CMA Intermediate · Direct and Indirect Taxation · Set off and Carry Forward of Losses
A specified business loss of Rs 4,00,000 for tax year 2026-27 is carried forward. In tax year 2027-28, the assessee has a profit of Rs 1,50,000 from a specified business and Rs 3,00,000 from a non-specified business. How much loss remains to be carried forward after 2027-28?
Rs 2,50,000 remains. The carried forward loss can be set off only against specified business profit of Rs 1,50,000 under Section 114(2), leaving Rs 2,50,000. The profit from the non-specified business cannot be used for this set off.
- ARs 2,50,000Correct
- BRs 1,00,000
- CNil
- DRs 4,00,000
Explanation
The brought forward loss can be set off only against profits of a specified business, which are Rs 1,50,000. Remaining loss is 4,00,000 - 1,50,000 = Rs 2,50,000. The non-specified profit of Rs 3,00,000 cannot absorb it, which is why Nil and Rs 1,00,000 are wrong.
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