M.S.P NADAR SONS, VIRUDHU NAGAR versus COMMISSIONER OF INCOME TAX (CENTRAL), MADRAS

Citation: [1993] 3 S.C.R. 446 · Decided: 28-04-1993 · Supreme Court of India · Bench: B.P. JEEVAN REDDY · Disposal: Dismissed

Judgment (excerpt)

A 
B 
M.S.P. NADAR SONS, VIRUDHU NAGAR 
v. 
COMMISSIONER OF INCOME TAX (CENTRAL), MADRAS 
APPRIL 28, '1993 
[B.P.JEEVANREDDY ANON. VENK.ATACHALA,JJ.] 
Income Tax Act 1961: 
Sections 70 (2) (ii) and 80T-Assessee- Selling shares held in 
companies-wng term capital gain as well as long term capital loss-Capital 
c gains-Computation of 
The appellant-assessee was a. Registered Firm. The assessment year 
concerned was 1973-74. During the relevant previous year being the financial 
year 1972-73, the assessee sold shares it held in several companies; from the 
sale in three companies it secured a gross long terms capital gain ofRs.5,61,508 
D 
However, in the sale of shares in six other companies it sustained a long term 
capital loss in a sum of Rs. 96,583. The assessee computed the capital gains on 
these transactions of sale of shares less the deductions under Section 80-T(b) 
and Section SOT (b) (ii) (1) and showed a profit .,f Rs. 1,81,671.00. 
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. F 
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The Income-Tax Officer did not agree wi!'• the mode of computation 
indicated by the asssessee; and set olfthe long :;.:rm capital loss against the 
long term capital gain in the first instance and then applied the deductions. 
provided by Section 80-T to the balance figure and ultimately computed the 
capital gains included in the total income at Rs. 2,29,963 . 
The asst;ssee aggrieved by the aforesaid ass ... ssment preferred an appeal 
which was dismissed by the Appellate Assistant Commissioner. 
In further appeal by the assessee the Tri bur --! agreed with the assessee's 
computation. 
Revenue asked for and obtained a refert.o;ce which the High Court 
answet-ed in the negative i.e. in favour of the Re, ·~nue. 
The High Court held that the ·income from capital gains constituted a 
separate head ofincome under the Income Tax Ad and that cap\tal gains are 
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bifurcated into. long term capital gains and short term capital gains, and 
446 
-
ual penetration 
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NADAR SONS, v. C.l.T.; 
447 
relying on the decision in Commi$sioner of Income Tax v. Sigappi Achi, 140 
A 
I.T.R. 448 held that in the instant case it was concerned only with long term 
capital gains, and that Section 70 (2) (ii) prescribes the manner in which the 
loss from sale of long term capital asset is to be set off. 
In the appeal to this Court it was submitted on behalf of the appellant-
assessee that according to the provisions and scheme of the Income-Tax Act 
capital gains had to be computed in respect of each asset separately and that 
Section 80-T prescribes different percentages of deduction for different types 
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of capital assets, and that the correct method, therefore, is to compute the 
capital gains with respect to each asset transferred saparately, in accordance_ 
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with Section 80-T before setting off the losses. 
Dismissing the appeal, this Court, 
HELD: 1. This is not a case where the assets transferred by the assessee 
during the relevant previous year consisted of both the types of capital assets, 
mentioned in sub-clauses (i) and (ii) of clause (b) of Section 80-T. They were 
of only one type namely those falling under sub-clause (ii) viz. shares. From 
the sale of certain shares the assessee derived profit and from the sale of 
certain other shares, he suffered loss. (450-E) 
2. The deductions provided by Section 80-T have to be applied to the -
"capital gains" arising from sale oflong term capital assets. In other words, 
the deductions provided by the said section have to be applied to the amount 
representing the capital gains during the relevant previous year. The amount 
of capital gains during the relevant previous year means the profits derived 
minus the losses suffered. (452-D) 
3.ltisnotpossibletotreatthetransferofeachassetseparatelyandapply 
the deductions separately. (452-E) 
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F 
Commissioner of Income Tax v. V. Venkatachalam. Civil Appeal No. 3044 
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·of 1993, dated April 13, 1993, relied on. 
Commissioner of Income Tax (Central) Madras v. Canara Workshops 
Private Limited, 161 I.T.R. 320, distinguished. 
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448 
SUPREME COURT REPORTS 
[1993) 3 S.C.R. 
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CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4851 (NT) of 
1990. 
From the Judgment and Order dated 31.1.89 of the Madras f:ligh Court in Tax 
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Case No. 900 of 1979, 
K.N. Shukla, R. Satish for Ms .. A. Subhashini for the Appellant. 
T.A. Ramachandran and Mrs. Janaki Ramachandran for the Respondent. 
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The Judgmen~ of the Court was delivered by 
B.P. JEEV AN REDDY .J. This appeal is preferred by the ass

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