Live Course on Drafting of Appeal and Reply of Penalty Notice by CA Sachin Sinha. Register Now!!

Query in Mafa

Balaji Sarangarajan (MBA & (CA Final)) (1131 Points)

04 December 2009

Hi all,

I just started my preparation for CA Final 1st group. I am referring Mr.Rastogi 's books for Mafa

I have a query in capital budgeting page no 39 - example 2.1, in which the author has calculated tax on loss.

My query is whether it is correct in calculating tax on loss if so can any one explain me about it.

Waiting for reply with anticipation.

Regards

Balaji Sarangarajan

Reply
Follow
Share

6 Replies

CA. MOBIN SAYYED (Sr. Team Leader) (114 Points)
Replied 04 December 2009

Actually tax on loss is nothing but the tax shield or u may call it tax saved.

(Guest)

If it is an existing company then it can save tax by setting it off against profits of other business. I can give more specific answer if I can get the problem. So please post the details of problem.

Ansari (ca final) (444 Points)
Replied 04 December 2009

Mobeen is right.

MITU.... (ARTICLE Assistant) (210 Points)
Replied 05 December 2009

it was in capital budegting chapter of PE II & pcc tax on loss means the tax shield

for eg If u incurr loss of 1lac & tax rate is 30% then tax on loss which was not paid due to loss is 30000 therefore actual loss to u is of only 70000.

i hope u have been clear from this eg

Abhishek pareek (CFO & Compliance Officer (Listed Co.)) (98 Points)
Replied 05 December 2009

As you know that there is a tax liability on profits/ gain, similarly there is also a tax saving on losses. if u have a loss from one head of income, then u can set it off against income under other head in some cases n if u don't have any other income, u will carry it forward.In the case of co., it will set it off against another income n ultimately the crux is that co. will save tax which need to be considered while making capital budgeting decision just like tax liability is considered in the same decisions.