CMA Intermediate · Direct and Indirect Taxation · Set off and Carry Forward of Losses
Vihaan Securities Pvt Ltd, a company, earned Rs 6,00,000 from its manufacturing business. Its only other activity is purchase and sale of shares of other companies, in which it has a loss of Rs 90,000. Its gross total income does not consist mainly of house property, capital gains or other sources income, and its principal business is not trading in shares or banking or lending. Under the Income-tax Act, 2025, how is the share loss treated?
The share loss is treated as a speculation loss because the company is deemed to carry on speculation business for its share trading and no exception applies. It can be set off only against speculation profits and carried forward for no more than four succeeding tax years.
- ASet off against the Rs 6,00,000 manufacturing profit, leaving Rs 5,10,000
- BTreated as a speculation loss, set off only against speculation business profit, and carried forward up to four succeeding tax yearsCorrect
- CTreated as a capital loss and carried forward for eight years
- DIgnored for tax purposes
Explanation
A company whose business includes purchase and sale of shares of other companies is deemed to carry on speculation business to that extent, and neither exception applies here. The Rs 90,000 loss therefore is a speculation loss, usable only against speculation profits, with carry forward limited to four succeeding tax years.
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