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

Mehta Diamonds Ltd has validly exercised the safe harbour option for its raw diamond selling business. It has brought forward unabsorbed depreciation and has also incurred a loss in another business in the same year. Under rule 100(3), which treatment is correct for the safe harbour business income?

Neither can be set off. Under rule 100(3), once safe harbour is validly opted, unabsorbed depreciation under section 33(11) and loss from another business under section 108(1) are not allowed against the income of the safe harbour business.

  1. AUnabsorbed depreciation may be set off but loss from the other business may not
  2. BNeither unabsorbed depreciation under section 33(11) nor loss from other business under section 108(1) can be set off against that incomeCorrect
  3. CBoth may be set off in full
  4. DLoss from other business may be set off but unabsorbed depreciation may not

Explanation

Rule 100(3)(c) bars set off of unabsorbed depreciation under section 33(11) or carried forward loss under section 112(1). Rule 100(3)(d) bars set off of loss from other business under section 108(1) against income of the safe harbour business. So neither is allowed.

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