My client has a short-term capital loss on STT-paid shares and short-term gains of both kinds. The officer set the loss off against the concessionally taxed gains first. Can he insist on that order?
No. Section 70 prescribes no chronology for set-off, and where the Act gives the assessee an option, the option that favours the assessee is the one to be exercised — so the assessee may set the short-term capital loss off against the gains taxed at the normal rate first and keep the concessionally taxed section 111A gains intact. The Calcutta High Court dismissed the Revenue's appeal against that view, finding no substantial question of law.
Decided by the High Court (Pinaki Chandra Ghose J and Sankar Prasad Mitra J) on 2008-12-19, reported as ITA No. 812 of 2008 with G.A. No. 3795 of 2008 (Calcutta High Court, Special Jurisdiction (Income Tax), Original Side). It bears on section 111A, section 70, section 45, section 260A of the Income Tax Act 1961, in Capital Gains, Assessment & Scrutiny and How Tax Law Is Read matters.
The arithmetic is worth real money on every portfolio that mixes on-market and off-market trades, and the difference has widened since 23 July 2024: the section 111A rate is now twenty per cent against a slab rate that can be thirty per cent plus surcharge, so preserving the concessional slice matters more, not less. The same reasoning has since been applied by the Tribunal to a foreign portfolio investor taxed under section 115AD read with section 111A, and, where the e-filing utility itself forced the wrong order, the Bombay High Court has directed that the utility be changed so the claim can be made at all — while expressly declining to decide the merits of the set-off itself. Be aware of the shape of this authority: the substantive reasoning is the Commissioner (Appeals)'s, reproduced in the High Court's order, and what the High Court itself held is that the Tribunal's order suffered from no illegality or irregularity and raised no substantial question of law.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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For the year in question the assessee earned short-term capital gain of Rs 7,29,584 on share transactions on which securities transaction tax was not paid, taxable at the normal rate, and short-term capital gain of Rs 2,27,564 on share transactions on which securities transaction tax was paid, eligible for the concessional rate under section 111A. It also suffered a short-term capital loss of Rs 7,17,660 on transactions involving payment of securities transaction tax. The Assessing Officer, without giving reasons, first set the STT-paid loss off against the STT-paid gain and then allowed the remaining loss of Rs 4,90,096 against the gain without STT, so that the concessional rate applied to a smaller figure. The Commissioner (Appeals) held for the assessee on this and on a separate addition of notional interest of Rs 10 lakh on an interest-free advance made out of the assessee's own funds. The Tribunal upheld that order and the Revenue appealed.
The appeal was dismissed. There was no illegality or irregularity in the order passed by the Tribunal and no substantial question of law was involved. The Commissioner (Appeals)'s conclusion — that section 70 prescribes no chronology of set-off, that the Act does not compel the assessee to set the STT-paid loss off against the STT-paid gain first, and that the assessee was entitled to exercise the option most beneficial to him — was left undisturbed.
The Commissioner (Appeals), as reproduced in the order, reasoned that the Assessing Officer had given no reason for his own sequence and had in principle accepted that a short-term capital loss with STT could be set off against a short-term capital gain without STT; that on a perusal of section 70 there is no prohibition, no specific mode of set-off and no chronology prescribed; and that it is a settled proposition that where a provision gives the assessee an option, the option that favours the assessee and not the Revenue should be exercised. The High Court, having perused the orders of the Commissioner (Appeals) and the Tribunal, held that it saw no reason to interfere.
We have carefully considered the said question and in our considered opinion, there is no illegality or irregularity in respect of the order so passed by the learned Tribunal.
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Handle my notice → Ask a CA on WhatsAppNo. Section 70 prescribes no chronology for set-off, and where the Act gives the assessee an option, the option that favours the assessee is the one to be exercised — so the assessee may set the short-term capital loss off against the gains taxed at the normal rate first and keep the concessionally taxed section 111A gains intact. The Calcutta High Court dismissed the Revenue's appeal against that view, finding no substantial question of law. This was decided by the High Court (Pinaki Chandra Ghose J and Sankar Prasad Mitra J) and bears on section 111A, section 70, section 45, section 260A of the Income Tax Act 1961. It is reported as ITA No. 812 of 2008 with G.A. No. 3795 of 2008 (Calcutta High Court, Special Jurisdiction (Income Tax), Original Side). The arithmetic is worth real money on every portfolio that mixes on-market and off-market trades, and the difference has widened since 23 July 2024: the section 111A rate is now twenty per cent against a slab rate that can be thirty per cent plus surcharge, so preserving the concessional slice matters more, not less. The same reasoning has since been applied by the Tribunal to a foreign portfolio investor taxed under section 115AD read with section 111A, and, where the e-filing utility itself forced the wrong order, the Bombay High Court has directed that the utility be changed so the claim can be made at all — while expressly declining to decide the merits of the set-off itself. Be aware of the shape of this authority: the substantive reasoning is the Commissioner (Appeals)'s, reproduced in the High Court's order, and what the High Court itself held is that the Tribunal's order suffered from no illegality or irregularity and raised no substantial question of law. If it applies to you, the first step is this: Compute the set-off both ways and put the two computations side by side in the return working, so the choice is visible and deliberate.
