March 2009
(a) S. 48 — Option to avail benefit of indexation or not is with assessee. (b) S. 70 — Capital gain computed with indexation can be set off against capital gain computed without indexation.
By C. N. Vaze, Shailesh Kamdar, Jagdish T. Punjabi, Chartered Accountants
Reading Time 3 mins
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37 (2008) 26 SOT 380 (Mum.)
Mohanlal N. Shah HUF v. ACIT
ITA No. 789 (Mum.) of 2004
A.Y. : 2002-03. Dated : 24-9-2008
(a) S. 48 of the Income-tax Act, 1961 — Option to avail
or not to avail benefit of indexation is with the assessee.
(b) S. 70 of the Income-tax Act, 1961 — Capital loss
computed with indexation can be set off against capital gain computed without
indexation.
During the relevant assessment year, the assessee had sold
shares and units of mutual funds. In respect of shares sold, the assessee did
not claim benefit of indexation, but in respect of units sold of one mutual fund
the assessee opted for indexation. The resultant loss from the units was set off
against the gain from shares.
The Assessing Officer held that though the benefit of
indexation is a privilege allowed to the assessee as S. 48, the same could not
be availed of on a pick-and-choose basis; and that the option to offer capital
gain at the rate of 20% with indexation and at the rate of 10% without
indexation lies with the assessee as S. 112, but before that S. 70 comes into
appraisal and for setting off of any income under the same head it is but
natural that capital gain is to be calculated on the same footing. Therefore, he
disallowed the method adopted by the assessee. The CIT(A) also held against the
assessee.
The Tribunal, following the decision in the case of
Devinder Prakash Kalra v. ACIT, (2006) 151 Taxman 17 (Delhi), held in favour
of the assessee. The Tribunal noted as under :
(1) The computation of income from capital gains is
governed by S. 48. A plain reading of the said provision reveals that a
capital gain from each asset which is transferred has to be computed.
Indexation is allowable while computing the ‘capital gain’ from the transfer
of each long-term capital asset.
(2) As provided in S. 48, option is with the assessee to or
not to avail of benefit of indexation for computation of capital gains on
transfer of each of long-term capital assets.
(3) It is only after computing the capital gains as per S.
48, can it be aggregated by setting off the loss u/s.70 and it is then that
the rate of tax as provided u/s.112 is to be applied.
(4) The Delhi Bench of the Tribunal in the case of
Devinder Prakash Kalra v. ACIT, (2006) 151 Taxman 17 (Mag.), has held that
S. 112 is not only a beneficial provision, but is also mandatory provision and
if several transactions have taken place by way of sale of shares, the
assessee can avail of the benefit of indexation in a few transactions and
avail of 10% tax rate in the remaining transactions.
