Discuss the provisions regarding set-off and carry forward and set-off of business losses.

Set-off of Business Loss Business loss first can be set-off against the profits of any other business in the same year. If in the same year, business head results in loss or profit any other business is insufficient to absorb the business loss, such un-absorbed business loss can be set-off against any income under any other head (except salary head).

Loss of Speculative Business [Sec. 73]: Any loss in a speculation business can not be set-off against the profits of a non -speculative business under the same, Nor can it be set-off against any income under any other head.

Carry forward and set-off of Business loss If any loss of a non speculative business could not be set-off according to the rules of set-off (given above), such un-absorbed business losses can be carried forward to be set-off against income (including income from speculative business) under the head profits and gains from business and profession for eight assessment years immediately succeeding the assessment year for which the loss was first computed subject to the following conditions:

  • The continuance of the same business (for which the loss has been computed) is not necessary. Business Loss of one business can be set-off against profits of another business.
  •  Un-absorbed business loss can be set-off only after allowing current year’s depreciation.
  •  Business loss can be carried forward only by the assesses who incurred the loss and not by any other person. Carry forward and set off of loss of speculation Business Loss of a speculation business can be set-off from the profits of speculation business in the same year and if any loss remains un adjusted, shall be carried forward for next four assessment years and can be set-off only against speculative profits.

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