Carry forward of Loss & Set off of Business loss other than Speculation Loss [Sec. 72]
*
Such loss can be carried forward up to EIGHT assessment years. *
Continuity of Business is not necessary for claiming set off of carried forward losses. *
Losses can be set off only against Income taxed in future years under the head ‘Profits & Gains from Business & Profession’ *
Losses incurred by an assessee can be claimed for set off against future year’s income only by the assessee who has incurred such loss, subject to the following exceptions:
*
Inheritance of the loss making business by the assessee’s legal heir, wherein latter will be allowed to set off the losses. *
In case of Amalgamation of a Company, the amalgamated money has the right to get its income set off against the carried forward losses of the amalgamating company. *
In case of Demerger of company, resulting company has the right to get its income set off against the carried forward losses of the Company before demerger, subject to conditions specified by the Central Govt. *
In case of succession of Proprietary concern/ Firm by a company such company has the right to get its income set off against the carried forward losses of the proprietary concern/ firm.
*
Return of Loss should be submitted on/ before the Due date otherwise the loss will not be allowed to be carried forward to future years. *
In case of an assessee having three types of NEGATIVE INCOMES, i.e., Current year depreciation, Unabsorbed Depreciation of previous years & Brought forward business losses of previous years to be set off against current year’s Business Income, the following order of priority should be followed:
*
First set off current year’s depreciation; *
Secondly set off Brought forward business losses since they can be carried forward only up to 8 assessment years. *
And lastly set off Unabsorbed Depreciation since they can be carried forward to future years without any time limitation.
CAclubindia
