1.

Inter – source adjustment under the head of

income (intra head adjustment)
2. Inter – head adjustment in the same
assessment year.
3. Carry forward of loss.
If the net result for any assessment year, in
respect of any source under any head of
income, is a loss, the assessee is entitled to
have the amount of such loss set off against
his income from any other source under head
of income for the same assessment year.
X has two businesses – A & B.
Profit From Business A Rs. 500000
Loss From Business B Rs. 200000.

The Loss of Rs. 200000 can be set off with his Profit of Rs.
500000. Therefore the amount taxable under the head
Profit & Gains from Business will be (500000 – 200000) Rs.
300000.
Where the net result of computation made for
any assessment year in respect of any head of
income is a loss, the same can be set off
against the income from other heads.
X has two non speculative Besides he has income from house
businesses A & B. property.
Profit From Business A Rs. 70000
Loss From Business B Rs. 290000.
Income from House property Rs. 510000

The Net Loss from both businesses of Rs. 220000(290000-

70000) can be set off with House Property income of Rs.
510000. Therefore the net income taxable is Rs. 290000.
 Speculation Loss – Cannot be set off against
any other head.
 Capital Loss - Cannot be set off against any
other head except ‘Capital Gains’.
 Loss from the activity of owning and
maintaining race horses - Cannot be set off
against any other head.
 Business loss cannot be set off with Salary.
 Loss cannot be set off against winnings from
lotteries, crossword puzzles etc.
 Loss from purchase of securities.
The following losses can be carried forward: -
 Loss under the head “Income from House
Property”.
 Loss under the head “Profits and Gains from
Business or Profession”.
 Loss under the head “Capital Gains”.
 Loss from the activity of owning and
maintaining race horses.
 Loss can be set off only against business
income.
 Losses can be carried forward by the person
who incurred the loss.
 Loss can be carried forward for 8 years.
 Return of loss should be submitted in time.
 Continuity of business not necessary.
 Carry forward of unabsorbed depreciation,
capital expenditure on scientific research and
family planning expenses.
 Transaction
involving purchase
Sec 43(5)
or sale of any
commodity

Periodically settled Actual delivery

Transfer of
commodity or
scripts
 Speculative loss can be set off only against
speculative income.
 Can be carried forward for 4 years.
 Continuity of Business is not necessary.
 Return of Loss should be submitted in time.
 Long term capital loss can be set off only against
long term capital gains.

 Short term can be set off against short term or

long term capital gains.

 Such loss can be carried forward for 8

assessment years immediately succeeding the
assessment year in which the loss was first
computed.

 Such loss can be carried forward unless return is

filed within the time limit of the section.
 Loss from such activities can be carried forward
to a subsequent year and set off only against
income from the business of owning and
maintaining race horses.

 Loss can be carried forward for four assessment

years immediately succeeding the assessment
year in which the loss was first computed.

 Such loss cannot be carried forward unless return

is filed within the time limit of section 139(1).
 Loss can be carried forward for eight
assessment years.
 Income from House I – 60000
 Loss from House II – (30000)
NET INCOME 30000

He has brought forward losses H1 (98-99)

30000, H2 (2001-02) 35000
 98-99 H1 loss will be ignored.
 Loss of 01-02 will be adjusted with 30000.
 Therefore 5000 will be carried forward.
Type of Loss to be carried Income against which carried forward Years
forward to the next year(s) loss can be set off in next year(s)

HOUSE PROPERTY LOSS INCOME FROM HOUSE PROPERTY 8 YEARS.

SPECULATION LOSS SPECULATION PROFITS 4 YEARS.

NON SPECULATION BUSINESS
LOSS:
Unabsorbed Depreciation, ANY INCOME NO TIME
Scientific Research & Family LIMIT
Planning Expenditure
Other Business Losses SPECULATIVE AND NON SPECULATIVE 8 YEARS

SHORT TERM CAPITAL LOSS SHORT AND LONG TERM GAINS 8 YEARS
LONG TERM CAPITAL LOSS LONG TERM CAPITAL GAINS 8 YEARS
LOSS FROM ACTIVITY OF INCOME FROM SUCH ACTIVITY 4 YEARS
OWNING & MAINTAINING RACE
HORSES
 XY Ltd. wants to amalgamate with PQ Ltd.The following losses
/allowances of XY ltd. in the assessment of XY Ltd is given
below. Find out the tax implications:-
 Unabsorbed depreciation of the previous year 1998-99-
Rs.36,000 Brought forward business loss of the previous year
2000-01 is Rs. 1,00,000;Unabsorbed scientific research
expenditure-Rs.11,000; bad debts-Rs.15,000;
 Capital gain on transfer of capital assets to PQ
Ltd.Rs.2,00,000 and brought forward capital loss Rs.40,000;
Loss of XY before amalgamation PQ XY

Unabsorbed depreciation If sec.72A It cease to

Rs.36000, Satisfied- exist –not
deductibl entitled
e
Brought forward business Allowed
losses-10,00,000,Bad debts
Capital gain Rs. 2,50,000 Not Not
Capital brought forward loss taxable transfer
Not
allowed
 The new company has to consider such gan
as business income. The cost of such goods
will be the cost of acquisition of original
owner.
 X ltd. purchased immovable property in 1994
for Rs. 50,00,000 and spent Rs 20,00,000 for
improvement. The asset is transferred to Y
Ltd which is dealing with properties for
Rs.90,00,000 in the scheme of amalgamation
of these two companies. Y ltd sold the
property for 110 lakhs. How much is the
business income?/Capital gain?/
 Business income of Rs.110-70=40 lakhs.

 Suppose Y ltd. Spent on repairs of the house

property Rs. 5,00,000 how is income
computed?
Thank you