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Order of set off of loss

Sujit Talukder (service) (719 Points)

28 June 2015

Dear Experts,

The Income for the FY 2014-15 is as under-

Loss from Business = -1,00,000

Deemed short term capital gain u/s 50 on depreciable asset = 2,00,000

Income from other sources (forfeiture of advance money against capital asset) = 40,000

The query is - What should be the order of set-off?

I want to set off as follows-

Loss from Business = -1,00,000

Income from other sources = 40,000

Remaining loss = -60,000

Capital gain u/s 50 = 2,00,000

Balance represents income as Capital gains = 1,40,000

Is the set off order correct? Or, Capital gain is first required to be adjusted with Capital gains and then IFOS.

Please guide.

Regards

Sujit Talukder

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Z ( ) (2965 Points)
Replied 30 June 2015

If assessees income is taxable at higher rate then the current set off looks good. Its not necessary to off set it with capital gain first.

S.71. (1) Where in respect of any assessment year the net result of the computation under any head of income, other than "Capital gains", is a loss and the assessee has no income under the head "Capital gains", he shall, subject to the provisions of this Chapter, be entitled to have the amount of such loss set off against his income, if any, assessable for that assessment year under any other head.

(2) Where in respect of any assessment year, the net result of the computation under any head of income, other than "Capital gains", [eg PGBP] is a loss and the assessee has income assessable under the head "Capital gains", such loss may, subject to the provisions of this Chapter, be set off against his income, if any, assessable for that assessment year under any head of income including the head "Capital gains" (whether relating to short-term capital assets or any other capital assets).

(3) Where in respect of any assessment year, the net result of the computation under the head "Capital gains" is a loss and the assessee has income assessable under any other head of income, the assessee shall not be entitled to have such loss set off against income under the other head.

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