MR. NIKHIL SAWHNEY,NEW DELHI V. ACIT, NOIDA

ITA 1249/DEL/2017

AI Insights

The case revolves around the appeal by Mr. Nikhil Sawhney against the decision of the Commissioner of Income Tax (Appeals)-I, Noida, which upheld the assessment order denying the carry forward of long-term capital loss incurred on the sale of shares and mutual funds subjected to STT. The primary legal issue was whether such a loss could be carried forward under the provisions of the Income-tax Act, 1961, despite the income from the corresponding gains being exempt under section 10(38). The Tribunal examined various judicial precedents and statutory provisions, ultimately deciding in favor of the revenue.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 780417 (ITAT-DELHI)
• Duration Of Justice: 8 year(s) 7 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2013-2014
• Appeal Filed On: 02-03-2017
• Other Referred Cases: CIT vs Karamchand Premchand Ltd., CIT vs Hariprasad and Co. Pvt Ltd., Royal Calcutta Turf Club vs CIT, Raptakos Brett and Co Ltd. vs DCIT, Tarun Sawhney vs ACIT, Schrader Duncan Ltd. vs ACIT, Apollo Tyres Ltd vs DCIT, Kishorebhai Bhikha bhai Virani vs DCIT, Vegetable Products Ltd vs CIT, Gold Coin Health Food (P.) Ltd. vs CIT, J.H. Gotla vs CIT, CIT vs Vegetable Products Ltd, CIT vs Elphinstone Spg. and Wvg. Mills Co. Ltd., CIT vs Sati Oil Udyog Ltd.
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: HARPREET KAUR HANSRA
• Assessee Lawyers: ROHIT JAIN
• Keywords: Business income; Capital asset; Revised return; Retrospective amendment; Question of law; Salary income; Cost of acquisition; Capital Gains; Source of fund; Earning of tax free income
• Section: 143(3); 271(1)(c); 14A; 2(14); 115JB

Judgement Text

"Page | 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “F”: NEW DELHI BEFORE SHRI M. BALAGANESH, ACCOUNTANT MEMBER AND SHRI VIMAL KUMAR, JUDICIAL MEMBER ITA No. 1249/Del/2017 (Assessment Year: 2013-14) Mr. Nikhil Sawhney, 17, Sunder Nagar, New Delhi-11003 Vs. DCIT, Central Circle, Noida (Appellant) (Respondent) PAN: AAUPS0222Q Assessee by : Shri Rohit Jain, Adv Ms. Somya Jain, Adv Revenue by: Ms. Harpreet Kaur hansra, Sr. DR Date of Hearing 06/08/2025 Date of pronouncement 10/10/2025 O R D E R PER M. BALAGANESH, A. M.: 1. The appeal in ITA No.1249/Del/2017 for AY 2013-14, arises out of the order of the Commissioner of Income Tax (Appeals)-I, Noida [hereinafter referred to as „ld. CIT(A)‟, in short] in Appeal No. 179/203/2015-16/Noida dated 29.11.2016 against the order of assessment passed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as „the Act‟) dated 31.03.2015 by the Assessing Officer, DCIT, Central Circle, Noida (hereinafter referred to as „ld. AO‟). 2. At the outset, we find that there is a delay of 18 days in filing of appeal before us by the assessee. Considering the reasons adduced in the condonation petition, in the interest of substantial justice, we are inclined to condone the delay and admit the appeal of the assessee for adjudication. Printed from counselvise.com ITA No. 1249/Del/2017 Mr. Nikhil Sawhney Page | 2 3. The only effective issue to be decided in this appeal is as to whether the assessee would be entitled to claim the long term capital loss on sale of shares through recognized stock exchange, where Securities Transaction Tax (STT) has been suffered and consequentially whether the same is eligible to be carried forward to subsequent years or not. 4. We have heard the rival submissions and perused the materials available on record. The assessee is an individual and was employed with Triveni Turbine Limited and had derived income from salary, interest income on bank deposits, dividend income from investments and capital gains/ losses. During the year under consideration, the assessee suffered long term capital loss of Rs. 79,79,441/- on sale of equity shares and equity oriented mutual funds which were subjected to levy of STT. In the original return of income filed on 05-08-2013, the aforesaid loss incurred on sale of shares was claimed to be carried forward to subsequent years in accordance with the provisions of the Act. Subsequently, in the revised return filed on 03-02-2015, the assessee out of abundant precaution, withdrew the aforesaid claim of carry forward of long term capital loss on sale of equity shares. The assessee, however, requested the Learned AO, vide letter dated 05-02- 2015 to consider the claim of carry forward of long term capital loss on merits. In the assessment framed under section 143(3) of the Act dated 31-03-2015, the Learned AO, on merits, held that since income from long term capital gains arising on transfer of equity shares and equity oriented mutual funds which are subjected to levy of STT is exempt from tax under section 10(38) of the Act, the assessee is therefore not entitled to claim long term capital loss on such transactions, thereby denying the carry forward of loss as claimed by Printed from counselvise.com ITA No. 1249/Del/2017 Mr. Nikhil Sawhney Page | 3 the assessee. This action of the Learned AO was upheld by the Learned CITA. 5. The various arguments advanced by the Learned AR could be summarized as under:- a) While capital gains, per se, on transfer of shares and equity- oriented mutual funds, as a source, is liable to tax in the hands of every resident individual, it is only in very limited and specified circumstances that such income is exempt from tax. b) When the source of income, i.e., gain on transfer of shares in the present case, per se, is not excluded/ exempt from tax, in such circumstances, loss arising from such source cannot be held to be denied, simply on the ground that income from such source is that too, in certain specified circumstances, exempt. c) There is no specific provision for denial of loss on transfer of shares. On the other hand, allowability of long-term capital loss is governed by Sections 70, 71 and 74 of the Act, which does not contain any prohibition on transfer of shares. d) The issue is covered by the decision of Hon‟ble Supreme Court in the case of CIT vs Karamchand Premchand Ltd. reported in 40 ITR 106(SC) , which has been followed and applied in CIT vs Hariprasad and Co. Pvt Ltd. reported in 99 ITR 118(SC). The issue is also covered by the decision of Hon‟ble Calcutta High Court in the case of Royal Calcutta Turf Club vs CIT reported in 144 ITR 709 (Cal) and decision of Mumbai Tribunal in the case of Raptakos Brett and Co Ltd. vs DCIT reported in 69 SOT 383 (Mum Trib). Printed from counselvise.com ITA No. 1249/Del/2017 Mr. Nikhil Sawhney Page | 4 e) When two conflicting views are possible on a particular issue, then the construction that is favourable to the assessee must be adopted was already held by the Hon‟ble Supreme Court in the case of CIT vs Vegetable Products Ltd reported in 88 ITR 192 (SC). It was argued by the Learned AR that the Hon‟ble Gujarat High Court in the case of Kishorebhai Bhikha bhai Virani reported in 367 ITR 261 (Guj) had indeed taken a contrary view and the said decision is per incuriam and hence not a binding precedent inasmuch as the same has not considered the fundamental law laid down in CIT vs Karamchand Premchand Ltd of Hon‟ble Supreme Court in 40 ITR 106 (SC) and decision of Hon‟ble Calcutta High Court referred supra. f) Capital gains arising on transfer of equity shares and equity oriented mutual funds is exempt only if the share is in the nature of long-term capital asset; such shares are transferred on the stock exchange and the transaction of sale of shares is subjected to levy of STT. Hence, the capital gain is exempt only under specified and restricted circumstances and not exempt as a source of income. The very same capital gains which arises on sale of shares and which is subjected to levy of STT is made taxable while computing the book profits under section 115JB of the Act by the statute. Similarly, off-market transfer of shares resulting in long-term capital gains are indeed liable to tax as a source because STT is not suffered thereon. Similarly, short-term capital gains irrespective of the fact whether it is subjected to levy of STT or not is indeed liable to capital gains as a source. Accordingly, it was vehemently argued that the capital gain as a source of income is not exempt from tax. On the contrary, the long-term capital gains on sale of shares and equity-oriented mutual funds which has been subjected to levy of STT alone, is exempt under section 10(38) of the Act. Hence the loss arising on sale of shares and equity-oriented mutual funds where Printed from counselvise.com ITA No. 1249/Del/2017 Mr. Nikhil Sawhney Page | 5 STT is suffered should be eligible to be set off against other capital gains and remaining portion should be allowed to be carried forward to subsequent years. g) The Learned AR placed heavy reliance on the decision of the Delhi Tribunal in the case of Tarun Sawhney vs ACIT in ITA Nos. 1212 and 1213/Del/2017 dated 25-10-2024 (assessee‟s brother under identical facts ) authored by the Accountant Member, wherein it was held as under:- “1. These appeals in ITA Nos.1212 and 1213/Del/2017 for AY 2012- 13 and 2013-14, arise out of the order of the Commissioner of Income Tax (Appeals)-I, Noida [hereinafter referred to as „ld. CIT(A)‟, in short] dated 29.11.2016 against the order of assessment passed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as „the Act‟) dated 30.03.2014 for AY 2012-13 and 31.03.2015 for AY 2013-14 by the Assessing Officer (hereinafter referred to as „ld. AO‟). 2. Identical issue is involved in both these appeals and hence they are taken up together and disposed of by this common order for the sake of convenience. With the consent of both the parties, the facts of Asst Year 2012-13 are taken up adjudication and the decision rendered thereon shall apply mutatis mutandis for Asst Year 2013-14 also except with variance in figures. 3. At the outset, there is a delay of 18 days in filing of appeal before us. We have gone through the condonation petition together with an affidavit thereon and we are convinced with the same. Accordingly, we hold that the assessee was prevented from sufficient cause from not filing the appeals in time. Accordingly, the delay in filing of appeals for both the years are hereby condoned and taken up for adjudication. 4. The only identical issue to be decided in this appeal is as to whether the ld CIT(A) was justified in confirming the action of the ld AO in not allowing the carry forward of Long Term Capital Loss (LTCL) arising on sale of shares and equity oriented mutual funds on which Securities Transaction Tax (STT) had been suffered by the assessee. 5. We have heard the rival submissions and perused the materials available on record. The assessee is an individual who was employed with M/s Triveni Engineering Limited and thereafter employed with M/s Triveni Turbine Limited with effect from 10.5.2011. The main sources of income for the assessee are income from salary, interest income on bank deposits and other investments and capital gains / losses. The Printed from counselvise.com ITA No. 1249/Del/2017 Mr. Nikhil Sawhney Page | 6 assessee suffered LTCL of Rs 1,04,27,637/- in Asst Year 2012-13 on sale of equity shares and equity oriented mutual funds which were subject to levy of STT in the original return of income filed. The aforesaid loss was claimed to be carried forward to subsequent years in accordance with the provisions of the Act. The assessee filed a revised return wherein out of abundant precaution, the assessee withdrew the claim of carry forward of aforesaid LTCL. However, during the course of scrutiny assessment proceedings, the assessee vide letter dated 25.3.2014 for Asst Year 2012-13 requested the ld AO to consider on merits, the aforesaid legal claim for carry forward of LTCL arising on sale of shares and equity oriented mutual funds which were subjected to levy of STT. The ld AO in the assessment order considered the issue on merits by holding that since the income from long term capital gains arising on transfer of equity shares and equity oriented mutual funds which are subjected to levy of STT is exempt from tax u/s 10(38) of the Act, the assessee is therefore not entitled to claim the benefit of carry forward of LTCL on such transactions. This action was upheld by the ld CIT(A). Aggrieved, the assessee is in appeal before us. 6. It would be relevant to understand that the capital gains per se on transfer of shares and equity oriented mutual funds, as a source, is liable to tax in the hands of every assessee and it is only when the same is subjected to levy of STT, it becomes exempt u/s 10(38) of the Act. Hence only if the said transfer of capital assets are made in the open market through a registered share broker registered in the stock exchange and subjected to levy of STT, the long term capital gains becomes exempt u/s 10(38) of the Act. On the contrary, if the transfer of such capital assets were made between two private parties without routing through the registered share broker in the recognized stock exchange and not suffering STT, then the long term capital gain would be liable to tax. In that event, the long term capital loss would be eligible to be carried forward to subsequent years as per the provisions of the Act. Hence capital gains, as a source per se, is liable to be exempt only under specified circumstances, on compliance to certain other conditions imposed. Further the proviso to section 10(38) of the Act specifically provides that the very same long term capital gain which had suffered STT would still become taxable while computing the book profits u/s 115JB of the Act. Hence it is very clear that the legislature never intended that the long term capital gains which had suffered STT would be completely exempt from tax under all the provisions of the Act. It is exempt only under specified circumstances. Hence it could be safely concluded that capital gains as an independent source is not exempt from tax automatically. The carry forward of LTCL is governed by the provisions of section 74 of the Act, wherein, there is no embargo provided in the said section with respect to subject mentioned transactions. Hence the LTCL on sale of equity shares and equity Printed from counselvise.com ITA No. 1249/Del/2017 Mr. Nikhil Sawhney Page | 7 oriented mutual funds, per se, would become eligible to be carried forward to subsequent years as per the provisions of the Act. 7. The ld AR before us rightly placed reliance on the decision of Hon‟ble Supreme Court comprising of 3 judges in the case of CIT vs Karamchand Premchand Ltd reported in 40 ITR 106 (SC). In the facts before the Hon‟ble Supreme Court, the question of applicability of provisions of section 5 of the Business Profits Tax Act 1947 was subjected to consideration and applicability of the Act to business outside British India was considered. In that case, the assessee had business in British India and also a pharmaceutical business in Baroda which was at relevant time outside British India. Assessee‟s business in British India showed business profits assessable under 1947 Act, but business carried on in Baroda showed loss. Whether in view of provisions of section 5, assessee was entitled to deduct losses incurred by it in its Baroda business and set off them against profits made in British India was the question before the Hon‟ble Supreme Court. The 3rd proviso to section 5 stipulated that the business income earned outside India would become taxable only when the said income is brought into India. In that case, the loss was incurred outside India. The Hon‟ble Apex Court appreciated the fact that since there was loss incurred outside India, there would be no question of bringing the loss into India by the assessee. Accordingly, the Hon‟ble Apex Court observed that :- “On behalf of the appellant it has been pointed out that the expression used in the third proviso to section 5 is—\"Provided further that the Act shall not apply to any income, profits or gains of a business etc.