s. 74(1)(b) — The amendment to s. 74(1)(b) does not apply to long- term capital loss incurred prior to AY 2003-04—Long-term capital loss of an assessment year prior to AY 2003-04 can be set-off even against short-term capital gain of AY 2003-04 or thereaf

The assessee had brought forward its long-term capital loss
of AY 2002-03, which was set-off against the short-term capital gain of Rs.
4,34,330 of AY 2004-05. In view of the amendment to s. 74(1)(b) w.e.f. AY
2003-04, the AO held that long-term capital loss can be set-off only against
long-term capital gain.

Aggrieved, the assessee preferred an appeal to the CIT(A),
who dismissed the appeal.

Aggrieved, the assessee preferred an appeal to the Tribunal.

Prior to amendment of s. 74(1)(b), w.e.f. AY 2003-04, if the
net result of the computation was a loss under the head `Capital Gains’, the
law, as it stood then, gave a right of set-off to the assessee against future
capital gains income. This right to set-off vested in the assessee in the year
in which the loss was incurred. There is nothing in the amendment which withdrew
this vested right of the assessee. The Tribunal, after considering the ratio of
the decision of the Apex Court in the case of Govinddas and Others, and also the
ratio of the decision of the Bombay High Court in the case of Central Bank of
India, held that the amendment to s. 74(1)(b) is prospective and not
retrospective; and that the assessee is entitled to set-off long-term capital
loss incurred in AY 2002-03 against any income assessable under the head
`Capital Gains’ for any subsequent assessment year.