Query
This query is : Resolved
04 March 2011
Dear Experts:
1. A company incurred a loss of Rs. 1o lacs, but the company has not filed its return of income in time. Hence it cannot carried forward the loss. Next year, the company filed the return in time, and willing to transfer the loss of Rs. 10 lacs. Whether it can do?
2. Additional Depreciation on P&M @ 20% is allowed every year or allowed only in the year of purchase of eligible P&M?
1. A company incurred a loss of Rs. 1o lacs, but the company has not filed its return of income in time. Hence it cannot carried forward the loss. Next year, the company filed the return in time, and willing to transfer the loss of Rs. 10 lacs. Whether it can do?
2. Additional Depreciation on P&M @ 20% is allowed every year or allowed only in the year of purchase of eligible P&M?
04 March 2011
What is the meaning of 'willing to transfer the loss of Rs 10 lakhs'.
Additional depreciation is available for one year only.
Additional depreciation is available for one year only.
04 March 2011
I am sorry sir, the company propose to set off the loss. whether it can?
10 August 2024
Let's address each of your queries regarding tax treatment and regulations for companies:
### 1. **Carry Forward of Losses**
**Scenario:**
- **Company incurred a loss of ₹10 lakhs** but did not file the return of income on time.
- **Next year, the company files the return** in time and wishes to carry forward the loss.
**Explanation:**
- **Timely Filing of Return:** Under Indian tax laws, particularly the Income Tax Act, 1961, losses can only be carried forward if the return of income for the year in which the loss was incurred is filed within the due date specified.
- **Section 139(1):** According to Section 139(1), if a company fails to file its return within the due date, it loses the benefit of carrying forward losses for that year.
- **Exception for Losses:** The only exception is for losses other than those under the head "Business" or "Profession" (such as capital losses), where filing within the due date is crucial for carry forward.
**Conclusion:**
- Since the company did not file its return of income for the year in which the ₹10 lakhs loss was incurred within the due date, it cannot carry forward that loss to subsequent years, even if it files returns in subsequent years.
### 2. **Additional Depreciation on Plant & Machinery**
**Scenario:**
- **Additional Depreciation:** The additional depreciation on plant and machinery is claimed at 20% as per the Income Tax Act.
**Explanation:**
- **Additional Depreciation under Section 32:** Under Section 32 of the Income Tax Act, additional depreciation is allowed at 20% on the cost of new plant and machinery acquired and installed by a company engaged in manufacturing or production.
- **One-Time Allowance:** This additional depreciation is generally allowed only in the year of purchase and installation of the eligible plant and machinery. It is not a recurring annual allowance but a one-time benefit given in the year of acquisition.
**Conclusion:**
- **Allowed Only in the Year of Purchase:** Additional depreciation at 20% is allowed only in the year of acquisition of the eligible plant and machinery, not every year.
### 3. **Set-Off of Losses**
**Scenario:**
- **The company proposes to set off a loss of ₹10 lakhs.**
**Explanation:**
- **Set-Off of Losses:** In general, losses can be set off against the income of the same year or carried forward to subsequent years, provided the loss is eligible for carry forward and the return of income was filed on time for the year in which the loss was incurred.
- **Carry Forward Requirements:** For losses under the head "Business" or "Profession," if the return was not filed within the due date, the loss cannot be carried forward.
**Conclusion:**
- **Set-Off in the Current Year:** Since the company did not file the return on time for the year the loss was incurred, it cannot carry forward the loss to offset against the income of the current or future years.
### Summary
1. **Carry Forward of Losses:** The company cannot carry forward the ₹10 lakhs loss to the next year as the return was not filed in time for the year in which the loss was incurred.
2. **Additional Depreciation:** Additional depreciation on plant and machinery at 20% is allowed only in the year of purchase and installation, not annually.
3. **Set-Off of Losses:** Losses cannot be carried forward if the return was not filed on time for the year in which the loss occurred, so the company cannot set off the loss of ₹10 lakhs against the income of the current year.
If you need further clarification or assistance with specific cases, consulting with a tax professional or company secretary may be beneficial.
### 1. **Carry Forward of Losses**
**Scenario:**
- **Company incurred a loss of ₹10 lakhs** but did not file the return of income on time.
- **Next year, the company files the return** in time and wishes to carry forward the loss.
**Explanation:**
- **Timely Filing of Return:** Under Indian tax laws, particularly the Income Tax Act, 1961, losses can only be carried forward if the return of income for the year in which the loss was incurred is filed within the due date specified.
- **Section 139(1):** According to Section 139(1), if a company fails to file its return within the due date, it loses the benefit of carrying forward losses for that year.
- **Exception for Losses:** The only exception is for losses other than those under the head "Business" or "Profession" (such as capital losses), where filing within the due date is crucial for carry forward.
**Conclusion:**
- Since the company did not file its return of income for the year in which the ₹10 lakhs loss was incurred within the due date, it cannot carry forward that loss to subsequent years, even if it files returns in subsequent years.
### 2. **Additional Depreciation on Plant & Machinery**
**Scenario:**
- **Additional Depreciation:** The additional depreciation on plant and machinery is claimed at 20% as per the Income Tax Act.
**Explanation:**
- **Additional Depreciation under Section 32:** Under Section 32 of the Income Tax Act, additional depreciation is allowed at 20% on the cost of new plant and machinery acquired and installed by a company engaged in manufacturing or production.
- **One-Time Allowance:** This additional depreciation is generally allowed only in the year of purchase and installation of the eligible plant and machinery. It is not a recurring annual allowance but a one-time benefit given in the year of acquisition.
**Conclusion:**
- **Allowed Only in the Year of Purchase:** Additional depreciation at 20% is allowed only in the year of acquisition of the eligible plant and machinery, not every year.
### 3. **Set-Off of Losses**
**Scenario:**
- **The company proposes to set off a loss of ₹10 lakhs.**
**Explanation:**
- **Set-Off of Losses:** In general, losses can be set off against the income of the same year or carried forward to subsequent years, provided the loss is eligible for carry forward and the return of income was filed on time for the year in which the loss was incurred.
- **Carry Forward Requirements:** For losses under the head "Business" or "Profession," if the return was not filed within the due date, the loss cannot be carried forward.
**Conclusion:**
- **Set-Off in the Current Year:** Since the company did not file the return on time for the year the loss was incurred, it cannot carry forward the loss to offset against the income of the current or future years.
### Summary
1. **Carry Forward of Losses:** The company cannot carry forward the ₹10 lakhs loss to the next year as the return was not filed in time for the year in which the loss was incurred.
2. **Additional Depreciation:** Additional depreciation on plant and machinery at 20% is allowed only in the year of purchase and installation, not annually.
3. **Set-Off of Losses:** Losses cannot be carried forward if the return was not filed on time for the year in which the loss occurred, so the company cannot set off the loss of ₹10 lakhs against the income of the current year.
If you need further clarification or assistance with specific cases, consulting with a tax professional or company secretary may be beneficial.
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