Recent court ruling – LTCG can be set off against losses from property sale.
Can we setup off Long Term Capital gains against losses from Property sale?
Recently there is a court ruling that said that the LTCG arising out of stock sale can be set off against the losses from the property sale. Till now this was not allowed by IT rules.
The Case
An individual who was also a director in a firm sold certain shares in an unlisted company.
The long-term capital gain (LTCG) from share sales was then offset by the long-term capital loss from the sale of real estate.
But the income tax dept had rejected it stating the such act is considered as tax avoidance.
The person filed a case in court to appeal against the same..
Court Verdict
The Income Tax Appellate Tribunal has given a verdict that tax planning is “not criminal” and should not be disregarded by tax authorities just because it benefits taxpayers.
According to the judgement, not all tax preparation is considered tax avoidance.
The firms and individuals can deduct LTCG on shares from real estate transactions.
While tax cheating cannot be praised, legitimate tax preparation within the legal framework cannot be rejected, according to the ITAT.
This ruling can help those tax payers who have incurred losses in the property sale.
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