Section 111A of the Income Tax Act
Income-tax Act, 2025: s.196
Section 111A of the Income-tax Act, 1961 corresponds to section 196 (Tax on short-term capital gains in certain cases) of the Income-tax Act, 2025.
Read section 196 of the 2025 Act
Correspondence checked against the ICAI tabular mapping of the two Acts and the BharatTax.co section commentary.
The decision most relied on for Section 111A is CIT v. J.H. Gotla (156 ITR 323), cited in 176 of the 279 judgments on BharatTax that turn on this section.
Leading authorities on Section 111A
The Supreme Court holds that for income tax purposes, the term 'income' includes 'loss,' allowing for the set-off of a spouse's or minor child's business losses when their income is clubbed with the assessee. This decision emphasizes interpreting tax statutes, especially benevolent provisions, by considering the legislative scheme over a strict literal construction.
Guidelines issued by the Central Board of Direct Taxes (CBDT) under Section 119 of the Income Tax Act, which relax the rigour of law, are binding on all income tax officers responsible for implementing the Act, who must follow these orders and instructions.
The determination of whether a transaction involving the sale and purchase of shares (or other assets) constitutes a trading transaction (business income) or an investment (capital gains) is a mixed question of law and fact. Courts must consider cumulative factors, including the assessee's habitual dealing and the intention at the time of the initial acquisition, rather than applying abstract tests.
The eligibility for an assessee to carry forward and set off losses, including capital losses, against future income is determined by the Assessing Officer in the year the set-off is claimed, not in the year the loss was incurred.
The selection of cases for scrutiny must be completed within the time prescribed by CBDT instructions. The department is bound by its own standards and cannot act with discrimination or selectively apply them.
The principle of consistency requires that the Assessing Officer or First Appellate Authority must follow decisions made in earlier years, unless there are good and sufficient reasons to deviate. An assessee's status should not be altered arbitrarily without assigning reasons or distinguishing facts.
Interest income earned by a cooperative society on deposits with a cooperative bank is eligible for deduction under Section 80P(2)(d). The decision in Mittal Court Premises Cooperative Society Ltd. v. Income Tax Officer (2010) 320 ITR 414, which considered the Supreme Court's ruling in Totagar Cooperative Sale Society Ltd., establishes this.
Each transaction can be considered a separate source of income, allowing taxpayers to choose between the Income-tax Act and a Double Taxation Avoidance Agreement (DTAA) for each transaction. Section 70(2) of the Act does not prescribe an order for setting off specific short-term capital losses against specific short-term capital gains, favouring the taxpayer in interpretation.
The definition of maximum marginal rate under section 2(29C) can be interpreted to determine the applicable surcharge rates, particularly for income including dividends, as per the First Schedule to the Finance Act. This affects how surcharge is calculated on taxable income.
The maximum marginal rate (MMR) of income tax is applied, and surcharge is levied separately if applicable. Surcharge is not leviable if the quantum of income is below a certain threshold.
