Long Term Loss - STT Paid

[PANKAJ JAIN]

Dear Freinds,

On first principle basis, if the income is exempt from tax, even the loss is exempted from tax i.e.loss is not available for any set off.

However, can the Assessee take a stand that claiming of exemption is the previllage of the Assessee (e.g.exemption u/s 10A, courts have held that the Assessee has an option to claim the exemption). Accordingly can he have a case to claim set off of such loss.

Is there any other ground available for such a claim?

is there any specific provision in the law or an S Court rulling directly on this issue?

Best Regards,

[sivaiah G]

I think there is no such provision which allows the exempted loss to be set off against the taxable income. Since from 2001 onwards, Sec 10A has undergone a change and hither to exemption u/s10A has become therefrom  a deduction. However, the intention of legislature is not clear as to why it continues to be in chapter III. But infact it should have been shifted to chapter VIA. As per Sec. 10A(6), the losses incurred by 10A unit can be set off against the taxable income of the assessee.( See 13 sot 470). NOw coming to the problem expressed, only the long term capital gains arisen on account of the transaction made thru recognised stock exchanges are only exempted. In other wards, if the transaction is made outside the stock exchange purview, then it will not be exempted. Therefore, it is always advisable to sell the loss making shares outside the stock exchanges provided the buyer is ready. It really happens. You, still, can convert your demat shares into physical form and transfer the same in the name of the buyer as it was done earlier. If explained, the buyer will also be ready because, there was no STT involved in this transaction and he will not lose anything out of this transaction. Further, the buyer of such shares should sell the said shares through stock exchanges only in order to get exemption/less rate of taxation in respect of the long term/ short term capital gains in order to get the benefit. I think it will solve the problem expressed.

[bhaveshformals]

No need to convert it into physical.
Your broker can do an off-market transaction through your DEMAT account only.


Bhavesh
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