or dairy farming, not the entire business, the loss suffered by the assessee was allowed as a deduction in computing the total income.

The Tribunal based on the facts and decision of United Investments TS-379-ITAT-2019 (Kol) allowed the set-off of the loss from selling shares on a stock exchange against the LTCG from selling unlisted section.

The Copy Of the Appellate is as under:

1717673056-ITA No. 46-2024-Rita Gupta