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CMA Intermediate · Direct and Indirect Taxation · Set off and Carry Forward of Losses

A company, Bharat Holdings Ltd, incurs a loss of Rs 90,000 from a speculation business in a tax year. Which statement follows from section 113 of the Income-tax Act, 2025?

A speculation loss can be set off only against profits of another speculation business. Any unabsorbed part is carried forward, but for no more than four tax years immediately succeeding the year the loss was first computed, as section 113 provides.

  1. AIt can be set off against any business profit of the same year
  2. BIt can be set off only against profits of another speculation business, and unabsorbed loss may be carried forward for up to four succeeding tax yearsCorrect
  3. CIt can be set off against capital gains of the same year and carried forward for eight years
  4. DIt can be carried forward indefinitely against speculation profits

Explanation

Section 113(1) permits set off only against profits and gains of another speculation business. Under section 113(3), carry forward is limited to four tax years immediately succeeding the year in which the loss was first computed. Allowing set off against other business profit or capital gains contradicts sub-section (1).

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