Wondering what this article is all about? Creatures of nature & food featuring in an Income tax Article? Yes, This article is something about creatures and their food. Don’t you people feel it’s always a boredom to talk about law and sections? So let’s do something new.
There are two beautiful sections in income tax which are liked by most of the assesses, these are section 70 and section 71 which provides for set-off of current year losses.
We bet, you’ll agree with us that many don’t understand what these two sections are all about when read in Act, that’s the beauty of law, if everyone understands then what about our bread. Let us make you understand.
Section 70 provides for set-off of losses within same head of income. For example cannibals (Human eating Human flesh) Human1 eating flesh of Human2 (Gain of business1 absorbing loss of business2, Gain of house property1 absorbing loss from house property2) except in case of capital gains.
Set-off in case of capital gains is bit complicated as this head contains two kind of capital gains/loss, long term and short term. If it’s the case of setting off long term loss with long term gain and short term loss with short term gain then above rule of cannibals apply. But, if setting off is intra-head then its like the relationship between Snake (Long term Capital Gain/Loss) & Rat (Short Term Capital Gain/Loss), Snake eats Rat (Long term capital gain absorbs short term capital loss) But, Rat doesn’t eat Snake (Short term capital gain cannot absorb long term capital loss), we mean to say short term loss can be set-off against long term gain but long term loss cannot be set-off against short term gains.
Section 71 is the section, which provides for Inter-head set-off of losses. i.e, loss under one head can be set-off against income of another head. But there are certain exceptions. Salary is like cow (herbivorous) and business loss is like fish fry (Non-Veg), cow doesn’t eat fish fry (Business loss cannot be set-off against salary income) Similarly Loss in a speculation business, capital gain, loss from the activity of owning and maintaining race horses can’t be set off against any other head.
Now you all will agree with us that a subject like tax can also be made interesting, by including creatures and their food habits, we have tried to make these sections easy to understand. You will agree that when some sections of law are interpreted with examples, they will have a long lasting impact and will never be easily forgotten.
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