03 December 2007
Any loss under the head, ‘profit and gain of business,’ other than speculation loss and depreciation can be set off against any other business income or any other head of income, except salary income, in the same assessment year.
After such setting off, if the resultant figure is yet a loss (business loss): If the loss in greater than income from any other business or income from any other head, then such loss can be carried forward up to eight assessment years. On carrying forward to subsequent years, this loss can be set off only against business income and not against any other head of income. Continuity of business is now not necessary for the purpose of set-off and carry-forward. Any loss under the head, ‘Other sources’ can be set off in the same assessment year against income from any other source or income from any other head. Salary, business/profession . The loss cannot be carried forward for set-off in future.
Section 56
INCOME FROM OTHER SOURCES.
(1) Income of every kind which is not to be excluded from the total income under this Act shall be chargeable to income-tax under the head "Income from other sources", if it is not chargeable to income-tax under any of the heads specified in section 14, items A to E.
(2) In particular, and without prejudice to the generality of the provisions of sub-section (1), the following incomes shall be chargeable to income-tax under the head "Income from other sources", namely :- (i) Dividends;
(ia) Income referred to in sub-clause (viii) of clause (24) of section 2;
(ib) Income referred to in sub-clause (ix) of clause (24) of section 2;
(ic) Income referred to in sub-clause (x) of clause (24) of section 2, if such income is not chargeable to income-tax under the head "Profits and gains of business or profession";
(id) Income by way of interest on securities, if the income is not chargeable to income-tax under the head "Profits and gains of business or profession";
(ii) Income from machinery, plant or furniture belonging to the assessee and let on hire, if the income is not chargeable to income-tax under the head "Profits and gains of business or profession";
(iii) Where an assessee lets on hire machinery, plant or furniture belonging to him and also buildings, and the letting of the buildings is inseparable from the letting of the said machinery, plant or furniture, the income from such letting, if it is not chargeable to income-tax under the head "Profits and gains of business or profession";
(iv) Income referred to in sub-clause (xi) of clause (24) of section 2, if such income is not chargeable to income-tax under the head "Profits and gains of business or profession" or under the head "Salaries".
Related Judgements
COMMISSIONER OF INCOME-TAX v. S. R. V. PRESS & PUBLICATIONS (P) LTD.
P. J. EAPEN v. COMMISSIONER OF INCOME-TAX.
COMMISSIONER OF INCOME-TAX v. J. V. GUPTA & SONS (HUF).
COMMISSIONER OF INCOME-TAX v. COCHIN SHIPYARD LTD.
COMMISSIONER OF INCOME-TAX v. SMT. P. ANDAL AMMAL. (CIT v. SMT. P. YAMUNA BAI.)
COMMISSIONER OF INCOME-TAX v. VAIKUNDAM RUBBER CO. LTD.
COMMISSIONER OF INCOME TAX v. PETRO-FILS CO-OPERATIVE LTD.
1- Short Term Loss can be set off against Short Term & Long Term Capital Gain.
2- Long Term loss can be set off against Long Term Capital Gain only. 3- Any loss other than above can be set off against Any Gapital Gain ( See Section 71 relevant part underlined for this )
Carry forward of of losses in subsequent 8 years
1- Short Term Loss can be set off against Short Term & Long Term Capital Gain. 2- Long Term loss can be set off against Long Term Capital Gain only.
Important Note- Please note that in case of loss on share securities or unit we have to consider section 94 (7) also wherein if some condition as per section fulfilled then loss on this shall be ignored if it does not exceeds its dividend income
Provision of section 71- See Italic part Set off of loss from one head against income from another. 3271. (1) Where in respect of any assessment year the net result of the computation under any head of income, other than “Capital gains”, is a loss and the assessee has no income under the head “Capital gains”, he shall, subject to the provisions of this Chapter, be entitled to 33 have the amount of such loss set off against his income, if any, assessable for that assessment year under any other head. (2) Where in respect of any assessment year, the net result of the computation under any head of income, other than “Capital gains”, is a loss and the assessee has income assessable under the head “Capital gains”, such loss may, subject to the provisions of this Chapter, be set off against his income, if any, assessable for that assessment year under any head of income including the head “Capital gains” (whether relating to short-term capital assets or any other capital assets). 34[(2A) Notwithstanding anything contained in sub-section (1) or sub-section (2), where in respect of any assessment year, the net result of the computation under the head “Profits and gains of business or profession” is a loss and the assessee has income assessable under the head “Salaries”, the assessee shall not be entitled to have such loss set off against such income.] (3) Where in respect of any assessment year, the net result of the computation under the head “Capital gains” is a loss and the assessee has income assessable under any other head of income, the assessee shall not be entitled to have such loss set off against income under the other head.] 35[(4) Where the net result of the computation under the head “Income from house property” is a loss, in respect of the assessment years commencing on the 1st day of April, 1995 and the 1st day of April, 1996, such loss shall be first set off under sub-sections (1) and (2) and thereafter the loss referred to in section 71A shall be set off in the relevant assessment year in accordance with the provisions of that section.]
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