Set-off and carry forward of losses

This query is : Resolved

CA. Jyoti Baid (Querist)
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24 January 2010 Respected All,

A company has the following sources of income.

Loss from Business - (2,50,000)
Loss from trading in shares -(20,00,000)
Income from interest on FD - 47,00,000

What should be the Total income of the company.
Is the set off allowed or loss from trading in shares will be treated as Speculation loss.

Regards,
Jyoti

s

CMA. Dinesh S Adhikari, ACMA

CMA. Dinesh S Adhikari, ACMA (Expert)
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25 January 2010 If Loss from Trading in Shares is CAPITAL LOSS then it is allowed only set-off only with either LTCG or STCG.

If Shares loss treated as Speculation Loss then it is also allowed for set-off only with Income from Speculation business.

However, Business loss is allowed to set-off with any income except Salary. But if this is broght forward business loss, then it is allowed for set-off only with business income.

Regards!!!

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CA. Jyoti Baid

CA. Jyoti Baid (Querist)
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25 January 2010 Thankyou for the reply.

The loss from trading in shares is not capital gain loss from investment in shares.

It is the business of the company to trade in shares.

Please refer to the Explanation to section 73 where it is mentioned that:
Where any part of the business of a company [other than a company whose gross total income consists mainly (51%) of income which is chargeable under the heads Interest on securities, Income from house property, Capital gains and Income from other sources], or a company the principal business of which is the business of banking or the granting of loans and advances) consists in the purchase and sale of shares of other companies, such company shall, for the purposes of this section, be deemed to be carrying on a speculation business to the extent to which the business consists of the purchase and sale of such shares.]

In our case, more than 51% of total income consists of Interest on FD, then why loss from trading in shares will be speculation business loss?

And

Can the loss from trading in shares be business income and hence be set off with Interest on FD.

Regards