\" It is argued that this language, (namely, that the Act shall not apply) is apt to exclude from the purview of the Act business the profits of which accrue or arise in an Indian State, except in so far as such profits are brought into the taxable territories. In support of this argument a reference has been made to section 4(3) of the Indian Income-tax Act as it stood prior to 1939 and reliance is placed on the decisions in Commissioner of Income-tax v. Somasundaram Chettiar AIR 1928 Mad. 487; and Provident Investment Co. Ltd. In re [1932] 2 Comp. Cas. 312. It is true that section 4(3) of the Indian Income- tax Act, as it stood prior to 1939, said that \"this Act (meaning the Indian Income-tax Act, 1922) shall not apply to certain classes of income\", and in the two decisions cited it was held that the word \"business\" meant a business whose profits were being assessed in the year under consideration and there was no justification for deduction of the expenses of a foreign business. We do not, however, think that the use of the expression, \"the Act shall not apply\", is decisive in this case. We have to read the third proviso as a whole and in the context in which it occurs, in order to find Printed from counselvise.com ITA No. 1249/Del/2017 Mr. Nikhil Sawhney Page | 8 out what it means. So read it is difficult to hold that it has the effect of excluding the Baroda business except in so far as the profits thereof are brought into the taxable territories. What it says in express terms is that the Act shall not apply to any income, profits or gains of business accruing or arising in an Indian State etc. It does not say that the business itself is excluded from the purview of the Act. We have to read and construe the third proviso in the context of the substantive part of section 5 which takes in the Baroda business and the phraseology of the first and second provisos thereto, which clearly uses the language of excluding the business referred to therein. The third proviso does not use that language and what learned counsel for the appellant is seeking to do is to alter the language of the proviso so as to make it read as though it excluded business the income, profits or gains of which accrue or arise in an Indian State. The difficulty is that the third proviso does not say so; on the contrary, it uses language which merely exempts from tax the income, profits or gains unless such income, profits or gains are received in or brought into India. Next, we have to consider what the expression \"income, profits or gains\" means. In the context of the third proviso, it cannot include losses because the latter part of the proviso says \"unless such income, profits or gains are received etc. into the taxable territories\". Obviously, losses cannot be brought into the taxable territories except in an accounting sense, and the expression \"income, profits or gains\" in the context cannot include losses. The expression must have the same meaning throughout the proviso, and cannot have one meaning in the first part and a different meaning in the latter part of the proviso. The appellant cannot therefore say that the third proviso excludes the business altogether, because it takes away from the ambit of the Act not only income, profits or gains but also losses of the business referred to therein. On behalf of the appellant it has been argued that though the language of the third proviso to section 5 of the Act is similar to that of section 14(2)(c) of the Indian Income-tax Act, the language of the two provisions is not identical and it is not correct to say that their effect is substantially the same. It is pointed out that the language of section 14(2)(c) was one of exemption only in respect of any income, profits or gains accruing or arising in an Indian State, though for purposes of \"total income\" the Income- tax Act applied thereto, and therefore the normal process of aggregating profits and losses wherever they occurred could be adopted. But, says learned counsel for the appellant, the position is otherwise under the third proviso to section 5 of the Act, Printed from counselvise.com ITA No. 1249/Del/2017 Mr. Nikhil Sawhney Page | 9 because, firstly, it uses the expression, \"the Act shall not apply\" and secondly, there is no question of exempting the profits from tax while including them for the purposes of \"total income\". We agree that the complication of excluding the profits from tax while including them for determining \"total income\" does not arise under the third proviso to section 5 of the Act; but the argument presented is the same as we have dealt with earlier. The argument merely takes us back to the question—does the third proviso to section 5 of the Act merely exempt the income, profits or gains or does it exclude the business ? If it excludes the business, the appellant is right in saying that the position under the proviso is not the same as under section 14(2)(c) of the Indian Income-tax Act. If on the contrary the proviso merely exempts the income, profits or gains of the business to which the Act otherwise applies, then the position is the same as under section 14(2)(c). It is perhaps repetition, but we may emphasize again that exclusion, if any, must be done with reference to business, which is the unit of taxation. The first and second provisos to section 5 do that, but the third proviso does not. Lastly, it has been contended that the construction adopted by the High Court is likely to lead to consequences which the Legislature manifestly could not have intended. This contention has been pressed in respect of two matters : (a) computation of capital under the rules in Schedule II of the Act in a case where the assessee company sustains a loss in an Indian State ; and (b) relief for deficiency of profits where the assessee makes profits in an Indian State but sustains a loss in India. As to the first matter, it has been fully dealt with by the High Court with reference to rule 2A of the Rules in Schedule II and it has been rightly pointed out that no difficulty really arises by reason of rule 2A. Nor are we satisfied that any real difficulty arises with regard to relief for deficiency of profits when the assessee makes profits in an Indian State but sustains a loss in India. The Act will not apply to such profits unless they are brought into India, and if they are brought into India, section 6 will apply with regard to relief on the ground of deficiency of profits. It is unnecessary to consider here any hypothetical difficulty which may arise in the application of section 6. The appellant relies on the third proviso to section 5 of the Act in support of the contention that it excludes the Baroda business of the assessee and the losses of that business cannot be set off against the profits of the business in India, and the appellant can succeed only on establishing that the proviso clearly and without any ambiguity excludes the Baroda business. We agree with the High Court that if there is any ambiguity of language, the benefit Printed from counselvise.com ITA No. 1249/Del/2017 Mr. Nikhil Sawhney Page | 10 of that ambiguity must be given to the assessee. However, the conclusion at which we have arrived is that on the language of the proviso as it stands, it does not exclude the Baroda business of the assessee but exempts only the income, profits or gains thereof unless they are received or deemed to be received in or brought into India. Accordingly, the High Court correctly answered the question of law referred to it. The appeal fails and is dismissed with costs. (EMPHASIS SUPPLIED BY US) 8. The ld DR vehemently relied on the order of Hon‟ble Supreme Court in the case of CIT vs Harprasad & Co. (P) Ltd reported in 99 ITR 118(SC) wherein the question raised before the Hon‟ble Supreme Court was as under:- \"Whether, on the facts and in the circumstances of the case, the capital loss of Rs. 28,662 could be determined and carried forward in accordance with the provisions of section 24 of the Indian Income-tax Act 1922, when the provisions of section 12B of the Income-tax Act, 1922, itself were not applicable in the assessment year 1955-56.\" 9. We find that the Hon‟ble Apex Court took into consideration the aspect that capital gains as an independent source of income was excluded / exempt from the purview of taxation for an interim period from 1.4.1948 to 31.3.1956. Hence the capital gains as a source per se was exempt from tax. Since the Asst Year involved before the Hon‟ble Apex Court was 1955-56, which falls within the interim period of exemption of capital gains, the court held that loss arising in previous year under the head not chargeable to tax cannot be allowed to be carried forward and absorbed against income in subsequent years from taxable source. (Emphasis supplied by us) . 10. Hence the reliance placed by the ld. DR and by the lower authorities on this decision would not advance the case of the revenue as it is factually distinguishable. 11. This important distinction need to be kept in mind while addressing the issue in hand before us. Hence it could be safely concluded that if the source or head of income itself is not excluded from taxation, the loss from the said source is available / allowable to the assessee to be set off or carry forward to subsequent years. The source or head of income in the instant case is capital gains. We find that the source of income i.e capital gains per se is not exempt from tax. Only the long term capital gain where STT is suffered alone is exempt from tax. The same long term capital gain where STT is not suffered Printed from counselvise.com ITA No. 1249/Del/2017 Mr. Nikhil Sawhney Page | 11 would still be liable to tax. Hence the denial of carry forward benefit of LTCL on STT suffered transaction would be unfair. We find that this issue had been duly considered by examining all the decisions on the impugned subject by the Co-ordinate Bench of Mumbai Tribunal in the case of Raptakos Brett & Co Ltd vs DCIT reported in 69 SOT 383 wherein it was held as under:- “7. We have heard rival submissions and perused the relevant findings given in the impugned orders. The main issue before us is, whether Long term capital loss on sale of equity shares can be set off against Long term capital gain arising on sale of land or not, as the income from Long term capital gain on sale of such shares are exempt u/s. 10(38). The nature of income here in this case is from sale of Long term capital asset, which are equity shares in a company and unit of an equity oriented fund which is chargeable to STT. First of all, Long term capital gain has been defined under section 2(39A), as capital gains arising from transfer of a Long term capital asset. Section 2(14) defines \"Capital asset\" and various exceptions and exclusions have been provided which are not treated as capital asset. Section 45 is the charging section for any profits or gain arising from a transfer of a capital asset in the previous year i.e. taxability of capital gains. Section 47 enlists various exceptions and transactions which are not treated as transfer for the purpose of capital gain u/s. 45. The mode of computation to arrive at capital gain or loss has been enumerated from sections 48 to 55. Further sub-section (3) of section 70 and section 71 provides for set off of loss in respect of capital gain. 8. From the conjoint reading and plain understanding of all these sections it can be seen that, firstly, shares in the company are treated as capital asset and no exception has been carved out in section 2(14), for excluding the equity shares and unit of equity oriented funds that they are not treated as capital asset. Secondly, any gains arising from transfer of Long term capital asset is treated as capital gain which is chargeable u/s. 45; thirdly, section 47 does not enlist any such exception that transfer of long term equity shares/funds are not treated as transfer for the purpose of section 45 and section 48 provides for computation of capital gain, which is arrived at after deducting cost of acquisition i.e. cost of any improvement and expenditure incurred in connection with transfer of capital asset, even for arriving of gain in transfer of equity shares; lastly, sections 70 & 71 elaborates the mechanism for set off of capital gain. Nowhere, any exception has been made/ carved out with regard to Long term capital gain arising on sale of equity shares. The whole genre of income under the head 'capital gain' on transfer of Printed from counselvise.com ITA No. 1249/Del/2017 Mr. Nikhil Sawhney Page | 12 shares is a source, which is taxable under the Act. If the entire source is exempt or is considered as not to be included while computing the total income then in such a case, the profit