Law:

Section:

Section 74 of the Income-tax Act, 1961 (Corresponding to section 24(2B) of Indian Income-tax Act, 1922) - Losses - Under head 'Capital gains' - Assessment year 1959-60 - Whether if capital loss pertains to any year prior to assessment year 1962-63, irrespective of fact whether such computation has been made as per provisions of 1922 Act or 1961 Act, such loss must be allowed to be carried forward for eight years - Held, yes - Whether, therefore, in instant case, Tribunal was incorrect in holding that assessee was not entitled to set off long term capital loss relating to assessment year 1959-60 beyond period of four years - Held, yes FACTS The assessee firm was assessed in the status of unregistered firm. For the assessment year 1959-60 the assessee had certain amount of long term capital loss assessed under section 143(3). Before the ITO the assessee claimed that said loss should be set off against the long term capital gains assessed in the assessment year 1964-65. The ITO was of the view that the long-term capital loss having been determined in terms of the assessment made under the 1961 Act the time-limit for set off was governed by section 74(2)(b) of that Act according to which long-term capital loss can be carried forward only for a period of four years. He, therefore, held that the assessment year 1964-65 being outside the time-limit, the long-term capital loss of the assessment year 1959-60 could not be set off against the long-term capital gains assessed for the assessment year 1964-65. On second appeal the Tribunal upheld the disallowance. On reference : HELD From a comparative study of the relevant provisions of the old Act and the new Act, it would be evident that neither under the old Act, nor under section 74 of the new Act as originally enacted, was any bifurcation made between short-term capital assets or long-term capital assets and consequential gain or loss flowing therefrom. Under section 24(2B) of the 1922 Act, a right was given to the assessee to carry forward capital loss for a period of eight years. Thus, under the old Act as well as section 74 as originally enacted, capital loss could be carried forward for eight years. A change has…

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