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PANKAJ SIRSET OFF AND CARRY FORWARD OF LOSSES

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PANKAJ SIR-

Notes

1. From A.Y. 2000-2001, there is no need to continue the same business in which the loss was
incurred.
2. The effect of depreciation, business loss and investment allowance should be given in the following
order:

Current Years Depreciation

Unabsorbed Business loss

Unabsorbed Depreciation

Unabsorbed Investment Allowance.

3. In terms of Section 80, the losses can be carried forward only if determined in pursuance of the
return filed within the time prescribed u/s. 139(1) except Depreciation and House Property.
4. Loss from an exempted source cant be set off against profits from a taxable source of income. E.g.
- long term capital loss on sale of shares sold through recognized stock exchange can not be set off
against long term capital gains on sale of land.
5. Losses can be set off from the clubbed incomes.

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PANKAJ SIR6. The schemes of intra head and inter head set off is mandatory. Assessee cant not choose to carry
forward the loss instead of set off in the same PY. However no sequence of inter head set off has
been given in the act. Assessee can set off in a manner, which is most beneficially to him from the
tax liability point of view

SECTION 32(2): SET OFF AND CARRY FORWARD OF UNABSORBED


DEPRECIATION
The respected SC IN CASE OF VIRMANI INDUSTRIES
rules and steps for set off and carry forward of unabsorbed depreciation

LTD. V CIT has set the following

Step 1: Where there is current years depreciation relating to a business then it should be set off from the amount of
profits the same business.
Step 2: If full depreciation can not be set off under step 1 then set off the unabsorbed depreciation against the profits
of any business or from income of profession carried on by the assessee.
Step 3: If still full depreciation cannot be set off under step 2 then it can be set off from the incomes of any other head
of income, except from the income under the head salary and winning from lotteries etc.
Step 4: If full deprecation cannot be set off under step 3 then it shall be carried forward to next previous year.
Step 5: Add such unabsorbed depreciation to the amount of depreciation of such previous year in which it has been
brought forward. Brought forward depreciation shall be treated as part of current years depreciation. Now
set off aggregated depreciation as per steps 1 to 3.
Step 6: Repeat steps 1 to 5 without any time limits. This means that unabsorbed depreciation can be carry forwarded
for unlimited period of time.
However step 5 and 6 are subject to the conditions of section 72(1). This means that if there is any brought forward
loss of the business then it shall be set off in priority to such unabsorbed depreciation.

Source-JS Johar Book

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PANKAJ SIR-

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PANKAJ SIR-

2.

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PANKAJ SIR-

3.

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PANKAJ SIR4

5. Mr. J submits the following particulars of his income for the AY 2011-2012. You are required to find his gross total
income.
Income from the let out house (Computed)
12,000
Loss from self occupied house
14,000
Profit of business of publication of books
45,600
Speculation income
8,000
Short-term capital gains
26,000
Long-term capital gains
4,000
Dividend from Indian company
4,000
Winnings in card game
8,000
The items brought forward for set-off are:
Loss from Sugar Mill of AY 2004-2005 which is discontinued
Loss from publication business of AY 2003-2004
Loss in card game of AY 2004-2005
Speculation loss of AY 2008-2009
Short-term capital loss of AY 2003-2004
Long term capital loss of AY 2002-2003
Solution:
Computation of Gross total Income of Mr. J
Income from House Property
(12,000 14,000, being loss from self-occupied house)
Income from Business and Profession:
(i) General Business (Publication business profit `45,600 B/F Loss of sugar mill
`13,000 B/F Loss of publication business `9,000)
(ii) Speculation business (Profit `8,000 B/f `24,000). Balance Loss of `16,000 shall
be carried forward.
Capital gains (STCG `26,000 + LTCG `4,000 B/F short term capital loss `12,000)
(B/F long-term capital loss cannot be set off, on account of expiry of time limit of 8
years)
Income from other sources (winnings in card game, b/F loss cannot be set off)
Gross total income

13,000
9,000
4,000
24,000
12,000
14,000

(2,000)
23,600
NIL

18,000
8,000
47,600

Source-JS Johar Book

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PANKAJ SIR6.From the following particulars regarding income, compute the total income of Mr. J for the AY 2011-2012:

Salary `9,000 p.m.;


