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CA Intermediate · Taxation · Set-Off or Carry Forward and Set-off of Losses

Arjun, a resident individual, incurred a non-speculative business loss of Rs 3,00,000 in tax year 2026-27, and also has unabsorbed depreciation of Rs 50,000 for that year that could not be set off in the year. He has no other income. He files his return of income for that year after the due date. Which statement is correct?

A business loss can be carried forward only if the return for that year is filed by the due date, so Arjun's Rs 3,00,000 loss lapses for carry forward. Unabsorbed depreciation has no such condition and continues to be carried forward indefinitely, even with a late return.

  1. ANeither the business loss nor the unabsorbed depreciation can be carried forward
  2. BBoth the business loss and the unabsorbed depreciation can be carried forward, as late filing has no effect
  3. CThe business loss cannot be carried forward, but the unabsorbed depreciation can be carried forwardCorrect
  4. DThe business loss can be carried forward for 8 years, but the unabsorbed depreciation cannot be carried forward

Explanation

Carry forward of a business loss requires the return to be filed by the due date. Unabsorbed depreciation is not subject to this condition and is carried forward indefinitely, even if the return is filed late. Therefore Arjun loses the Rs 3,00,000 business loss for carry forward but keeps the Rs 50,000 unabsorbed depreciation.

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