Law:

Section:

Section 166, read with section 48, of the Income-tax Act, 1961 - Representative assessee - Direct assessment or recovery not barred - Assessment year 1971-72 - Assessee, a beneficiary of a trust, was a shareholder of SML which gave it right to get 186 right shares of RTM-Similarly, trust, also a shareholder of SML, got 157 shares of RTM - Value of SML share fell by Rs. 108 after rights issue - Both assessee and trust sold their respective shares of RTM at certain gain - In the return filed, however, the assessee claimed capital loss on sale of 343 shares of RTM computing the cost of the shares as Rs. 100 per share and claiming deduction of Rs. 108.75 per share, being the difference in the cum-right and ex- right quotations of the shares of SML - ITO determined capital gains in respect of RTM shares held by her personally, and disallowed deduction on SML shares - Whether Tribunal rightly held that having opted to make direct assessment on assessee, a beneficiary of aforesaid trust, capital loss arising to trust could beset off against assessee's individual income from capital gains - Held, yes FACTS The assessee, a beneficiary of a trust, held certain shares of SML and, by way of rights thereon, got 186 shares of RTM. The trust also held certain shares of SML and similarly got 157 shares of RTM. During the assessment year 1971-72, both the assessee as well as the trust sold their respective shares of RTM at a certain gain. In the return filed, however, the assessee claimed capital loss on sale of 343 shares of RTM, computing the cost of the shares as Rs. 100 per share and claiming deduction of Rs. 108.75 per share, being the difference in the cum-right and ex-right quotations of the shares of SML. The ITO, while disallowing the deduction of Rs. 108.75 per share claimed by the assessee, determined the capital gains in respect of sale of shares belonging to her personally, separate from those held by the trust. On appeal, the AAC held that the assessee was entitled to the deduction for fall in value of shares in SML while computing the capital gain in respect of shares of RTM. As regards the similar claim made in respect of shares sold by the trustee, the AAC…

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