or loss resulting from such a source do not enter into the computation at all. However, if a part of the source is exempt by virtue of particular \"provision\" of the Act for providing benefit to the assessee, then in our considered view it cannot be held that the entire source will not enter into computation of total income. In our view, the concept of income including loss will apply only when the entire source is exempt and not in the cases where only one particular stream of income falling within a source is falling within exempt provisions. Section 10(38) provides exemption of income only from transfer of Long term equity shares and equity oriented fund and not only that, there are certain conditions stipulated for exempting such income i.e. payment of security transaction tax and whether the transaction on sale of such equity share or unit is entered into on or after the date on which chapter VII of Finance (No.2) Act, 2004 comes into force. If such conditions are not fulfilled then exemption is not given. Thus, the income contemplated in section 10(38) is only a part of the source of capital gain on shares and only a limited portion of source is treated as exempt and not the entire capital gain (on sale of shares). If an equity share is sold within the period of twelve months then it is chargeable to tax and only if it falls within the definition of Long term capital asset and, further fulfils the conditions mentioned in sub-section (38) of section 10 then only such portion of income is treated as exempt. There are further instances like debt oriented securities and equity shares where STT is not paid, then gain or profit from such shares are taxable. Section 10 provides that certain income are not to be included while computing the total income of the assessee and in such a case the profit or loss resulting from such a source of income do not enter into computation at all. However, a distinction has been drawn where the entire source of income is exempt or only a part of source is exempt. Here it needs to be seen whether section 10(38) is source of income which does not enter into computation at all or is a part of the source, the income in respect of which is excluded in the computation of total income. For instance, if the assessee has income from Short term capital gain on sale of shares; Long term capital gain on debt funds; and Long term capital gain from sale of equity shares, then while computing the taxable income, the whole of income would be computed in the total income and only the portion of Long term capital gain on sale of equity shares would be removed from the taxable income as the same is exempt u/s 10(38). This precise issue had come up for consideration before the Hon'ble Calcutta High Court in Royal Calcutta Turf Club's case (supra), Printed from counselvise.com ITA No. 1249/Del/2017 Mr. Nikhil Sawhney Page | 13 wherein the Hon'ble High Court observed that \"under the Income tax Act, 1961 there are certain incomes which do not enter into the computation of the total income at all. In computing the total income of a resident assessee, certain incomes are not included under s.10 of the Act. It depends on the particular case; where the Act is made inapplicable to income from a certain source under the scheme of the Act, the profit and loss resulting from such a source will not enter into the computation at all. But there are other sources which, for certain economic reasons, are not included or excluded by the will of the Legislature. In such a case, one must look to the specific exclusion that has been made.\" The Hon'ble High Court was besieged with the following question \"Whether under s.10(27) read with s.70 of the I.T. Act, 1961, was the assessee entitled to set off the loss on the two heads, namely, Broodmares Account and the Pig Account, against its income of other sources under the head \"Business\"\" Their Lordships after analysing the provisions of section 70 and section 10(27) observed in the following manner: \"In this case it is important to bear in mind that set-off is being claimed under Section 70 of the 1961 Act which permits set off of any income falling under any head of income other than the capital gain which is a loss, the assessee shall be entitled to have the amount of such loss set off against his income from any other source under the same head. We have noticed that in the instant case the exclusion has been conceded in computing the business income or the source of income from the head of business and in computing that business income, the loss from one particular source, that is, broodmares account and the pig account, had been excluded contrary to the submission of the assessee. The assessee wanted these losses to be set off. The Revenue contends that as the sources of the income are not to be included in view of the provisions of Clause (27) of s. 10 of the 1961 Act, the loss suffered from this source could also not merit the exclusion. Under the I.T. Act, there are certain incomes which do not enter into the computation of the total income at all. In this connection we have to bear in mind the scheme of the charging section which provides that the incomes shall be charged and s. 4 of the Act provides that the Central Act enacts that the incomes shall be charged for any assessment year and in accordance with and subject to the provisions of the 1961 Act in respect of the total income of the previous year or years or whatever the case may be. The scheme of \" total income \" has been explained by s. 5 of the Act which provides that subject to the provisions of the Printed from counselvise.com ITA No. 1249/Del/2017 Mr. Nikhil Sawhney Page | 14 Act, the total income of the previous year of a person who is a resident includes all income from whatever source it is derived. In computing the total income, certain incomes are not included under s. 10 of the Act. It depends on the particular case where certain income, in respect of which the Act is made inapplicable to the scheme of the Act, and in such a case, the profit and loss resulting from such a source do not enter into the computation at all. But there are other sources which for certain economic reasons are not included or excluded by the will of the Legislature. In such a case we must look to the specific exclusion that has been made. The question is in this case whether s. 10(27) is a source which does not enter into the computation at all or is a source the income in respect of which is excluded in the computation of total income. How this question will have to be viewed, has been looked into by the Supreme Court in several decisions to some of which our attention was drawn.\" After discussing the various decisions of the Hon'ble Supreme Court specifically the decision of in the case of Karamchand Premchand Ltd. (supra), the Hon'ble High Court came to the following conclusion: \"cl.(27) of s.10 excludes in express terms only \"any income derived from a business of live-stock breeding or poultry or dairy farming. It does not exclude the business of livestock breeding or poultry or dairy farming from the operation of the Act. Therefore, the losses suffered by the assessee in the broodmares account and in the pig account were admissible deductions in computing its total income\" Thus, the ratio laid down by the Hon'ble Calcutta High Court is clearly applicable and accordingly we follow the same in the present case. 9. Now coming to the argument of the learned DR and learned CIT(A) that income includes loss and if income is exempt then loss will also not be taken into computation of the income, and such an argument is with reference to the decision of Hon'ble Supreme Court in the case of Hariprasad & Co. (P.) Ltd. [1975] 99 ITR 118. The Hon'ble Supreme Court, opined that, if loss was from the source or head of income not liable to tax or congenitally exempt from income tax, neither the assessee was required to show the same in the return nor was the Assessing Officer under any obligation to compute or assess it much less for the purpose of carry forward. Further, the Hon'ble Supreme Court observed that \"From the charging provisions of the Act, it is discernible that the words ' income ' or ' profits and gains' should be understood as including losses also, so that, in one sense Printed from counselvise.com ITA No. 1249/Del/2017 Mr. Nikhil Sawhney Page | 15 'profits and gains' represent ' plus income ' whereas losses represent 'minus income'. In other words, loss is negative profit. Both positive and negative profits are of a revenue character. Both must enter into computation, wherever it becomes material, in the same mode of the taxable income of the assessee. Although Section 6 classifies income under six heads, the main charging provision is Section 3 which levies income-tax, as only one tax, on the 'total income ' of the assessee as defined in Section 2(15). An income in order to come within the purview of that definition must satisfy two conditions. Firstly, it must comprise the ' total amount of income, profits and gains referred to in Section 4(1)'. Secondly, it must be 'computed in the manner laid down in the Act'. If either of these conditions fails, the income will not be a part of the total income that can be brought to charge.\" While concluding the issue their Lordships observed that \"it may be remembered that the concept of carry forward of loss does not stand in vacuo. It involves the notion of set- off. Its sole purpose is to set off the loss against the profits of a subsequent year. It pre-supposes the permissibility and possibility of the carried-forward loss being absorbed or set off against the profits and gains, if any, of the subsequent year. Set off implies that the tax is exigible and the assessee wants to adjust the loss against profit to reduce the tax demand. It follows that if such set-off is not permissible or possible owing to the income or profits of the subsequent year being from a non-taxable source, there would be no point in allowing the loss to be \"carried forward\". Conversely, if the loss arising in the previous year was under a head not chargeable to tax, it could not be allowed to be carried forward and absorbed against income in a subsequent year from a taxable source.\" The ratio and the principle laid down by the Hon'ble Apex Court would not apply here in this case, because the concept of income includes loss will apply only when entire source is exempt or is not liable to tax and not in the case where only one of the income falling within such source is treated as exempt. The Hon'ble Apex Court on the other hand, itself has stated that if loss from the source or head of income is not liable for tax or congenitally exempt from income tax, then it need not be computed or shown in the return and Assessing Officer also need not assess it. This distinction has to be kept in mind. Hon'ble Calcutta High Court in Royal Turf Club have discussed the aforesaid decision of the Hon'ble Supreme Court and held that the same will not apply in such cases. Thus, in our conclusion, we hold that section 10(38) excludes in expressed terms only the income arising from transfer of Long term capital asset being equity share or equity fund which is chargeable to STT and not Printed from counselvise.com ITA No. 1249/Del/2017 Mr. Nikhil Sawhney Page | 16 entire source of income from capital gains arising from transfer of shares. It does not lead to exclusion of computation of capital gain of Long term capital asset or Short term capital asset being shares. Accordingly, Long term capital loss on sale of shares would be allowed to be set off against Long term capital gain on sale of land in accordance with section 70(3). 10. Coming to the decision of the ITAT Mumbai Bench in the case of Schrader Duncan Ltd. (supra), the issue involved there was, whether the loss on transfer of capital asset being units US 64 Scheme of Unit Trust of India can be allowed and entitled to carry forward the same for set off of in subsequent assessment years, when the income arising from such transfer of unit is exempt u/s. 10(33). The Tribunal held that the source both capital gain and capital loss on sale of units of US64 is itself excluded and not only the income arising out of capital gain. The Hon'ble Tribunal have noted the history of US64 Scheme and the purpose for which such scheme was launched. In this context of transfer of US64 scheme the Tribunal held that the provisions were not meant to enable the assessee to claim loss by indexation for set off against other capital gain chargeable to tax. This decision is slightly distinguishable and secondly, we have already discussed the issue at length and have held that the ratio of Hon'ble Calcutta High Court is applicable in the present case. Lastly, coming to the decision of Hon'ble Gujarat High Court in the case of Kishorebhai Bhikhabhai Virani (supra), we find that the issue involved in the present case was almost the same, wherein the Hon'ble High Court after following the decision of Hon'ble Supreme Court in the case of Hariprasad & Company (P.) Ltd. (supra), had decided the issue against the assessee. Since we have already noted down the ratio of Hon'ble Calcutta High Court, wherein the Hon'ble High Court has discussed this issue in detail after relying upon series of decisions of Hon'ble Supreme Court and have reached to a conclusion as discussed above, and, therefore, we are respectfully following the ratio of the decision of the Calcutta High Court. Further the said decision have not been referred or distinguished by the Hon'ble Gujarat High Court. Accordingly, we allow the assessee's ground no.1 and direct the Assessing Officer to allow the claim of set off of Long term capital loss on sale of shares against the Long term capital gain arising on sale of land.” Printed from counselvise.com ITA No. 1249/Del/2017 Mr. Nikhil Sawhney Page | 17 12. The ld DR before us vehemently relied on the decision of Hon‟ble Kerala High Court in the case of Apollo Tyres Ltd vs DCIT reported in 450 ITR 618 (Ker) which had rendered the decision on the very same issue in favour of the revenue. We find that the decisions of Hon‟ble Gujarat High Court in the case of Kishorebhai Bhikhabhai Virani reported in 367 ITR 261 (Guj) together with the decision of Hon‟ble Supreme Court in the case of Harprasad & Co. reported in 99 ITR 118 (SC) were relied upon . We have already dealt with the distinctive feature of the facts prevailing in Harprasad & Co supra. Hence reliance placed on the said decision would not advance the case of the revenue. It is pertinent to note that the decision of Hon‟ble Gujarat High Court has been considered by the Co-ordinate Bench of Mumbai Tribunal in the case of Raptakos Bros referred supra. Moreover, we find that the same issue in dispute was subject matter of consideration by the Hon‟ble Calcutta High Court in the case of Royal Calcutta Turf Club vs CIT reported in 144 ITR 709 (Cal) which has been considered by the Mumbai Tribunal supra. Hence now we are left with a situation that one decision of non- jurisdictional high court (i.e Kerala) is against assessee and one decision of non-jurisdictional high court (i.e. Calcutta) is favouring assessee. Hence as decided by the Hon‟ble Supreme Court in the case of CIT vs Vegetable Products Ltd reported in 88 ITR 192 (SC), the construction that is favourable to the assessee should be considered. We find that the issue in dispute that source of income is not taxable per se (i.e capital gains as such) has been dealt extensively by the three judges bench of Hon‟ble Supreme Court in the case of Karamchand Premchand supra (40 ITR 106- SC) and hold that to be more appealing to the facts of the instant case. 13. We further find that the request of the revenue vide letter dated 6.12.2022 addressed to the Hon‟ble President of Tribunal for constitution of Special Bench in the light of divergent decisions given by the Delhi Tribunal and in the light of decisions of Hon‟ble Gujarat High Court and Hon‟ble Kerala High Court referred supra. The Hon‟ble President of Tribunal vide his order dated 21.6.2023 had rejected the request of the revenue for constitution of Special Bench. Hence this Bench is forced to look into the various divergent decisions of Tribunal and various High Courts and decide the issue hereinabove. 