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What the proviso to Section 112 essentially requires is that where the tax payable in respect of income arising from a listed security, being a long term capital asset, exceeds 10% of the capital gains before indexation, then such excess beyond 10% is liable to be ignored.
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Circular No. 721 & 779 are of significance because they clearly reflect the Revenue’s understanding that (i) The benefit of a set off would be available while computing the income arising from the transfer of a long term capital asset, which is part of the total income of an assessee; and (ii) The benefit of the cost inflation index or indexation would continue to be available subject to the condition that where the tax on long term capital gains without adjustment for indexation exceeds 10%, such excess shall be ignored.
HIGH COURT OF BOMBAY
CIT
v.
Anuj A. Sheth HUF
ITA No. 2285 of 2009
April 7, 2010
