Can short term capital loss from sale of shares of a pvt ltd co be adjusted against business income from commission received. Raj Desai , Pune
The provision regarding adjustment of short term capital losses (STCL)is provided under sub-section 2 of Section 70 of the I T. Act as under
(2) Where the result of the computation made for any assessment year under sections 48 to 55 in respect of any 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.
As can be seen that short term capital loss can be adjusted with any kind of Capital Gains only i.e short term capital gains or long term capital gains.
Income from commission is not capital gains but falls under the head profit from business or profession. Therefore, short term capital loss can not be adjusted with commission income.
What happens to unadjusted STCL?
The unadjusted short term capital loss shall be carried forward to next eight years and shall be adjusted with any kind of capital gains which arises in future. This provided u/s 74 of the I T Act
74. (1) Where in respect of any assessment year, the net result of the computation under the head Capital gains is a loss to the assessee, the whole loss shall, subject to the other provisions of this Chapter, be carried forward to the following assessment year, and
(a) in so far as such loss relates to a short-term capital asset, it shall be set off against income, if any, under the head Capital gains assessable for that assessment year in respect of any other capital asset;
(b)…….
(c) if the loss cannot be wholly so set off, the amount of loss not so set off shall be carried forward to the following assessment year and so on.]
(2) No loss shall be carried forward under this section for more than eight assessment years immediately succeeding the assessment year for which the loss was first computed.
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