14. In view of the aforesaid detailed observations and in the light of ratio decidendi laid down by various judicial precedents hereinabove , we have no hesitation to hold that the assessee would be entitled for carry forward of LTCL on STT suffered transactions, to subsequent years as per the provisions of the Act. Accordingly, the grounds raised by the assessee are allowed. 15. In the result, both the appeals of the assessee are allowed.” Printed from counselvise.com ITA No. 1249/Del/2017 Mr. Nikhil Sawhney Page | 18 6. Per Contra, the Learned DR vehemently relied on the order passed by this Tribunal in assessee‟s own case for the Assessment Year 2012-13 in ITA No. 1248/Del/2017 dated 17-8-2020 reported in 119 taxmann.com 372 (Delhi Trib) wherein it was held as under:- “26. We have carefully considered rival contention and perused the orders of lower authorities. According to the provisions of section 10 (38) of the income tax act, any 'income' arising from the transfer of a long-term capital asset, being an equity shares in the company or unit of an equity oriented fund, shall not be included in the total income of the previous year of any person, provided the transaction of the sale of such shares or equity are subject to securities transaction tax, if the same transaction is entered into after chapter VII is enacted. There is no dispute between the assessee and the revenue that if the 'income' arising on the sale of such shares is positive i.e. profit/gain, it would be exempt under this section. But dispute is that when assessee incurs 'loss' on transfer of such long term capital assets, whether same shall be ignored for the purpose of computation of the income of the assessee or shall be considered part of the income computation mechanism and should be allowed to be set-off in accordance with other provisions of the act and shall also be carried forward. 27. This issue has arise in because in this year assessee has incurred long-term capital loss on sale of shares which was subject to securities transaction tax. The assessee wants that this loss should be allowed to enter into the computation of total income of the assessee and if is not set-off against any other capital gain in that year, then it should be allowed to be carried forward in future years. In nutshell, the controversy is exemption provisions u/s 10 (38) that 'income' arising from transfer of a long-term capital asset shall only include positive i.e. Gain or the negative i.e. Losses also. 28. Precisely the provisions of the section speaks like this:— CHAPTER III INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME Incomes not included in total income. 10. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included— (38) any income arising from the transfer of a long-term capital asset, being an equity share in a company or a unit of an equity oriented fund where— (a) the transaction of sale of such equity share or unit is entered Printed from counselvise.com ITA No. 1249/Del/2017 Mr. Nikhil Sawhney Page | 19 into on or after the date on which Chapter VII of the Finance (No. 2) Act, 2004 comes into force3; and (b) such transaction is chargeable to securities transaction tax under that Chapter : 4[Provided that the income by way of long-term capital gain of a company shall be taken into account in computing the book profit and income-tax payable under section 115JB.] Explanation.—For the purposes of this clause, \"equity oriented fund\" means a fund— (i) where the investible funds are invested by way of equity shares in domestic companies to the extent of more than 5[sixty-five] per cent of the total proceeds of such fund; and (ii) which has been set up under a scheme of a Mutual Fund specified under clause (23D) : Provided that the percentage of equity shareholding of the fund shall be computed with reference to the annual average of the monthly averages of the opening and closing figures;] 29. Assessee has relied upon the plethora of the judicial precedents and mainly on the decision of the coordinate bench in case of Raptakose Brett & Co. Ltd (supra) Dated June 10, 2015 wherein the identical issue was decided and it was held as under:— \"8. From the conjoint reading and plain understanding of all these sections it can be seen that, firstly, shares in the company are treated as capital asset and no exception has been carved out in section 2(14), for excluding the equity shares and unit of equity oriented funds that they are not treated as capital asset. Secondly, any gains arising from transfer of Long term capital asset is treated as capital gain which is chargeable u/s. 45; thirdly, section 47 does not enlist any such exception that transfer of long term equity shares/funds are not treated as transfer for the purpose of section 45 and section 48 provides for computation of capital gain, which is arrived at after deducting cost of acquisition i.e. cost of any improvement and expenditure incurred in connection with transfer of capital asset, even for arriving of gain in transfer of equity shares; lastly, sections 70 & 71 elaborates the mechanism for set off of capital gain. Nowhere, any exception has been made/carved out with regard to Long term capital gain arising on sale of equity shares. The whole genre of income under the head 'capital gain' on transfer of shares is a source, which is taxable under the Act. If the entire source is exempt or is considered as not to be included while computing the total income then in such a case, the profit or loss resulting from such a source do not enter into the computation at all. Printed from counselvise.com ITA No. 1249/Del/2017 Mr. Nikhil Sawhney Page | 20 However, if a part of the source is exempt by virtue of particular \"provision\" of the Act for providing benefit to the assessee, then in our considered view it cannot be held that the entire source will not enter into computation of total income. In our view, the concept of income including loss will apply only when the entire source is exempt and not in the cases where only one particular stream of income falling within a source is falling within exempt provisions. Section 10(38) provides exemption of income only from transfer of Long term equity shares and equity oriented fund and not only that, there are certain conditions stipulated for exempting such income i.e. payment of security transaction tax and whether the transaction on sale of such equity share or unit is entered into on or after the date on which chapter VII of Finance (No.2) Act, 2004 comes into force. If such conditions are not fulfilled then exemption is not given. Thus, the income contemplated in section 10(38) is only a part of the source of capital gain on shares and only a limited portion of source is treated as exempt and not the entire capital gain (on sale of shares). If an equity share is sold within the period of twelve months then it is chargeable to tax and only if it falls within the definition of Long term capital asset and, further fulfils the conditions mentioned in sub-section (38) of section 10 then only such portion of income is treated as exempt. There are further instances like debt oriented securities and equity shares where STT is not paid, then gain or profit from such shares are taxable. Section 10 provides that certain income are not to be included while computing the total income of the assessee and in such a case the profit or loss resulting from such a source of income do not enter into computation at all. However, a distinction has been drawn where the entire source of income is exempt or only a part of source is exempt. Here it needs to be seen whether section 10(38) is source of income which does not enter into computation at all or is a part of the source, the income in respect of which is excluded in the computation of total income. For instance, if the assessee has income from Short term capital gain on sale of shares; Long term capital gain on debt funds; and Long term capital gain from sale of equity shares, then while computing the taxable income, the whole of income would be computed in the total income and only the portion of Long term capital gain on sale of equity shares would be removed from the taxable income as the same is exempt u/s 10(38). This precise issue had come up for consideration before the Hon'ble Calcutta High Court in Royal Calcutta Turf Club's case (supra), wherein the Hon'ble High Court observed that \"under the Income-tax Act, 1961 there are certain incomes which do not enter into the computation of the total income at all. In computing the total income of a resident assessee, certain incomes are not included under s.10 of the Act. It depends on the particular case; where the Act is made inapplicable to income from a certain source under the scheme of the Act, the profit and loss resulting from such a source will not enter into the computation at all. But there are other sources which, for certain economic reasons, Printed from counselvise.com ITA No. 1249/Del/2017 Mr. Nikhil Sawhney Page | 21 are not included or excluded by the will of the Legislature. In such a case, one must look to the specific exclusion that has been made.\" The Hon'ble High Court was besieged with the following question \"Whether under s.10(27) read with s.70 of the I.T. Act, 1961, was the assessee entitled to set off the loss on the two heads, namely, Broodmares Account and the Pig Account, against its income of other sources under the head \"Business\"\" Their Lordships after analysing the provisions of section 70 and section 10(27) observed in the following manner: \"In this case it is important to bear in mind that set-off is being claimed under section 70 of the 1961 Act which permits set off of any income falling under any head of income other than the capital gain which is a loss, the assessee shall be entitled to have the amount of such loss set off against his income from any other source under the same head. We have noticed that in the instant case the exclusion has been conceded in computing the business income or the source of income from the head of business and in computing that business income, the loss from one particular source, that is, broodmares account and the pig account, had been excluded contrary to the submission of the assessee. The assessee wanted these losses to be set off. The Revenue contends that as the sources of the income are not to be included in view of the provisions of clause (27) of s. 10 of the 1961 Act, the loss suffered from this source could also not merit the exclusion. Under the I.T. Act, there are certain incomes which do not enter into the computation of the total income at all. In this connection we have to bear in mind the scheme of the charging section which provides that the incomes shall be charged and s. 4 of the Act provides that the Central Act enacts that the incomes shall be charged for any assessment year and in accordance with and subject to the provisions of the 1961 Act in respect of the total income of the previous year or years or whatever the case may be. The scheme of \" total income \" has been explained by s. 5 of the Act which provides that subject to the provisions of the Act, the total income of the previous year of a person who is a resident includes all income from whatever source it is derived. In computing the total income, certain incomes are not included under s. 10 of the Act. It depends on the particular case where certain income, in respect of which the Act is made inapplicable to the scheme of the Act, and in such a case, the profit and loss resulting from such a source do not enter into the computation at all. But there are other sources which for certain economic reasons are not included or excluded by the will of the Legislature. In such a case we must look to the specific exclusion that has been made. The question is in this case whether s. 10(27) is a source which does not enter into the computation at all or is a source the income in respect of which is excluded in the computation of total income. How this question will have Printed from counselvise.com ITA No. 1249/Del/2017 Mr. Nikhil Sawhney Page | 22 to be viewed, has been looked into by the Supreme Court in several decisions to some of which our attention was drawn.\" After discussing the various decisions of the Hon'ble Supreme Court specifically the decision of in the case of Karamchand Premchand Ltd. (supra), the Hon'ble High Court came to the following conclusion: \"cl.