Loss arising from exempt source income u/s 10(38) held allowable to be set-off or carried forward

Shiv Kumar Jatia Vs ITO (ITAT Delhi)

Contention of the Assessing Officer

It is noticed that the transactions of sale of shares were subject to Securities Transaction Tax (STT). Long-Term Capital Gain on transaction of sale of shares, where the transactions have suffered STT, is exempt from tax u/ s 10 (38) of the Act. Under the scheme of the Income Tax Act, where income from a particular source is exempt from tax (i.e. incomes exempt under section 10), the gain or loss from transactions such source does not enter into the computation of income as the same gets excluded at the threshold itself. Therefore, loss from such source is not available for set off or for carry forward for set- off against income chargeable to tax. Therefore, while the computation of Long Term Capital Gain/Loss on the sale off the said shares is accepted as correct, the aforesaid net Long Term Capital Loss (Rs. 4,45,74,513 /-) shall not be carried forward for set-off against Long Term Capital Gain, if any, in the succeeding years.

Held by CIT (A)

CIT (A) supported the action of the Assessing Officer relying on the FAQ dated 04.02.2018 issued by CBDT. The question 23 of the said instructions is as under:

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