Commissioner of Income Tax vs Durga Prasad Gupta

The Income Tax Appellate Tribunal, Allahabad, has referred the following question u/s 256(1) of the Income Tax Act, 1961 (hereinafter referred to as "the Act"), for opinion to this court :

"Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was correct in law in holding that the assessee is entitled to the relief u/s 80T on the entire amount of long-term capital gains arising from the sale of building and not on the net amount of long-term capital gains, arrived at after setting off the long-term capital loss on the shares arising during the same previous year ?"

The reference relates to the assessment year 1982-83. Briefly stated, the facts are that the assessee had earned capital gains on the sale of immovable property of Rs. 5,15,125. He also suffered capital loss on the sale of shares at Rs. 92,640. The net capital gains thus after adding the income from property amounted to Rs. 4,28,085. The Income Tax Officer allowed the relief u/s 80T of the Act on the net income. However, in further appeal, the Tribunal has accepted the claim of the respondents and it held that relief u/s 80T of the Act is admissible on the entire amount of capital gain arising from the sale of building after allowing long-term capital loss on the shares, which arose during the same year.

Heard Sri Shambu Chopra, learned counsel for the Revenue and Sri V.K. Rastogi, learned counsel for the assessee.

In view of the insertion of Section 80AB of the Act, deduction under Chapter VI-A is admissible on the net income only. Section 80AB has been held to be retrospective in operation by the Supreme Court in the cases of H.H. Sir Rama Varma Vs. Commissioner of Income Tax, Kerala, ; Motilal Pesticides (I.) Pvt. Ltd. Vs. Commissioner of Income Tax, and N.N. Bhagwati Vs. Commissioner of Income Tax, . In this view of the matter the Tribunal has committed an error in holding that the relief u/s 80T is admissible on the entire long-term capital gains.

In view of the foregoing discussions, we answer the aforesaid questions referred to us in the negative, i.e., in favour of the Revenue and against the assessee. There will be however, no order as to costs.