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

Rough Stones Ltd has a valid safe harbour option for its raw diamond selling business for the tax year. It also has unabsorbed depreciation brought forward and a loss from another business in the same year. Under Rule 100(3), which treatment applies to the safe harbour business income?

Neither can be set off. Where a valid safe harbour option is in force, the rules disallow set off of unabsorbed depreciation and carried forward loss, and also disallow set off of loss from other business or other heads against the income of the eligible business.

  1. AUnabsorbed depreciation may be set off, but loss from other business may not
  2. BLoss from other business may be set off, but unabsorbed depreciation may not
  3. CBoth unabsorbed depreciation and loss from other business may be set off against the income
  4. DNeither unabsorbed depreciation nor loss from other business may be set off against the incomeCorrect

Explanation

Rule 100(3)(c) bars set off of unabsorbed depreciation and carried forward loss, and 100(3)(d) bars set off of loss from other business or other head against this business income. So neither set off is allowed.

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