(27) of s.10 excludes in express terms only \"any income derived from a business of live-stock breeding or poultry or dairy farming. It does not exclude the business of livestock breeding or poultry or dairy farming from the operation of the Act. Therefore, the losses suffered by the assessee in the broodmares account and in the pig account were admissible deductions in computing its total income\" Thus, the ratio laid down by the Hon'ble Calcutta High Court is clearly applicable and accordingly we follow the same in the present case. 9. Now coming to the argument of the learned DR and learned CIT(A) that income includes loss and if income is exempt then loss will also not be taken into computation of the income, and such an argument is with reference to the decision of Hon'ble Supreme Court in the case of Hariprasad & Co. (P.) Ltd. [1975] 99 ITR 118. The Hon'ble Supreme Court, opined that, if loss was from the source or head of income not liable to tax or congenitally exempt from income tax, neither the assessee was required to show the same in the return nor was the Assessing Officer under any obligation to compute or assess it much less for the purpose of carry forward. Further, the Hon'ble Supreme Court observed that \"From the charging provisions of the Act, it is discernible that the words ' income ' or ' profits and gains' should be understood as including losses also, so that, in one sense 'profits and gains' represent ' plus income ' whereas losses represent 'minus income'. In other words, loss is negative profit. Both positive and negative profits are of a revenue character. Both must enter into computation, wherever it becomes material, in the same mode of the taxable income of the assessee. Although section 6 classifies income under six heads, the main charging provision is section 3 which levies income-tax, as only one tax, on the 'total income ' of the assessee as defined in section 2(15). An income in order to come within the purview of that definition must satisfy two conditions. Firstly, it must comprise the ' total amount of income, profits and gains referred to in section 4(1)'. Secondly, it must be 'computed in the manner laid down in the Act'. If either of these conditions fails, the income will not be a part of the total income that can be brought to charge.\" While concluding the issue their Lordships observed that \"it may be remembered that the concept of carry forward of loss does not stand in vacuo. It involves the notion of set- off. Its sole purpose is to set off the loss against the profits of a subsequent year. It pre-supposes the Printed from counselvise.com ITA No. 1249/Del/2017 Mr. Nikhil Sawhney Page | 23 permissibility and possibility of the carried-forward loss being absorbed or set off against the profits and gains, if any, of the subsequent year. Set off implies that the tax is exigible and the assessee wants to adjust the loss against profit to reduce the tax demand. It follows that if such set-off is not permissible or possible owing to the income or profits of the subsequent year being from a non-taxable source, there would be no point in allowing the loss to be \"carried forward\". Conversely, if the loss arising in the previous year was under a head not chargeable to tax, it could not be allowed to be carried forward and absorbed against income in a subsequent year from a taxable source.\" The ratio and the principle laid down by the Hon'ble Apex Court would not apply here in this case, because the concept of income includes loss will apply only when entire source is exempt or is not liable to tax and not in the case where only one of the income falling within such source is treated as exempt. The Hon'ble Apex Court on the other hand, itself has stated that if loss from the source or head of income is not liable for tax or congenitally exempt from income tax, then it need not be computed or shown in the return and Assessing Officer also need not assess it. This distinction has to be kept in mind. Hon'ble Calcutta High Court in Royal Turf Club have discussed the aforesaid decision of the Hon'ble Supreme Court and held that the same will not apply in such cases. Thus, in our conclusion, we hold that section 10(38) excludes in expressed terms only the income arising from transfer of Long term capital asset being equity share or equity fund which is chargeable to STT and not entire source of income from capital gains arising from transfer of shares. It does not lead to exclusion of computation of capital gain of Long term capital asset or Short term capital asset being shares. Accordingly, Long term capital loss on sale of shares would be allowed to be set off against Long term capital gain on sale of land in accordance with section 70(3). 10. Coming to the decision of the ITAT Mumbai Bench in the case of Schrader Duncan Ltd. (supra), the issue involved there was, whether the loss on transfer of capital asset being units US 64 Scheme of Unit Trust of India can be allowed and entitled to carry forward the same for set off of in subsequent assessment years, when the income arising from such transfer of unit is exempt u/s. 10(33). The Tribunal held that the source both capital gain and capital loss on sale of units of US64 is itself excluded and not only the income arising out of capital gain. The Hon'ble Tribunal have noted the history of US64 Scheme and the purpose for which such scheme was launched. In this context of transfer of US64 scheme the Tribunal held that the provisions were not meant to enable the assessee to claim loss by indexation for set off against other capital gain chargeable to tax. This decision is slightly distinguishable and secondly, we have already discussed the issue at length and have held that the ratio of Hon'ble Calcutta High Court is applicable in the present case. Lastly, coming to the decision of Hon'ble Gujarat High Court in the case of Kishorebhai Bhikhabhai Virani (supra), we find that Printed from counselvise.com ITA No. 1249/Del/2017 Mr. Nikhil Sawhney Page | 24 the issue involved in the present case was almost the same, wherein the Hon'ble High Court after following the decision of Hon'ble Supreme Court in the case of Hariprasad & Company (P.) Ltd. (supra), had decided the issue against the assessee. Since we have already noted down the ratio of Hon'ble Calcutta High Court, where in the Hon'ble High Court has discussed this issue in detail after relying upon series of decisions of Hon'ble Supreme Court and have reached to a conclusion as discussed above, and, therefore, we are respectfully following the ratio of the decision of the Calcutta High Court. Further the said decision have not been referred or distinguished by the Hon'ble Gujarat High Court. Accordingly, we allow the assessee's ground no. 1 and direct the Assessing Officer to allow the claim of set off of Long term capital loss on sale of shares against the Long term capital gain arising on sale of land.\" [Highlight and underline supplied by us] Based on the above decision of the coordinate bench, subsequently some benches followed this decision. Therefore, we do not find any necessity of reproducing either the citation of those decisions or the content thereof because they do not lay down any new principles or did not consider any new arguments but those specifically relies on this tribunal decision. 30. Whereas one of the decision of Coordinate Bench, of course while deciding the levy of penalty u/s 271 (1) ( c) of the income tax act , but dealing with the controversy and also referring to the decision of the coordinate bench referred to above , in Asia Pacific Performance SICAV (supra) held as under :— We shall first discuss the assessee's explanation on the merits. The issue, as would be apparent from the foregoing, is the validity in law of the set off of loss on transactions (of transfer) of long-term capital assets specified under section 10(38), on which securities transaction tax is paid, against the income under the head \"Long-term capital gains\", on which no securities transaction tax being paid in its respect. The assessee's case is along the following lines : (a) the only condition in law (per section 70(3)) is that long- term capital loss (LTCL) is to be set off against the long- term capital gain and not short-term capital gain ; (b) there has been no amendment in law, i.e., post section 10(38), according exemption to income arising on transfer of long-term capital assets (LTCAs), being equity shares, etc., on or after October 1, 2004, on which securities transaction tax is chargeable in law, either under section 70 or under any other section. That is, the exemption provided by section 10(38) is absolute. Accordingly, long-term capital Printed from counselvise.com ITA No. 1249/Del/2017 Mr. Nikhil Sawhney Page | 25 loss could be set off against the long-term capital gain, irrespective of whether security transaction tax in its respect has paid or not, so that the assessee can at its option choose the course which is more beneficial to it. In fact, the Board has also vide its Circular No. 26 (LXXVI-3) [F No. 4(53)-IT/54] dated July 7, 1955 recognised the assessee's right in choosing the method for setting off which is more beneficial to the assessee; (c) the exemption under section 10(38) relates to a class of transactions, and not the source or the head of income itself. A distinction is to be made with reference to the source which does not enter the computation of income at all, and a source, income from which is excluded in the computation of income. Reliance in this context is placed on the decision in the case of Royal Calcutta Turf Club v. CIT [1983] 144 ITR 709 (Cal.); and (d) in any case, any ambiguity in law is to be interpreted in favour of the subject (refer: CIT v. Naga Hills Tea Co. Ltd. [1973] 89 ITR 236 (SC). We have given our careful consideration to the matter. We find the assessee's case is wholly unmaintainable in view of the law as explained by the hon'ble apex court over a series of decisions, viz.CIT v. Gold Coin Health Food (P.) Ltd. [2008] 304 ITR 308 (SC); CIT v. J.H. Gotla [1985] 156 ITR 323 (SC) and CIT (Central) v. Harprasad and Co. (P.) Ltd. [1975] 99 ITR 118 (SC), to cite some. We begin by reproducing/enlisting the observations by the apex court from the said decisions. In CIT (Central) v. Harprasad and Co. (P.) Ltd. [1975] 99 ITR 118 (SC), also relied upon by the Assessing Officer, which decision was also in context of capital gains, and under the Indian Income-tax Act, 1922 (pages 124, 125) : \"From the charging provisions of the Act, it is discernible that the words 'income' or 'profits and gains' should be understood as including losses also, so that, in one sense 'profits and gains' represent 'plus income' whereas losses represent 'minus income'*. In * CIT v. Karamchand Premchand Ltd. [1960] 40 ITR 106; [1960] 3 SCR 727 (SC) and CIT v. Elphinstone Spg. and Wvg. Mills Co. Ltd. [1960] 40 ITR 142; [1960] 3 SCR 953 (SC). other words, loss is negative profit. Both positive and negative profits are of a revenue character. Both must enter into computation, wherever it becomes material, in the same mode of the taxable income of the assessee. Although section 6 classifies income under six heads, the main charging provision is section 3 which levies income-tax, as only one tax, on the 'total income' of the assessee as defined in section 2(15). An income in order to come within Printed from counselvise.com ITA No. 1249/Del/2017 Mr. Nikhil Sawhney Page | 26 the purview of that definition must satisfy two conditions. Firstly, it must comprise the 'total amount of income, profits and gains referred to in section 4(1)'. Secondly, it must be 'computed in the manner laid down in the Act'. If either of these conditions fails, the income will not be a part of the total income that can be brought to charge.\" (Emphasis Supplied) In CIT v. J.H. Gotla [1985] 156 ITR 323 (SC), the apex court, after examining the scheme of the Act, including as to the carry forward of loss, held that in computing the assessee's income, the income of his wife or minor children, which is liable to be added under section 16(3) (of the 1922 Act), would include profit or loss from the business of the assessee's spouse or minor children and, accordingly, upheld the set off of brought forward business loss from such business. The premise on which the said decision rests is again that income includes loss. In CIT v. Gold Coin Health Food (P.) Ltd. [2008] 304 ITR 308 (SC), the issue before the hon'ble apex court was whether the penalty under section 271(l)(c) could be levied if the return of income is at a loss, i.e., in view of the amendment by the Finance Act, 2002 with effect from April 1, 2003 in Explanation 4 to the section. In deciding the matter, the hon'ble court referred to various precedents. The following section of the judgment is relevant for our purposes wherein the apex court, adverting to the decision in the case of CIT (Central) v. Harprasad and Co. (P.) Ltd. [1975] 99 ITR 118 (SC), clarifies that income by definition also includes losses : (pages 312, 313) \"7. In Reliance Jute and Industries Ltd. v. CIT [1979] 120 ITR 921, it was observed by this court that the law to be applied in income-tax assessments is the law in force in the assessment year unless otherwise provided expressly or by necessary implication. Before proceeding further, it will be necessary to focus on the definition of the expression 'income' in the statute. Section 2(24) defines 'income' which is an inclusive definition, and includes losses, i.e., negative profit. The position has been elaborately dealt with by this court in CIT v. Harprasad and Co. (P.) Ltd. [1975] 99 ITR 118. This court held with reference to the charging provisions of the statute that the expression 'income' should be understood to include losses. The expression 'profits and gains' refers to positive income whereas losses represent negative profit or in other words minus income. This aspect does not appear to have been noticed by the Bench in Virtual Soft Systems Ltd.'s case [2007] 289 ITR 83 (SC); [2007] 9 SCC 665. Reference to the order by this court dismissing the Revenue's Civil Appeal No. 7961 of 1996 in CIT v. Prithipal Singh and Co. [2001] 249 ITR 670 (SC) is also not very important because that was in relation to the assessment year 1970-71 when Explanation 4 to section 271(l)(c) was not in existence. The view of this court in Harprasad's case [1975] 99 ITR 118 (SC) leads to the irresistible conclusion that income also includes losses.