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CA Final · Direct Tax Laws & International Taxation · Profits and Gains of Business or Profession

Kumar Diamonds Ltd validly opts for safe harbour for its raw diamond selling business in the relevant tax year and declares profit as required. The business has an unabsorbed depreciation brought forward and the company also has a loss in another business. Which treatment follows from Rule 100(3)?

Neither can be set off. Under Rule 100(3), once the safe harbour option is valid, unabsorbed depreciation and carried forward losses are not allowed, and loss from another business cannot be set off against this business income. Current depreciation is deemed already given.

  1. AUnabsorbed depreciation may be set off, but the loss of the other business may not
  2. BBoth unabsorbed depreciation and the other business loss may be set off against this profit
  3. CNeither unabsorbed depreciation under section 33(11) nor the other business loss under section 108(1) can be set off against this business incomeCorrect
  4. DOnly the other business loss may be set off, but depreciation for the year is claimed separately

Explanation

Rule 100(3)(c) bars set off of unabsorbed depreciation under section 33(11) and carried forward loss under section 112(1). Rule 100(3)(d) bars set off of loss from other business under section 108(1). Hence neither set off is allowed, and depreciation for the year is deemed already allowed.

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