Short-term capital loss from a transaction can be set-off against short-term capital gain from any transaction at the option of the taxpayer

S. 70, 115AD; A/y 2005-06; in favor of taxpayer:- Taxpayer, a FII, earned short-term capital gains on sale of shares which it bifurcated as pre and post 30 September 2004 (pre and  post STT), chargeable to tax at 30% and 10%, respectively under section 115AD. It also suffered short-term capital loss during both these periods. It set-off pre-STT short-term capital loss against pre-STT short-term capital gain and also post-STT short- term capital loss against left over balance of pre-STT short-term capital gain. The Revenue, however, al owed set-off of post-STT short-term capital loss only against post-STT short-term capital gain.

On appeal, held, under section 70(2), the option is with the taxpayer to decide as to whether the short-term capital loss from the first transaction ought to be set-off against the short-term capital gain of transaction No. 2, 3 or 4, etc., as the case may  be, whether within or outside the cut-off date. Thus, the higher benefit opted by the taxpayer by exercising such option was to be allowed.

Decided by ITAT – Mumbai in the case of First State Investments (Hongkong) Ltd. vs. ADIT (Intl. Tax.) [2009] 33 SOT 26 (Mum)