LTCG in other asset classes can now be used to set off against losses: Tax tribunal

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Individuals will now be able to set off the long-term capital gains (LTCG) that they get from their equity holdings. The Income Tax Appellate Tribunal (ITAT) recently held that using tax liability from one asset class to another in a manner that results in beneficial tax planning is “not illegal” and Income Tax authorities should not disregard it as such either, a report said.

The ruling came during a case before the tribunal, in which the director of the company had sold some shares in an unlisted company. The LTCG was set off long-term capital loss (LTCL) that the director endured as a result of some unfortunate real estate deals, Economic Times reported.

“The assessing officer (tax official) has primarily questioned the timing of booking the loss and selling these shares, which, even according to the assessing officer, are ‘worthless’. It is not for the assessing officer to take a call on how an assessee should organise his fiscal affairs so as to serve the interests of the revenue authorities,” according to the tribunal statement.

Also Read: Long term vs short term capital gains tax: Here are key things you should know

Paras Savla, partner at KPB & Associates, a tax advisory firm, told ET that the tax department has questioned taxpayers in the past when they set off long-term capital gains from one asset class to another.

“The ruling not only allows it but also says that tax planning shouldn’t be frowned upon by the revenue authorities. The genuine and permissible tax planning cannot be considered to denigrate taxpayers,” he added.

Also Read | Income tax return filing: Choose this ITR form if you have income under capital gains

In its order, the tax tribunal said the commercial decisions must be best left to the persons concerned. “What the buyer of these shares does to the company is the business of the buyer of the shares, and it is not even necessary that he would do anything immediately. It is incorrect to say that these shares are completely worthless,” it said.

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