House A (let out) `40,000; House B (Let out) ` (20,000); House C (Self-occupied) `(50,000);
Business A `2,00,000; Business B ` (2,50,000), Business C (shares speculation) `30,000; Business D
(commodity speculation) `(40,000);
d)
Short-term capital gains `30,000; Short-term capital loss `40,000;
e)
Long-term capital gains `1,00,000;
f)
Profits from card games (gross) `50,000; Loss from horse races `30,000;
g)
Winnings from lottery (net of TDS) `70,000.
a)
b)
c)

Solution:

Computation of gross total income of Mr. J for AY 2011-2012


Salary

1,08,000

Income from house property (40,000 20,000 50,000)

(30,000)

Profits and gains of Business or profession :


(i)
General Business (2,00,000 2,50,000)
(ii)
Speculation Business (30,000 40,000) Balance loss of `10,000 to be c/f

(50,000)

Capital gains :
(i)
Short-term capital gains ( `30,000 `40,000)
(ii)
Long-term capital gains

(10,000)
1,00,000

90,000

Income from other sources : [ `50,000 + {70,000 x 100 (100 30)}]

1,50,000

TOTAL INCOME

2,68,000

Some additional Questions-Section 70- Source-JS Johar Book


EXAMPLE 1
PGBP(Speculation business)
PGBP(Trading business)
PGBP income
EXAMPLE 3
LTCG
STCG
Capital gains Income
EXAMPLE 5
House property SO
House property LO
HP Income
EXAMPLE 7
Speculation business
Normal business
PGBP income
EXAMPLE 9

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EXAMPLE 2
2,00,000
PGBP(Speculation business) (1,00,000)
(1,00,000)
PGBP(Trading business)
2,00,000
100000
PGBP income
200000
EXAMPLE 4
(1,00,000)
LTCG
(1,00,000)
2,00,000
LTCG
2,00,000
200000
Capital gains Income
100000

(1,50,000)
2,00,000
50000

EXAMPLE 6
Cloth Business
Steel business
PGBP income

(80,000)
1,00,000
100000

EXAMPLE 8
Speculation business income
2,00,000
Normal business income
(1,25,000)
PGBP income
75000

(50,000)
75,000
25000

EXAMPLE 10

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PANKAJ SIR-

Speculative in FOREX
Speculative in Shares
PGBP income

(2,00,000)
5,00,000
300000

LTCG on sale of house


STCG on sale of gold
Capital Gains income

(80,000)
2,00,000
200000

EXAMPLE 11
LTCG on sale of house
LTCG on sale of gold
Capital gains income

2,00,000
(1,00,000)
100000

EXAMPLE 12
STCG on sale of land
LTCG on sale of house
Capital gains income

(90,000)
1,00,000
10000

EXAMPLE 14
Dividends from RIL.
Interest on debentures
Card games
Income from Other Sources

5,000
7,000
(10,000)
7000

EXAMPLE 13
Card games on Diwali night
Card games on New Year night
Card games income

(50,000)
80,000
30000

Some additional Questions-Section 71- Source-JS Johar Book


EXAMPLE 15
PGBP
CG
TOTAL INCOME

EXAMPLE 16
(2,00,000)
3,00,000
100000

EXAMPLE 17
CG
Speculation business
TOTAL INCOME

(2,00,000)
3,00,000
300000

CG
Speculation business
TOTAL INCOME

(2,00,000)
3,00,000
300000

Agriculture Income
Trading business
TOTAL INCOME

3,00,000
(2,00,000)
NIL

(50,000)
3,00,000

(37,000)
1,00,000
100000

EXAMPLE 22
PGBP
Salary income
TOTAL INCOME

EXAMPLE 23
HP
Salary income
TOTAL INCOME

(1,50,000)
5,00,000
350000

EXAMPLE 24
PGBP
HP
TOTAL INCOME

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3,00,000
(2,00,000)
300000

EXAMPLE 20

EXAMPLE 21
PGBP
Lottery
TOTAL INCOME

EXAMPLE 25

3,00,000
(2,00,000)
300000

EXAMPLE 18

EXAMPLE 19
Agriculture income
Trading business
TOTAL INCOME

PGBP
CG
TOTAL INCOME

(80,000)
2,00,000
120000

EXAMPLE 26

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Share business (speculation)


House property
TOTAL INCOME
EXAMPLE 27
House property
Agriculture income
TOTAL INCOME

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2,00,000
(1,50,000)
50000

(2,50,000)
6,00,000
NIL

PANKAJ SIR-

O and M of race horses (10,000)


PGBP income
2,00,000
TOTAL INCOME
200000
EXAMPLE 28
HP income
PGBP income
LTCG income
TOTAL INCOME

(1,50,000)
2,00,000
2,00,000
250000

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