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

“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.

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.

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.

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 Page | 22 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).

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, 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.

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 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 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."

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.

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 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.

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.

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 "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."

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.

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 (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."

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.

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 Page | 33 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.

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.

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 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 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 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. Page | 37 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] .

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'.

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."

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 Page | 38 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 Page | 39 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.

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 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.

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.

In the result, appeal of the assessee is dismissed.”

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.

In the result, the appeal of the assessee is dismissed.