STT-Paid Share Loss Cannot Be Carried Forward Under Section 10(38): ITAT Delhi

Nikhil Sawhney Vs ACIT (ITAT Delhi)

Summary: ITAT Delhi dismissed the appeal of Nikhil Sawhney for Assessment Year 2012-13 and upheld denial of carry-forward of long-term capital loss of Rs.90,80,571 arising from transfer of equity shares and equity-oriented mutual funds on which securities transaction tax was paid. The assessee had originally claimed long-term capital loss of Rs.1,25,36,949, including Rs.90,80,571 relating to STT-paid securities covered by Section 10(38), but did not claim the latter amount in the revised return. During assessment, he nevertheless contended that the loss should be allowed because Section 10(38) exempted only specified income and did not exclude the underlying source of capital gains from the Act. The Assessing Officer and CIT(A) rejected the claim on the ground that “income” includes negative income or loss and, therefore, a loss arising from a transaction whose positive income is exempt under Section 10(38) cannot enter the computation of total income.

Before the Tribunal, the assessee relied extensively on CIT v. Karamchand Premchand Ltd., Royal Calcutta Turf Club v. CIT and Raptakos Brett & Co. Ltd. v. DCIT, besides several Tribunal decisions allowing such losses. The Revenue relied principally upon Kishorebhai Bhikhabhai Virani v. ACIT, Harprasad & Co. (P.) Ltd., Asia Pacific Performance SICAV and decisions explaining that “income” includes loss. The Tribunal held that the controversy was whether the expression “any income” in Section 10(38) covered both positive income and negative income/loss.