\" Printed from counselvise.com ITA No. 1249/Del/2017 Mr. Nikhil Sawhney Page | 27 (Emphasis Supplied) In sum and substance all these decisions having been rendered in different contexts and fact-settings, is that loss is only negative income and that the definition of \"income\" under section 2(24) of the Act includes \"loss\". In other words, it bears the same character and quality as does the positive income. Accordingly, if a particular income is exempt from tax, so that it does not enter the computation process (for and toward determination of total income under section 2(45)), it would be so for such income whether positive or negative, i.e., loss. In fact, in the case of CIT (Central) v. Harprasad and Co. (P.) Ltd. [1975] 99 ITR 118 (SC), the apex court clarified that the assessee is not obliged to disclose loss from a source of income in its return where the income from that source is tax exempt, nor the Income-tax Officer under an obligation to compute or assess the same. Even ignoring for a moment the defining or machinery provisions of the Act, and looking fairly at the concept or notion of \"income\" from a common perception/standpoint, what, one may ask, is loss, if not negative income? How could it (loss) have a character other than that of income, being only the result of the same computation process which yields a positive income? Further, if construed to bear a character or nature different from income, how could the same be adjusted or set off against income? In fact, it is only its computation that yields or reveals a loss. In fact, as we have seen the same (computation) becomes applicable or would need to be applied only for computing income which forms part of the total (or taxable) income. That is, an income exempt under Chapter III of the Act, not forming part of the total income, would not enter the computation process to determine the quantum of income (which only determines either positive or negative income) under the relevant heads of income, each of which has its own computation provisions. Needless to add, the assessee did not prefer any appeal against the non-acceptance of its so-called legal claim. Rather, as aforenoted, the apex court has clarified that the assessee is not obliged to disclose loss from a source of income in its return where the income from that source is tax exempt, nor the Income-tax Officer under an obligation to compute or assess the same. The fallacy, to our mind, lies in reading the word \"income\" occurring in section 10(38) to mean only positive income, and for which there is no warrant in law or in any provision of the Act. That would be reading the said provision de hors the scheme of the Act as well as the law as explained and settled by the apex court. Section 2(24), which defines the term \"income\" under the Act inclusively, per sub-clause (vi) defines income to include capital gains chargeable under section 45 of the Act. In as much as therefore \"capital gains\" is not chargeable under section 45, the same stand excluded at the very threshold, i.e., is not income by definition. Printed from counselvise.com ITA No. 1249/Del/2017 Mr. Nikhil Sawhney Page | 28 Coming to the facts of the case proper, we begin by reproducing section 10(38) of the Act, which reads as under: \"Chapter III. Incomes which do not form part of total income 10. Incomes not included in total income-In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included-…… (38) any income arising from the transfer of a long-term capital asset, being an equity share in a company or a unit of an equity oriented fund where- (a) the transaction of sale of such equity share or unit is entered into on or after the date on which Chapter VII of the Finance (No. 2) Act, 2004 comes into force ; and (b) such transaction is chargeable to securities transaction tax under that Chapter : Provided that the income by way of long-term capital gain of a company shall be taken into account in computing the book profit and income-tax payable under section 115JB. Explanation. - For the purposes of this clause, 'equity oriented fund' means a fund-……\" Now, if securities transaction tax paid long-term capital gain is exempt under section 10(38), so is the loss from the same class of assets, i.e., long-term capital assets, being equity shares, etc., specified under section 10(38), where securities transaction tax paid. The same, as clarified during the hearing itself, is thus considered as a separate source of income, and the quantum of income therefrom being exempt becomes irrelevant for the purposes of the Act. In fact, one only needs to consider the proposition as to the exact status of income, if so, arising on the on-market transactions, i.e., instead of loss. If the income, were it to be so, falls under section 10(38), how could the loss, which is distinguishable only by the arithmetical result, be of a different nature. The same is, therefore, to be ignored. Rather, the assessee having income from the said source, i.e., the assets specified in section 10(38) (at Rs. 1,660.41 lakhs), the loss (Rs. 106.49 lakhs) would stand to be reduced therefrom, to arrive at the income under section 10(38). The two cannot be treated differently, as has been done by the assessee. The \"controversy\" under reference dissolves immediately upon the word \"income\" occurring in section 10(38) being, as is required to be, and as clarified time and again by the apex court, construed as inclusive of loss. One is in fact not required to go into the mechanics of section 70 (intra-head adjustment for aggregation of income towards determining the income under each head of income for the current year) for the purpose ; the income being exempt, so that it would not enter Printed from counselvise.com ITA No. 1249/Del/2017 Mr. Nikhil Sawhney Page | 29 the computation process for determination of the total income under section 2(45). That is, the moment there is a transfer of an asset specified in section 10(38), any income or loss arising therefrom is irrelevant for the purpose of computation of total income, where the transaction attracts securities transaction tax, being a precondition for the application of the said provision. The assessee's case, therefore, only needs to be stated to be rejected. Coming to the decision in the case of Royal Calcutta Turf Club v. CIT [1983] 144 ITR 709 (Cal.), the assessee's reliance on the same is wholly misplaced. The said decision is premised on the argument that a source of income is different from the income therefrom. What would, therefore, be required to be seen is whether the income from a certain source that is exempt, so that it would enter the computation of the taxable income, or it is the source of income itself that stands excluded. Reproducing the observations by the apex court in the case of CIT (Central) v. Harprasad and Co. (P.) Ltd. [1975] 99 ITR 118 (SC) as extracted hereinabove (at paragraph 3.1 of this order), the hon'ble court distinguished the said decision by the apex court by observing that in that case the capital gains were neither intrinsically nor congenitally of income character (paragraph 14 of the decision). Section 2(24) of the Act which defines income under the Act inclusively, in its relevant part, reads as under: \"2. Definitions. - In this Act, unless the context otherwise requires, - (24) 'income' includes-….. (vi) any capital gains chargeable under section 45.\" (Emphasis Supplied) Clearly, therefore, any capital gain, i.e., any profit or gain arising on the transfer of a capital asset, is \"income\" under the Act only if and to the extent it is chargeable under section 45 of the Act. As such, the Act classifies all capital gains arising as from two sources, one which bears the character of the income for the purposes of the Act and the other which does not. \"Section 2(45), which defines the term 'total income' under the Act, reads as under : '2. Definitions.-In this Act, unless the context otherwise requires,- (45) \"total income\" means the total amount of income referred to in section 5, computed in the manner laid down in this Act;\" The income by way of capital gains in the instant case is, by virtue of being exempt under section 10(38), not chargeable under section 45 and, consequently, outside the scope of the total income. Accordingly, it may be seen that, firstly, the relevant capital assets, income from which Printed from counselvise.com ITA No. 1249/Del/2017 Mr. Nikhil Sawhney Page | 30 is not chargeable under section 45, constitutes a separate source of income and, two, being so, i.e., tax exempt under section 10(38), would thus not go to form part of the total income. Both conditions as stated by the apex court in CIT (Central) v. Harprasad and Co. (P.) Ltd. [1975] 99 ITR 118 (SC) fail. The observations made by the hon'ble high court qua capital gains while distinguishing the said decision by the apex court, i.e., of the income under reference being intrinsically not income, would thus apply with equal force in the instant case, as it did in the case of Harprasad & Co. (P.) Ltd. It is this that led us to state of the reliance by the assessee on the decision in the case of Royal Calcutta Turf Club v. CIT [1983] 144 ITR 709 (Cal.) as completely misplaced.\" Therefore, it is apparent that when the decision in the case of Raptakose Brett & Co. Ltd. (supra) was rendered on 10 June 2015, the decision of the coordinate bench in case of Asia Pacific Performance SICAV (supra) dated 27 December 2013 was neither cited nor considered. 31. Now coming to the decision of Raptakose Brett & Co Limited (supra), decision of the honourable Gujarat High Court in case of Kishorebhai Bhikhabhai Virani (supra) was cited. The coordinate bench in para number 10 held that \"Lastly, coming to the decision of Hon'ble Gujarat High Court in the case of Kishorebhai Bhikhabhai Virani (supra), we find that the issue involved in the present case was almost the same, wherein the Hon'ble High Court after following the decision of Hon'ble Supreme Court in the case of Hariprasad & Company (P.) Ltd. (supra), had decided the issue against the assessee. Since we have already noted down the ratio of Hon'ble Calcutta High Court, wherein the Hon'ble High Court has discussed this issue in detail after relying upon series of decisions of Hon'ble Supreme Court and have reached to a conclusion as discussed above, and, therefore, we are respectfully following the ratio of the decision of the Calcutta High Court. Further the said decision have not been referred or distinguished by the Hon'ble Gujarat High Court. 32. Now coming to the decision of the honourable Gujarat High Court in Kishorbhai Bhikhabhai Virani (supra) which decided the identical issue wherein following three main issues were raised:— A. Whether, in the facts and in the circumstances of the case, the Tribunal was justified in law in corifirming the disallowance of the appellant's claim regarding set off and carried forward of long-term capital loss of Rs. 1,44,73,463 against the long-term capital gain of Rs. 1,03,00,809 for the same assessment year ? B. Whether, on the facts and in the circumstances of the case, the appellant's claim with regard to set off and carried forward of long- term capital loss of Rs. 1,44,73,463 can be disallowed on the basis Printed from counselvise.com ITA No. 1249/Del/2017 Mr. Nikhil Sawhney Page | 31 of the decisions of the horible apex court in the case of CIT v. Harprasad and Co. P. Ltd. [1975] 99 ITR 118 (SC) and the Madras High Court in the case of CIT v. S.S. Thiagarajan [1981] 129 ITR 115 (Mad.), especially when neither the facts nor the provisions of law discussed in the said decisions are comparable to the facts of the appellant's case and the provisions of law applicable to the appellant's case ? C. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in invoking the provisions of section 10(38) of the Act, especially when the appellant's case is governed by the provisions contained in section 74(1)(b) of the Act ? 33. The honourable Gujarat High Court answered these questions after recording the facts as Under:— \"2. Briefly stated the facts are that for the assessment year 2006-07 the assessee had filed the return of income declaring a total income of Rs. 8.67 lakhs (rounded off). The return of the assessee was taken under scrutiny. During the assessment, it was noticed that the assessee had sold the shares of one Suashish Diamond Ltd. and incurred capital loss of Rs. 1.44 crores (rounded off) during the year under consideration. During the same period, the assessee also earned long-term capital gain of Rs. 1.03 crores (rounded off) on sale of shares of one Karp Diamond Ltd. Such long-term capital gain was charged under section 45 of the Income-tax Act, 1961 (hereinafter referred to as \"the Act\"). In the return that the assessee filed, it had claimed set off of the capital loss of Rs. 1.44 crores against the capital gain of Rs. 1.03 crores. The Assessing Officer disputed such claim and after hearing the assessee disallowed the same holding that the loss from exempt source can neither be allowed as set off nor can be allowed to be carried forward and absorbed against income in subsequent years from the taxable source. 3. The issue ultimately reached the Tribunal. The Tribunal by the impugned judgment ruled in favour of the Revenue and against the asses-see, basing reliance on the provisions contained in section 10(38) of the Act and also referring to various other provisions including section 70(3) of the Act. The Tribunal relied on the decision of the apex court in the case of CIT v. Harprasad and Co. P. Ltd. [1975] 99 ITR 118. 