CA Final · Direct Tax Laws & International Taxation · Aggregation of Income, Set Off or Carry Forward of Losses
Meenakshi Traders Pvt Ltd, a company whose principal business is manufacturing textiles, also buys and sells shares of other listed companies. Its gross total income does not consist mainly of house property, capital gains or other sources income. For the tax year it incurs a loss of Rs 6,00,000 on purchase and sale of shares. How is this loss treated under section 113 of the Income-tax Act, 2025?
The loss is a deemed speculation loss. A company whose business partly consists of buying and selling shares of other companies is deemed to run a speculation business to that extent, unless an exception applies. None applies here, so the loss can be set off only against speculation profits.
- ADeemed speculation loss, to be set off only against profits of another speculation businessCorrect
- BNormal business loss, to be set off against its textile manufacturing profits
- CCapital loss, to be set off only against capital gains
- DLoss to be ignored as share trading is not a business
Explanation
Under section 113(5), a company with part of its business consisting of purchase and sale of shares of other companies is deemed to carry on speculation business to that extent. The exceptions in section 113(6) do not apply, since its principal business is textiles and its GTI is not mainly from house property, capital gains or other sources. So the Rs 6,00,000 loss is a speculation loss and cannot be set off against manufacturing profit.
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