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Option of Set off or carry forward

Shikha Sharma (Chartered Accountant) (311 Points)

27 January 2010

Hi friends,

Can current year business loss be carried forward to next assessment years, even when, income from other sources is avialable for set off in the current year..

Is it mandatory for set off of current year business loss in the year of incurring such loss, or is it a the discretion of the assessee

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12 Replies

Amir (Learner) (4016 Points)
Replied 27 January 2010

Dear Shikha,

YES, IT IS MANDORY TO SETOFF WITH THE CURRENT YEAR'S INCOME FIRST.

Max Payne (employed) (2569 Points)
Replied 27 January 2010

Set off planning is at the discretion of the assessee.

You have to compulsorily set off current year and brought forward losses against eligible incomes to the maximum extent in a year.

Only discretion available is that assessee can choose against which head, what, should be set off (according to the provisions of the act of course:p)

Shikha Sharma (Chartered Accountant) (311 Points)
Replied 27 January 2010

Thanks a lot.. But can you please specify the provision according to which it has to be mandatorily set off.. Even I feel that it has to be set off but don't know as per which section is it given?

Amir (Learner) (4016 Points)
Replied 27 January 2010

Dear Shikha,

Sec 72 which deals with Carry forward of PGBP Losses, says that "so much of loss which couldnot be setoff as per sec 71 can be carried forwrd..........."

Sec 71 deals with the set off of losses.

RADHIKA JALAN (agarwal) (1521 Points)
Replied 27 January 2010

amir is correct..............

CA Amit Kumar (C.A., CWA Final) (251 Points)
Replied 27 January 2010

agree with amir

C.Balaji (Learner) (1867 Points)
Replied 27 January 2010

Agree with Mr. Amir

Current year losses should be adjusted with available income before carry forwarding to next year.

sudhir rawal (B.COM/PCC/ARTICLE/'O'LEVEL) (314 Points)
Replied 27 January 2010

yes amir is right i agree with amir

you cannot carry forward loss of business to next year if you have other income for set off

you have to set off with it

it can be carry forward in that situation when there is no other source of income is for set off under set off and carry forward provision then it's last option for carry forward

and as per section 72 of income tax act 1961 you can carry forward and set off of business loss other than speculation loss

Bhawana Sharma (UP) (23 Points)
Replied 27 January 2010

AS per sec 72 Buisness loss other than speculation loss , to the extent not set-off under sec.71, shall be carry frwd to the next AY and set-off against the income under the head PGBP of the next 8 AY
It is not necessary that the loss should be set off against the PGBP of the business in relation to which the loss was incurred.

Shikha Sharma (Chartered Accountant) (311 Points)
Replied 28 January 2010

But Sec 72 says that previous year loss which could not be set off or which is not set off can be carried forward. Does this imply that it is at the option of the assesse to set off or carry forward??

Amir (Learner) (4016 Points)
Replied 28 January 2010

Dear Shikha,

This will clear ur doubt

Assessee does not have any option - Section 72 provides for carry forward of loss only when such loss cannot be set off against income under any other head. Under the Act, there is no provision which give option to the assessee to show the profit as income from one source and carry forward the loss from another source of income to the next year - CIT v. Milling Trading Co. (P.) Ltd. [1994] 76 Taxman 389 (Guj.).

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