CS Executive · Tax Laws and Practice · Clubbing Provisions and Set Off and Carry Forward of Losses
Under the Income-tax Act, 2025, Sunrise Ltd (a company) has two business parts. Its business includes purchase and sale of shares of other companies. Its gross total income does not consist mainly of house property, capital gains or other sources income, and its principal business is manufacturing. Which statement is correct?
Sunrise Ltd is deemed to carry on speculation business to the extent its business consists of buying and selling shares of other companies. The exceptions do not apply because its income is not mainly passive and its principal business is manufacturing. Manufacturing income is not affected.
- AShare trading is deemed speculation business to the extent the business consists of such purchase and saleCorrect
- BIt is never deemed speculation because it is a company
- CEntire manufacturing income is deemed speculation income
- DShare trading loss may be set off freely against manufacturing profit
Explanation
Section 113(5) deems a company to carry on speculation business to the extent its business consists of purchase and sale of shares of other companies. The exceptions in section 113(6) apply only if the gross total income consists mainly of house property, capital gains or other sources income, or the principal business is share trading, banking or lending. Neither applies here, so the deeming applies to the share part only.
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