The interpretation of statutory provisions and their application in relation to deduction under Chapter VI and treatment of short-term capital loss.

Ashok Bhan, J.

1. This petition has been filed under Section 256(2) of the Income-tax Act, 1961 (for short the Act), by the Commissioner of Income-tax, seeking a mandamus to the Income-tax Appellate Tribunal, Chandigarh, to refer the following question of law stated to be arising from the order of the Tribunal :

"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that short-term capital loss be not mingled with long-term capital gain -- rather deduction under section 80T should be allowed on the entire amount of long-term capital gain as shown and short-term capital loss be treated as loss of current year in accordance with the provisions of Section 74 ignoring the specific provisions of Sub-section (2)(i) of Section 70 of the Income-tax Act, 1961 ?"

2. In short the facts are :

3. The assessee is an individual. His source of income is salary, house property, share from profit and from other sources. The return of income for the accounting period ending March 51, 1981, relevant for the assessment year 1981-82 was filed on August 27, 1981, declaring a net income of Rs. 62,724. During the course of assessment proceedings, it was found that the assessee had transferred/sold 950 equity shares of face value of Rs. 25 showing capital gain at Rs. 1,51,169 and Rs. 10,125--4 per cent, irredeemable non-cumulative preference shares with cost of acquisition at Rs. 45 each at sale price of Rs. 30. The Income-tax Officer, not satisfied with the cost of acquisition taken by the assessee at the rate of Rs. 45 per share, in respect of irredeemable non-cumulative preference shares, adopted the value at Rs. 30 and computed the short-term loss at Rs. 1,519 against Rs. 1,53,394 claimed by the assessee. After adjusting this short-term loss of Rs. 1,519 against the long-term capital gain shown by the assessee at Rs. 1,51,169 in respect of transfer of 950 equity shares, the Assessing Officer allowed the statutory deduction under Section 80T at Rs. 73,255 and assessed the remaining" amount to tax. The assessment was accordingly framed by the Income-tax Officer, Central Circle I, Ludhiana, on a total income of Rs. 2,39,350, vide order dated July 16, 1984.

4. Aggrieved against the findings recorded by the Income-tax Officer, the assessee filed an appeal before the Commissioner of Income-tax (Appeals), Ludhiana, who vide his order dated August 8, 1986, while allowing relief in respect of deduction under Section 80T, confirmed the Assessing Officers action in the working out of capital gains.

5. Not satisfied with the findings of the Commissioner of Income-tax (Appeals), the assessee filed a second appeal before the Income-tax Appellate Tribunal, Chandigarh Bench, Chandigarh, which vide its order dated April 20, 1992, allowed the assessees appeal by allowing short-term capital loss of Rs. 1,53,394 including Rs. 1,519 with further directions that deductions under Section 80T should be allowed on the entire amount of Rs. 1,51,169 being long-term capital gains, and the short-term capital loss was directed to be treated as loss of the current year in accordance with the provisions of Section 74.

6. The petition filed by the Revenue under Section 256(1) seeking to refer the aforesaid question of law to this court was dismissed by the Tribunal by observing that the Tribunal had decided the matter in accordance with and subject to the provisions of law and, therefore, no question of law arises. Thereafter, the Revenue filed the present petition under Section 256(2) seeking a mandamus directing the Tribunal to refer the question of law stated to be arising from the order of the Tribunal.

7. The assessee is not present despite service. Learned counsel for the Department has been heard. Mr. R. P. Sawhney, senior advocate, has contended that the Tribunal has not appreciated the legal position as per Section 80AB wherein it has been provided that the net amount of income assessable under a particular