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CA Final · Direct Tax Laws & International Taxation · Aggregation of Income, Set Off or Carry Forward of Losses

Mehta Traders Ltd, a trading company, has two speculation businesses. For the current tax year, speculation business A shows a loss of Rs 3,00,000 and speculation business B shows a profit of Rs 5,00,000. It also has a non-speculative business profit of Rs 4,00,000. Under the Income-tax Act, 2025, what is the income from speculation business and the non-speculative business after set off?

Speculation income is Rs 2,00,000 and non-speculative business income remains Rs 4,00,000. A speculation loss can be set off only against profit of another speculation business, so the Rs 3,00,000 loss reduces the Rs 5,00,000 speculation profit and cannot touch other business profit.

  1. ASpeculation Rs 2,00,000 and non-speculative Rs 4,00,000Correct
  2. BSpeculation Rs 5,00,000 and non-speculative Rs 1,00,000
  3. CSpeculation Rs 0 and non-speculative Rs 6,00,000
  4. DSpeculation Rs 2,00,000 and non-speculative Rs 1,00,000

Explanation

A speculation loss may be set off only against profits of another speculation business (section 113). Loss of 3,00,000 set off against 5,00,000 gives 2,00,000. The non-speculative profit of 4,00,000 is untouched. Option B wrongly sets the loss against non-speculative profit.

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