COMMISSIONER OF INCOME TAX Vs. GAUTAM SARABHAI

JUDGEMENT

(1.) THE Tribunal, Ahmedabad Bench 'B', has referred, at the instance of the Revenue, the following two questions of law for our opinion under S. 256(1) of the IT Act, 1961 :

(2.) IN order to appreciate the nature of the controversy posed for our decision in the present proceedings, it is necessary to have a look at certain relevant facts. The assessment year under reference is 1968 69, the previous year being the year ended 31st March, 1968. The assessee is an individual. He submitted his return of income declaring his total income of Rs. 4,02,790 on 30th September, 1968, within the time allowed to the assessee. The assessee's capital gain for the assessment year under reference was Rs. 5,392 before allowing deductions under S. 80T of the IT Act, 1961. The capital loss brought forward from the earlier years was Rs. 34,607. The figure of capital loss brought forward from the earlier years worked out as under :

(3.) BEING aggrieved by the order of the ITO, the assessee carried the matter in appeal before the AAC, Special Range, Ahmedabad. The AAC by his order dated 13th September, 1972, held that under S. 74(1)(a)(ii) of the Act, capital loss had to be set off against the capital gain which related to the capital assets other than short term capital assets assessable for that assessment year. He held that the said loss brought forward had to be set off against the capital gain assessable. He further held that the capital gain in the previous year can only be determined after applying the provisions of S. 80T and, therefore, the deduction of Rs. 5,000 under S. 80T must be allowed first and the provisions of carry forward and set off must be applied thereafter.