4. The assessee is now in appeal before us. Having heard the learned counsel for the assessee, we see no error in the decision of the Tribunal. Section 74 of the Act pertains to losses under the head \"Capital gains\" and clause (b) of sub-section (1) of section 74 of the Act provides, inter alia, that where in respect of any assessment year, the net result of the computation under the head \"Capital gains\" is a loss, the whole loss shall, subject to the other provisions of Chapter VI, be carried forward to the following assessment year and in so far as it relates to a long-term capital asset, it shall be set off against income, if any, under the head of Printed from counselvise.com ITA No. 1249/Del/2017 Mr. Nikhil Sawhney Page | 32 \"Capital gains\" assessable for that assessment year in respect of any other capital asset not being a short-term capital asset. It is this provision that the learned counsel for the assessee has placed heavy reliance on. For the application of the said provision, what is necessary is that there should be a loss suffered by the assessee under the head of \"Capital gains\". In such a situation, if such loss relates to long-term capital asset, it is permitted to be carried forward for the following assessment year and be set off against income, if any, under the head of \"Capital gains\" assessable for that assessment year in respect of any other capital asset other than a short-term capital asset. For the reasons mentioned hereinafter, in view of the facts of this case, it was not open for the assessee to claim set off of the loss in sale of shares of Sua-shish Diamond Ltd. Perhaps section 74 of the Act may have otherwise also no applicability because it refers to carry forward of the capital loss set off against capital gain of the subsequent year, which is not the case in the present case. Section 70 of the Act refers to income from any other source under the said head of \"Income\". Sub-section (3) thereof which is relevant for our perspective reads as under : \"70. (3) Where the result of the computation made for any assessment year under sections 48 to 55 in respect of any capital asset (other than a short-term capital asset) is a loss, the assessee shall be entitled to have the amount of such loss set off against the income, if any, as arrived at under a similar computation made for the assessment year in respect of any other capital asset not being a short-term capital asset.\" 5. Under section 70(3) of the Act, therefore, where in respect of any capital asset other than short-term capital asset there is a loss, the assessee is entitled to have the amount of such loss set off against the income in respect of any another capital asset not being a short-term capital asset. What is, therefore, significant is that the assessee should have suffered a loss in respect of any capital asset, which is not a short- term capital asset. 6. In this context, section 10(38) of the Act becomes relevant. As is well known, section 10 pertains to income not included in the total income. Clause (38) thereof reads as under : \"10. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included -. . . (38) any income arising from the transfer of a long-term capital asset, being an equity share in a company or a unit of an equity oriented fund where- (a) the transaction of sale of such equity share or unit is entered into on or after the date on which Chapter VII of the Finance (No. 2) Act, 2004, comes into force ; and Printed from counselvise.com ITA No. 1249/Del/2017 Mr. Nikhil Sawhney Page | 33 (b) such transaction is chargeable to securities transaction tax under that Chapter: Provided that the income by way of long-term capital gain of a company shall be taken into account in computing the book profit and income-tax payable under section 115JB.\" 7. The fact that the capital asset in question, namely, the shares of Suashish Diamond Ltd. was covered under section 10(38) of the Act was not in dispute. That being the position, by virtue of section 10(38) of the Act, in computing the total income of the previous year, any income covered under such clause shall not be included. If that be so, the loss also arising out of such an asset and covered by the said clause would likewise be not includable in computation of the income of the assessee for the year under consideration The contention of the learned counsel for the assessee that for the purpose of section 10(38) of the Act the term \"income\" would not include \"loss\", cannot be accepted and rightly rejected by the Tribunal. If this is the conclusion, it can immediately be seen that any loss in respect of any such capital asset would not be available for set off The Tribunal rightly relied on the decision in the case of Harprasad & Co. (P.) Ltd. (supra) to come to a conclusion that the term \"income\" under section 10(38) of the Act would also include the loss. In the said decision, the apex court observed that the concept of carry forward of loss does not stand in vacuo. It involves the notion of set off It postulates permissibility and possibility of the carried forward loss being absorbed or set off against the profits and gains of the subsequent year. Set off implies that the tax is exigible and the assessee wants to adjust the loss against profit to reduce the tax demand. It was held that if such set off is not permissible or possible owing to the income or profits of the subsequent year being from a non- taxable source, there would be no point in allowing loss to be \"carried forward\". Conversely, if the loss arising in the previous year was under a head not chargeable to tax, it could not be allowed to be carried forward and absorbed against income in a subsequent year, from a taxable source.\" 34. About the above decision of the honourable Gujarat High Court the coordinate bench in Raptakose Brett & Co Ltd. (supra) considered the stating that the facts of the case before the honourable Gujarat High Court and the facts before the coordinate bench are almost the same[para number 10 of that decision]. However the bench opted to follow the decision of Honourable Calcutta High Court stating that honourable Gujarat High Court did not consider the decision of the honourable Calcutta High Court. 35. We are of the view that when the honourable Gujarat High Court has followed the decision of Honourable Supreme Court in case of Hari prasad & Co P Ltd (supra) and when the coordinate bench has held that the facts of the case before it were almost same with the facts before Printed from counselvise.com ITA No. 1249/Del/2017 Mr. Nikhil Sawhney Page | 34 the honourable Gujarat High Court, we are inclined to follow the decision of the honourable Gujarat High Court instead of the decision of the coordinate benches placed before us. It is a trite principle of judicial discipline that binds us to follow the decision of higher judicial forum, then of parallel judicial forum. 36. The learned authorised representative has submitted that the decision of the honourable Gujarat High Court should not be followed by us but we must follow the decision of the coordinate benches, as the decision of the honourable Gujarat High Court is 'sub silentio' and 'per incuriam' for the reasons given by the learned authorised representative. 37. Firstly, we as tribunal are not authorised to state that any decision of the honourable High Court is 'sub silentio' or 'per incuriam'. It is neither in our domain nor do we have any authority because we are subordinate to the honourable High Court. However, the argument of the learned authorised representative that we should follow the decision of the coordinate bench in Raptakose Brett & Co. Ltd. (supra) and not the decision of the honourable Gujarat High Court are required to be dealt with on merits because other wise our order would not be complete. So, We deal with each of the argument of the learned authorised representative as Under. (a) First and foremost, the decision of the apex Court in the case of Karamchand Premchand (supra) was not even referred to nor considered by Honourable Gujarat High court; (i) we come to the first argument of the learned authorised representative that the Hon. Gujarat High Court should have dealt with the decision of the honourable supreme court in case of 40 ITR 18 and non consideration of that decision forces us to not to follow it. The decision of the honourable Supreme Court in case of Karamchand Premchand Ltd. (supra) was first dealt with by the honourable Supreme Court itself in CIT v. Chunilal Mongaram [1961] 43 ITR 1 wherein it has held as Under:- \"We consider that these contentions are correct. As to the first ground, it seems clear to us that under the third proviso to section 5 of the Excess Profits Tax Act, 1940, where the profits etc., of a part of the firm's business accrued or arose at Bhatinda, that part of the business shall for the purpose of the said section be deemed to be a separate business. If that is so the losses which arose art Bhatinda must also be the losses of a separate business. We may here read section 5 and the third proviso thereto: \"5. This Act shall apply to every business of which any part of the profits made during the chargeable accounting period is Printed from counselvise.com ITA No. 1249/Del/2017 Mr. Nikhil Sawhney Page | 35 chargeable to income-tax by virtue of the provisions of sub- clause (i) or sub-clause (ii) of clause (b) of sub-section (1) of section 4 of the Indian Income-tax Act, 1922, or of clause (c) of that sub-section:.. Provided further that thus Act shall not apply to any business the whole of the profits of which accrue or arise in an Indian State; and where the profits of a part of a business accrue or arise in an Indian State such part shall, for the purposes of this provision, be deemed to be a separate business the whole of the profits of which accrue or arisen in an Indian State, and the other part of the business shall, for all the purposes of this Act, be deemed to be a separate business.\" In CIT v. Karamchand Premchand Ltd.** this court considered section 5 of the Business Profits Tax Act, 1947, and pointed out the distinction between the third proviso thereto and the third proviso to section 5 of the Excess Profits Tax Act, 1940. This *[1958] 33 I.T.R. 170, 175 (Punj.). **[1960] 40 I.T.R. 106 (S.C.). Page No : 0007 court quoted with approval the decision in Commissioner of Excess Profits Tax v. Bhogilal H. Patel* and held that the language used in the third proviso to section 5 of the Excess Profits Tax Act, 1940, was one of exclusion and that Act did not apply to profits etc., of that part of the business which arose in an Indian State. If that part of the business has to be treated as a separate business for the purposes of the Excess Profits Tax Act, it is difficult to see how the losses incurred in an Indian State can be taken into consideration for the same purposes. We think that the High Court was in error in thinking that the third proviso to section 5 of the Excess Profits Tax Act did not touch the question which the High Court had to answer. On the contrary, we think that the proviso answers the question against the assessee.\" (ii) The second occasion that honourable Supreme Court had of considering the decision of the Karamchand Premchand Ltd was in case of Harprasad & Co (P.) Ltd. (supra) at page number 124 wherein it considered the charging provisions of the act and held that the words \"Income\" or 'profit or gain\" should be understood as it includes \"losses\" also. The honourable Supreme Court held as Under:- \"Section 2(6C) provides that \"income\" includes (among other Printed from counselvise.com ITA No. 1249/Del/2017 Mr. Nikhil Sawhney Page | 36 things)- \"(vi) any capital gain chargeable under section 12B. \" From the charging provisions of the Act, it is discernible that the words \"income\" or \"profits and gains\" should be understood as including losses also, so that, in one sense \"profits and gains\" represent \"plus income\" whereas losses represent \"minus income\" CIT v. Karamchand Prem Chand Ltd. [1960] 40 ITR 106 ; [1960] 3 SCR 72. In other words, loss is negative profit. Both positive and negative profits are of a revenue character. Both must enter into computation, wherever it becomes material, in the same mode of the taxable income of the assessee.\" (iii) Honourable Supreme Court also considered the above decision in case of Karamchand Premchand Ltd. (supra) and Hari Prasad & Co. (P.) Ltd. (supra) in IPCA laboratory Ltd. v. Dy. CIT [2004] 135 Taxman 594/266 ITR 521 in para number 16 as Under:- \"16. Faced with this situation, it was submitted that even a loss is a negative profit. In support of the submission, reliance was placed upon the authority of this Court in the case of CIT v. Harprasad & Co. (P.) Ltd. [1975] 99 ITR 118. In this case the meaning of loss was being considered in the context of capital gains made from sale of shares. The question was whether the loss could be carried forward and set off against capital gains in a subsequent year. While considering this question, it was held as follows : \"From the charging provisions of the Act, it is discernible that the words 'income' or 'profits and gains' should be understood as including losses also, so that, in one sense 'profits and gains' represent 'plus income' whereas losses represent 'minus income'. In other words, loss is negative profit. Both positive and negative profits are of a revenue character. Both must enter into computation, wherever it becomes material, in the same mode of the taxable income of the assessee. . . .\" (iv) And lately, honourable Supreme Court had an occasion to consider the above decision in CIT v. Sati Oil Udyog Ltd. [2015] 56 taxmann.com 285/230 Taxman 521/372 ITR 746 (SC) in para number 10 and 11 as Under:— \"10. Mr. Kaul, learned Additional Solicitor General is right in referring to the definition of \"income\" in section 2(24) of the Income-tax Act, 1995 and drawing our attention to the fact Printed from counselvise.com ITA No. 1249/Del/2017 Mr. Nikhil Sawhney Page | 37 that the said definition is an inclusive one. Further, it is settled law at least since 1975 that the word \"income\" would include within it both profits as well as losses. This is clear from CIT v. Harprasad & Co. (P.) Ltd. [1975] 99 ITR 118 (SC) paragraph 17 of which lays down the law as follows: '17. From the charging provisions of the Act, it is discernible that the words \"income\" or \"profits and gains\" should be understood as including losses also, so that, in one sense \"profits and gains\" represent \"plus income\" whereas losses represent \"minus income\" [CIT v. Karamchand Prem Chand, (1960) 3 SCR 727 : 40 ITR 106 (SC) : CIT v. Elphinstone Spg. & Wvg. Mills Co. Ltd. (1960) 3 SCR 953 : 40 ITR 142 (SC)] . In other words, loss is negative profit. Both positive and negative profits are of a revenue character. Both must enter into computation, wherever it becomes material, in the same mode of the taxable income of the assessee. Although section 6 classifies income under six heads, the main charging provision is section 3 which levies income tax, as only one tax, on the \"total income\" of the assessee as defined in Section 2(15). An income in order to come within the purview of that definition must satisfy two conditions: Firstly, it must comprise the \"total amount of income, profits and gains referred to in Section 4(1)\". Secondly, it must be \"computed in the manner laid down in the Act\". If either of these conditions fails, the income will not be a part of the \"total income\" that can be brought to charge.' 