For the year in question the assessee earned short-term capital gain of Rs 7,29,584 on share transactions on which securities transaction tax was not paid, taxable at the normal rate, and short-term capital gain of Rs 2,27,564 on share transactions on which securities transaction tax was paid, eligible for the concessional rate under section 111A. It also suffered a short-term capital loss of Rs 7,17,660 on transactions involving payment of securities transaction tax. The Assessing Officer, without giving reasons, first set the STT-paid loss off against the STT-paid gain and then allowed the remaining loss of Rs 4,90,096 against the gain without STT, so that the concessional rate applied to a smaller figure. The Commissioner (Appeals) held for the assessee on this and on a separate addition of notional interest of Rs 10 lakh on an interest-free advance made out of the assessee's own funds. The Tribunal upheld that order and the Revenue appealed. The matter was decided on 2008-12-19 by the High Court (Pinaki Chandra Ghose J and Sankar Prasad Mitra J). On those facts the High Court held as follows. The appeal was dismissed. There was no illegality or irregularity in the order passed by the Tribunal and no substantial question of law was involved. The Commissioner (Appeals)'s conclusion — that section 70 prescribes no chronology of set-off, that the Act does not compel the assessee to set the STT-paid loss off against the STT-paid gain first, and that the assessee was entitled to exercise the option most beneficial to him — was left undisturbed.
The Commissioner (Appeals), as reproduced in the order, reasoned that the Assessing Officer had given no reason for his own sequence and had in principle accepted that a short-term capital loss with STT could be set off against a short-term capital gain without STT; that on a perusal of section 70 there is no prohibition, no specific mode of set-off and no chronology prescribed; and that it is a settled proposition that where a provision gives the assessee an option, the option that favours the assessee and not the Revenue should be exercised. The High Court, having perused the orders of the Commissioner (Appeals) and the Tribunal, held that it saw no reason to interfere. In the words reproduced by the source cited on this page: "We have carefully considered the said question and in our considered opinion, there is no illegality or irregularity in respect of the order so passed by the learned Tribunal."
It was decided by the High Court on 2008-12-19 and is reported as ITA No. 812 of 2008 with G.A. No. 3795 of 2008 (Calcutta High Court, Special Jurisdiction (Income Tax), Original Side). Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 111A, section 70, section 45, section 260A, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The appeal was dismissed. There was no illegality or irregularity in the order passed by the Tribunal and no substantial question of law was involved. The Commissioner (Appeals)'s conclusion — that section 70 prescribes no chronology of set-off, that the Act does not compel the assessee to set the STT-paid loss off against the STT-paid gain first, and that the assessee was entitled to exercise the option most beneficial to him — was left undisturbed. It arises in Capital Gains, Assessment & Scrutiny and How Tax Law Is Read matters, on section 111A, section 70, section 45, section 260A of the Income Tax Act 1961, and was decided by Pinaki Chandra Ghose J and Sankar Prasad Mitra J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Set the short-term capital loss off first against short-term gains taxed at the ordinary rate, leaving the section 111A gains to bear the concessional rate. Cite the absence of any prescribed chronology in section 70 as the primary point, and the beneficial-option principle as the second. If the return utility will not accept the order you want, raise a grievance on the portal at once and keep the acknowledgment — that is the record the Bombay High Court acted on in K2 Family Private Trust. For FY 2024-25 do the exercise separately for transfers before and on or after 23 July 2024, because the two blocks of section 111A gains bear different rates.
Still good law. Followed and applied by the ITAT Mumbai on 13 June 2025 in the Fidelity Rutland Square Trust II group of appeals, which records that under section 70 no chronology has been mentioned in respect of set off of losses. It was cited to the Bombay High Court in K2 Family Private Trust (15 December 2025), but that Court expressly declined to express any opinion on the merits of the mode of set-off (paragraph 22), so it is not authority that the entitlement is settled. No decision doubting Rungamatee was searched for. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
This order carries NO numbered paragraphs, so no paragraph locator is given for anything. The set-off reasoning quoted by practitioners as 'Rungamatee' is in fact the Commissioner (Appeals)'s order, reproduced verbatim inside the High Court's order; the High Court's own words are confined to its concluding passage, and the key_quote here is taken from that passage. The transactions are of financial year 2004-05, assessment year 2005-06, decades before 23 July 2024; the reasoning is about the order of set-off and is not rate-specific, which is why it has been applied to later years. The order also decides an unrelated notional-interest addition, which is not covered here. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeal was dismissed. There was no illegality or irregularity in the order passed by the Tribunal and no substantial question of law was involved. The Commissioner (Appeals)'s conclusion — that section 70 prescribes no chronology of set-off, that the Act does not compel the assessee to set the STT-paid loss off against the STT-paid gain first, and that the assessee was entitled to exercise the option most beneficial to him — was left undisturbed.
TaxSphere, “CIT v Rungamatee Trexim — the assessee chooses the order of set-off between STT-paid and non-STT short-term gains”, https://taxnotice.vittsphere.com/caselaw/case/cit-v-rungamatee-trexim-order-of-set-off-between-stt-paid-and-non-stt-short-term-gains/ (validity last checked 2026-09-08)
The judgment itself is a government work and may be quoted freely. The summary, the validity note and the reasoning on this page are this library's own writing: quote them with attribution, and please do not present either as the words of the court — this page keeps the two apart and so should a quotation of it.
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The e-filing utility forces my client's STT-paid short-term loss against STT-paid gains first and will not let him claim the sequence he wants. Is his only option to file the return the utility's way and argue later?
My foreign portfolio investor client has non-STT short-term gains taxed under section 115AD and STT-paid short-term gains taxed at the section 111A rate, plus an STT-paid short-term loss. The officer re-sequenced the set-off. Can he?
My client's short-term gains on shares are partly from on-market STT-paid sales and partly from an off-market transfer. Does the concessional rate cover both, and what is the rate now?
My client sold listed equity shares twice in FY 2024-25 — once in June 2024 and once in September 2024. What rate and what exempt threshold apply to each lot?
