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CMA Intermediate · Direct and Indirect Taxation · Set off and Carry Forward of Losses

Which statement about carry forward of a specified business loss under Section 114 is correct, as compared with a speculation business loss under Section 113?

Section 114 contains no four-year limit, while Section 113(3) restricts speculation loss to four succeeding tax years. Section 114(2) lets the unabsorbed loss be carried forward year after year, against specified business profits only.

  1. ASection 114 text contains no four-year limit on carry forward, whereas Section 113(3) has oneCorrect
  2. BBoth sections limit carry forward to four succeeding tax years
  3. CSection 114 loss can be set off against salary income
  4. DSection 114 loss is carried forward only for one following tax year

Explanation

Section 113(3) bars carry forward beyond four succeeding tax years for speculation loss. Section 114(2) allows carry forward to the following tax year and so on, with no such time limit stated. It confines set off to specified businesses, so the salary option is wrong.

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