CA Final · Direct Tax Laws & International Taxation · Aggregation of Income, Set Off or Carry Forward of Losses
Sagar Investments Ltd, a company, has gross total income consisting mainly of income from other sources and capital gains. Part of its activity is the purchase and sale of shares of other companies, which produced a loss of Rs 1,20,000 in tax year 2026-27. Its other business is a small trading business with profit of Rs 3,00,000. Which statement is correct under section 113?
The deemed speculation provision does not apply to this company, because its gross total income consists mainly of capital gains and income from other sources. The share trading loss is therefore an ordinary business loss and can be set off against its Rs 3,00,000 trading profit.
- AIt is deemed to carry on speculation business to the extent of share trading, so the Rs 1,20,000 loss is restricted to speculation profits
- BThe deemed speculation rule does not apply, since its gross total income consists mainly of income under the heads Capital gains or Income from other sources, so the loss is set off against the trading profitCorrect
- CThe deemed speculation rule applies only if the company's principal business is banking
- DThe loss is set off against trading profit only if the company has carried on shares business for four years
Explanation
Section 113(5) deems share trading by a company to be speculation business, but 113(6)(a) excludes a company whose gross total income consists mainly of house property, capital gains or other sources income. Here the exception applies, so the share loss is a normal business loss and sets off against the Rs 3,00,000 trading profit. Option A ignores the exception.
Did you get it right without looking?
One question tells you little. A timed set on Aggregation of Income, Set Off or Carry Forward of Losses shows your real accuracy, how long you take and where you lose marks.
More Aggregation of Income, Set Off or Carry Forward of Losses questions
- Kaveri Pvt. Ltd. is an Indian company whose principal business is manufacturing auto parts. In the tax year it also purchased and sold share…
- Sahakari Nagar Co-operative Bank Ltd, engaged in banking for eight years, demerged an undertaking into a resulting co-operative bank during …
- Meenakshi Traders Pvt Ltd, an Indian company, has a tax year in which its speculation business shows a loss of Rs 6,00,000, while its normal…
- Kaveri Securities Ltd is a company whose principal business is manufacturing textiles. Its business also includes purchase and sale of share…
- For tax year 2026-27, Ravi Textiles Pvt Ltd, a manufacturing company, earned Rs 6,00,000 from its regular manufacturing business. It also in…
- Rajan owns race horses and maintains them for running in lawful horse races. In a tax year his stake money was Rs 2,10,000 and revenue expen…