11. This judgment has subsequently been followed in several judgments. The fairly recent judgment of this Court in Jt. CIT v. Saheli Leasing & Industries Ltd. [2010] 324 ITR 170/191 Taxman 165 (SC) referred to the aforesaid judgment and held as follows:— '23. In the aforesaid decision in Gold Coin case [(2008) 9 SCC 622 : (2008) 304 ITR 308] , the expression \"income\" in the statute appearing in section 2(24) of the Act has been clarified to mean that it is an inclusive definition and includes losses, that is, negative profit. This has been held so on the strength of earlier judgments of this Court in CIT v. Harprasad and Co. (P.) Ltd. [(1975) 3 SCC 868 : 1975 SCC (Tax) 158 : (1975) 99 ITR 118] and followed in Reliance Jute and Industries Ltd. v. CIT [(1980) 1 SCC 139 : 1980 SCC (Tax) 67 : (1979) 120 ITR 921] . After an elaborate and detailed discussion, this Court held with reference to the charging provisions of the statute that the expression \"income\" should be understood to include losses. Printed from counselvise.com ITA No. 1249/Del/2017 Mr. Nikhil Sawhney Page | 38 The expression \"profits and gains\" refers to positive income whereas \"losses\" represents negative profit or in other words minus income. Considering this aspect of the matter in greater detail, Gold Coin [(2008) 9 SCC 622: (2008) 304 ITR 308] overruled the view expressed by the two learned Judges in Virtual Soft Systems [(2007) 9 SCC 665 : (2007) 289 ITR 83] . 24. Relevant ITR paras 11 and 12 of Gold Coin [(2008) 9 SCC 622 : (2008) 304 ITR 308] dealing with income and losses are reproduced hereinbelow: (SCC p. 628, paras 15-16) \"15. When the word 'income' is read to include losses as held in Harprasad case [(1975) 3 SCC 868 : 1975 SCC (Tax) 158 : (1975) 99 ITR 118] it becomes crystal clear that even in a case where on account of addition of concealed income the returned loss stands reduced and even if the final assessed income is a loss, still penalty was leviable thereon even during the period 1-4-1976 to 1-4-2003. Even in the Circular dated 24-7-1976, referred to above, the position was clarified by the Central Board of Direct Taxes (in short 'CBDT'). It is stated that in a case where on setting of the concealed income against any loss incurred by the assessee under any other head of income or brought forward from earlier years, the total income is reduced to a figure lower than the concealed income or even to a minus figure the penalty would be imposable because in such a case 'the tax sought to be evaded' will be tax chargeable on concealed income as if it is 'total income'. 16. The law is well settled that the applicable provision would be the law as it existed on the date of the filing of the return. It is of relevance to note that when any loss is returned in any return it need not necessarily be the loss of the previous year concerned. It may also include carried-forward loss which is required to be set up against future income under section 72 of the Act. Therefore, the applicable law on the date of filing of the return cannot be confined only to the losses of the previous accounting years.\" 25. The necessary consequence thereof would be that even if the assessee has disclosed nil income and on verification of the record, it is found that certain income has been concealed or has wrongly been shown, in that case, penalty can still be levied. The aforesaid position is no more res integra and according to us, it stands answered in favour of the Revenue and against the assessee.' (v) Therefore, from all the above decision of the honourable Printed from counselvise.com ITA No. 1249/Del/2017 Mr. Nikhil Sawhney Page | 39 Supreme Court which considered the decision of Hariprasad & Co. (P.) Ltd. (supra) as well as Karamchand Premchand Ltd. (supra) and has held that the word \"income\" includes loss also as the word income is comprising of positive income as well as negative income. In view of this according to us the controversy before us is not whether any source is excluded or included. But the controversy is whether the provisions of section 10 (38) starts with \"any income\" would include both positive income/surpluses or negative income/losses. According to us, all the decisions of the honourable Supreme Court also held that the word income also includes losses. Therefore both the decision of Honourable supreme court in case of Karamchand Premchand and Haripsad & co (P.) Ltd. (supra) lay down the same law as held by Honorable Supreme court in series of its decisions. Thus, to say that Honourable Gujarat High court should have considered Karamchand Premchand (supra) and not Harisprasad & co (P.) Ltd. (supra) is not correct. (b) Secondly, the decision of the Calcutta High Court in Royal Calcutta (supra), which considered the decisions in Karamchand Premchand Ltd. (supra) and also Harprasad & Co. (P.) Ltd. (supra), was not referred nor consideredby Hon Gujarat High court; (i) Honourable Gujarat High Court considered Harprasad and Co. (P.) Ltd. (supra) and S.S. Thiagarajan (supra), it followed and relied upon. This is apparent that honourable Gujarat High Court wherein it dealt with the whole controversy and considered the decision of the honourable Supreme Court in para number three and seven of its decision. The decision in the case of Karamchand Premchand is not required to be discussed as it also lays down the same thing which was laid down by the Hariprasad & Co private limited by honourable Supreme Court. Therefore, this reason given by the learned authorised representative does not appeal to us and hence rejected. (ii) further with respect to the argument of the learned authorised representative that the honourable Gujarat High Court did not considered the decision of the honourable Calcutta High Court in case of Royal Calcutta Turf club Ltd. (supra) where the issue of business income was considered. According to us, with respect to the exempt income the expenditures are now ( From 1/4/1962) disallowed Under the provisions of section 14 A of the income tax act, therefore there cannot be losses in case of an exempt income in the business. In view of this, even before us, if for a second we presume that the honourable Gujarat High Court did not consider the decision of the honourable Calcutta High Court, it does not have any significance on the Printed from counselvise.com ITA No. 1249/Del/2017 Mr. Nikhil Sawhney Page | 40 merits before us. In view of this, we reject this contention of the learned authorised representative. (c) Thirdly, the decision in the case of Harprasad & Co. (P.) Ltd. (supra) was relied upon and referred to only for the proposition that income includes loss. The fundamental facts and the legal proposition laid down (as elaborately discussed supra) that during the relevant period capital loss, per se, was not liable to tax and hence loss was held to be not allowable by the apex Court, was not even brought to the notice of the Court. This argument has been adequately dealt with earlier wherein we have held that honourable Supreme Court in series of decision has held that 'income' includes losses. Therefore, this ground/argument of the learned authorised representative is also rejected. (d) In para 4, the Court noted that the assessee's primary reliance was only on section 74; we find that this is an unnecessary argument advanced by the assessee whether the issue is covered u/s 74 or u/s 70 of the income tax act as we have held that u/s 10 (38), even the losses are to be thrown out from the computation itself at the threshold and therefore this argument does not survive. (e) The fundamental legal position that unless the source, per se, is exempt/excluded, the loss cannot be ignored, was not even argued nor considered In view of our finding while interpreting the provisions of Section 10 (38) of the income tax act we do not find that if the source is excluded or included it will give any other result. Therefore, this argument of the learned authorised representative is rejected. 38. Now we come to the authoritative commentary of Kanga & Palkhivala's The law and Practice of Income-tax - 11 Th Edition at page no 531-532 of Vol -I which deals with the issue of losses of income u/s 10 as under :— \"2. Losses from Incomes covered under section 10 — A thorny issue that arises under s 10 is the question of what happens if the assessee has a loss under a particular clause. For instance, s 10(38) deals with income from sale of certain equity shares and mutual funds on which securities transaction tax is paid. Now, if there is a loss, will the loss also not form part of the total income? Or will the assessee, subject to the other provisions of the Act, be able to set off these losses against capital gains for that year? Section 10 states that 'income' falling within any of its clauses shall not be included in the computation of 'total income' of the assessee. The question is, does income include a loss? In the case of an insurance company making a loss under the scheme covered under s 10(23AAB), the Bombay High Court skirted this question - it held that since insurance companies' assessments are Printed from counselvise.com ITA No. 1249/Del/2017 Mr. Nikhil Sawhney Page | 41 covered under s 44, the question of disallowing this loss did not arise. This is the correct decision in that context, since insurance companies are treated differently under the Act. In certain judgments under s 271(1)(c) dealing with penalty, the Courts have held that income does not include loss. These judgments were overturned by the introduction of an Explanation in that section. This Explanation was held to be retrospective as it was clarificatory, effectively overruling all the previous judgments holding that income does not include loss. For this, the Supreme Court relied on the judgments in CIT v. Harprasad and Co. P. Ltd. and CIT v. J.H. Gotla, which were rendered in the context of clubbing of income. Recently, the Supreme Court, while upholding the constitutional validity of the retrospective amendment to s 143(1A), held that it was 'settled law at least since 1975 that the word \"income\" would include within it both profits as well as losses'.5. The upshot of this discussion is that the law is now fairly settled that \"income\" includes \"loss\". It is submitted, however, that when applying this proposition to s 10, a distinction must be made between business income and incomes that fall under the head of capital gains. In the case of business income, the question of a 'loss' under a clause falling within s 10 will not arise at all because the expenditure towards earning this business income is anyway disallowed under s 14A. But when it comes to incomes covered under 'capital gains', like those covered under s 10(38),6. where s 14A does not apply, the judgments discussed above will now imply that any losses will also not be included in the computation of total income.\" [Bold and underline supplied by us] 39. In view of the above facts, judicial precedents as well as the authoritative commentary on The Income-tax Law And Practice, we are of the view that the lower authorities have not committed any error in ignoring the loss incurred by the assessee on sale of shares and securities, on which assessee has paid securities transaction tax, holding that when the income is exempt, then both positive income as well as the negative loss , both, do not enter into the regular computation of the assessee. Accordingly, the orders of the lower authorities are upheld wherein the assessee has been denied the set of and or carry forward of long-term capital loss of Rs. 9 080 571/- on transfer of shares on which the assessee has paid securities transaction tax and are covered by the provisions of section 10(38) of the Act 40. Assessee has also slipped in its written submission that when there are two views on an issue, the opinion which is favourable to the assessee should be adopted. We have given our thoughtful consideration to this issue and find that when honourable Supreme Court has decided on issue that income includes loss also, it decides from the day one when the law is enacted. Therefore, now there are no two views on the issue so, we are constrained to take a view in favour of the revenue and against the assessee on this issue. Printed from counselvise.com ITA No. 1249/Del/2017 Mr. Nikhil Sawhney Page | 42 41. In view of the above facts and circumstances and respectfully following the decision of the honourable Gujarat High Court as well as the authoritative commentary on law and practice of income tax supported by the decisions of the honourable Supreme Court, we dismiss ground number [1] of the appeal of the assessee which is the solitary ground in this appeal. 42. In the result, appeal of the assessee is dismissed.” 7. We have given our thoughtful consideration of the matter on record and the submissions. What is material to this Bench is that in the case of assessee‟s brother, the Bench wherein in coram one of us, i.e. Accountant Member has authored the decision benefitting the brother of assessee. However, in assessee‟s own case, another Co-ordinate Bench has taken divergent view. The persuasive value of the decision in assessee‟s own case for earlier year binds us to follow the same. Accordingly, we decide the grounds raised herein against the assessee and in favour of the revenue. We are making it very clear that this decision shall not be taken as a precedent in any other case involving identical issue. 8. In the result, the appeal of the assessee is dismissed. Order pronounced in the open court on 10/10/2025. -Sd/- -Sd/- (VIMAL KUMAR) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 10/10/2025 A K Keot Copy forwarded to 1. Applicant 2. Respondent 3. CIT Printed from counselvise.com "