Setoff & CF

8/8/2019 Setoff & CF

1/21

Setoff& Carry forward of

Losses:

By

B.Pani M.Com,LLB,FCA,FICWA,ACS,DISA,[email protected] 9731397829


2/21

Loss from Speculation business- only

against profit from that business

>Long term Capital Loss: Only against

long term capital gain

>Owning & maintaining Race horses:

against same business

>Loss cannot be setoff against winning

from lotteries, crosswords puzzles, races

including horse races, card games andother games of any sort or from gambling

or betting of nay other form or nature


3/21

Setoff of loss from one head

against income of another head:

Inter head Loss under one h

ead can be setoff against

income under another head. Exceptions

are: Loss from Speculation business

Loss from CG

Loss from owning & maintaining Racehorses


4/21

Carry forward of Losses

Loss from HP

Loss from B/P

Loss from CG Loss from OS- Loss from owning &

maintaining Race horses


5/21

Carry forward and Setoff of loss

B/P : Other than speculative business

CG : LTCL against LTCG

CG : STCL against STCG & LTCG HP : Against HP income only

OS : Loss from owning & maintaining

Race horses


6/21

nter ource et o osses

Section 70 Where the net result for any assessment year in respect of any source

falling under any head of income other than Capital Gains, is a loss, the

same can be set off against income from any other source under the same

head.

Where the computation for any assessment year in respect of short termcapital asset is a loss, the same can be set off only against income, if any,

arrived at under a similar computation in respect of any other capital asset

i.e. short term capital gain / long term capital gain

STCL Set off against STCG/LTCG

Where the computation for any assessment year in respect of any capital

asset ( other than a short term capital asset) i.e. a long term capital loss, the

same can be set off only against income, if any, arrived at under a similar

computation in respect of any other capital asset, not being a short term

capital asset.

LTCL Set off against LTCG


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Exceptions to Inter Source Set

Off Activity of owning or maintaining of race

horses

Speculation business Short term capital loss set off against

Short Term Capital Gain / Long Term

Capital Gain

Long term capital loss set off only

against Long term Capital Gain


8/21

Set off of loss - Section 71 Loss under any head of income, other than Capital

Gains and no income under the head Capital Gains,

such loss can be set off against income, if any,

assessable for that assessment year under any other

head. Loss under any head of income, other than Capital

Gains can be set off against income, if any,

assessable for that assessment year under any head

of income including the head Capital Gains.

Loss under the head Capital Gains cannot be set off

against income under any other head of income.


9/21

Carry forward and set off of loss

from house property Section 71B Where the loss under the head Income

from house property cannot / is not wholly

set off against income from any other head

of income, the same shall be carriedforward and set off for 8 assessment years

immediately succeeding the assessment

year for which the loss was computed.

The above shall be first set off against

income from the above head assessable

for that assessment year.


10/21

Carry Forward and Set Off of

business losses Under Section 72 Where the Loss under the head Profits & Gains of

Business or Profession cannot / is not wholly set off

against income from any other head of income, the

same shall be carried forward and set off for 8

assessment years immediately succeeding the

assessment year for which the loss was computed.

The above shall be first set off against income fromthe above head assessable for that assessment year.

Loss can be carried forward if the return is filed u/s

139 (1) and it is determined and communicated u/s

157.


11/21

Carry Forward / Set Off of Loss &

Unabsorbed depreciation in amalgamation

or demerger

The amalgamation shall be of a company

owning an Industrial undertaking or Ship orHotel with another company or amalgamation

of banking company with specified bank.

Loss set off in the hands of Amalgamated

Company.

Can be carried forward for a period of 8 years

from the year in which amalgamation takes

place.


12/21

Conditions to be fulfilled by the

Amalgamated Company Under Section 72

A (2) Amalgamated company holds 3/4th of the book value of fixed

assets of amalgamating company continuously for a minimum

period of 5 years from the date of amalgamation.

Business of the amalgamating company shall be continued fora period of 5 years from the date of amalgamation.

To ensure revival of the business and to prove that the

amalgamation is for genuine business purpose (Conditions

under Rule 9C to be satisfied)

Achievement of at least 50% of installed capacity on date of

amalgamation

Furnishing Chartered Accountants Certificate in Form 62.


13/21

Conditions to be fulfilled by the

Amalgamating Company Under Section 72

A (2) The amalgamating company is engaged in the

business at least for three years.

The accumulated loss has occurred or thedepreciation remains unabsorbed for three or

more years.

As on the date of amalgamation, it has held

continuously at least three fourths of the value

of the fixed assets held by it two years prior to

the date of amalgamation.


14/21

Loss of Demerged Company Set off of loss in the hands of either

Resulting Company only (or)

Resulting Company and demerged Company

If the business is directly relatable to resulting company - Set

off in the hands of resulting company.

If business is not directly relatable to resulting company -

Apportioned between demerged company and resulting

company in the ratio

[ Loss of Demerged Company prior to demerger x Assets

transferred to resulting company] / Total Assets of demerged

Company prior to demerger].


15/21

Carry Forward of Loss in case of

succession of business Under Section 72 A

(6) Accumulated Loss and Unabsorbed depreciation of

Predecessor firm or Proprietary concern - shall be

deemed to be the loss or allowance for depreciation of

the successor company and set off of such loss /allowance will be available for a period of 8 years

commencing form the previous year of such business

reorganization.

Proviso to the above section Conditions laid down

under proviso to clause (xiii) / (xiv) to section 47 to be

complied with.


16/21

Losses in Speculation Business

Under Section 73 Loss in respect of speculation business shall be set off only

against income under speculation business.

Brought forward unabsorbed speculation business loss shall be

set off only against income under Speculation Business

The above shall be first set off against income from the above

head assessable for that assessment year

Carry forward and set off is permissible for 4 assessment years

immediately succeeding the assessment year for which the losswas computed.

Loss can be carried forward if the return is filed u/s 139 (1) and

it is determined and communicated u/s 157


17/21

Losses under the head Capital Gains

Under Section 74

Short term Capital Loss shall be set off against income, if any,under the head Capital Gains in respect of income under any

other capital asset.

Long tern capital loss shall be set off against income, if any,

under the head Capital Gains in respect of any other capitalasset not being short term capital asset.

LTCL Set off only against LTCG




immediately succeeding the assessment year for which the loss

was computed.




18/21

Losses under the head Income from

other sources Under Section 74 A

Loss in respect of activity of owning and maintaining race horse

shall be set off only against income under activity of owning

and maintaining race horse .

The above brought forward unabsorbed loss shall be set offonly against income under the same head.




immediately succeeding the assessment year for which the loss

was computed.




19/21

Loss of closely held company

Under Section 79 Loss shall be carried forward to subsequent yearsprovided

Not less than 51% of the voting power were beneficially

held by the same persons both on the last day of theprevious year in which the loss is incurred and on the

last day of the year in which such loss is ought to be set

off.

Exception to the above

Death of shareholder or gift by shareholder to

relative

Change in shareholding of Indian Company, which is

subsidiary of foreign company.


20/21

Order of Priority in Carry

Forward and Set Off of Losses Current scientific research capital expenditure u/s35(1)

Current depreciation u/s 32(1)

Unabsorbed business losses of previous years u/s

72(1)

Unabsorbed family planning promotion expenditure of

previous year u/s 36(1)(ix) Unabsorbed depreciation of previous years u/s 32(2)

Unabsorbed scientific research capital expenditure of

previous years u/s 35(4).


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Setoff & CF