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Inter Source Adjustment under Same Head of Income Inter Head Adjustment Carry Forward and Set off of Loss from House Property Carry Forward and Set off of Loss from ‘PGBP’ (other than Speculation)
Carry Forward and Set off of Loss from Speculative Business Carry Forward and Set off of Loss from Capital Gain Carry Forward and Set off of Loss from ‘OMRH’
Carry Forward and Set off of Loss/Depreciation under Amalgamation Restriction of C/F of losses in certain cases Restriction for Private Company to C/F the lo sses in Certain case Dividend Stripping Bonus Stripping Return of Income must be filed by due date in case of Loss Deduction not allowed for ‘WRC’
SEC 70 Inter Source Adjustment under Same Head of Income Where the net result for any A.Y. in respect of any source falling under any head of income is a loss, the assessee shall be entitled to have the amount of such loss set off against his income from any other source under the same head. Exception:-
(i)
Speculation loss can be set-off only against speculation profits. It cannot be set-off against business profits though both of them fall under the same head, "profits and gains of business or profession.
(ii)
Any loss on account of revenue expenditure, expenditure, incurred on maintenance maintenance of race horses, can be setoff only against the income from the same source. Such loss cannot be set-off against any other income, falling under the head "income from other sources".
(iii)
Long-term capital loss can be set-off only against long-term capital gains. It cannot be set-off against short-term capital gains though both of them fall under the same head "capital gains".
(iv)
Any loss sustained from a source, the income of which is exempt, is not to be set-off against any taxable income from any other source. For example, the income of an educational institution is exempt under Sec. 10(23C). The deficit of such institution cannot be set-off against the profits of any other business. Lallubhai Garothandas Mehta Charitable Trust (Guj.) Similarly, the loss from "agriculture business" cannot be set-off from the profit of "timber business" because agriculture income is exempt under Sec. 10(1).
B r i g h t P r o f e s s i o n a l s ( P ) L T D. 1/53, Lalita Park, Laxmi nagar, Delhi-92
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SEC 71 Inter Head Adjustment Where the net result for any assessment year, under any head of income is a loss, the assessee shall be entitled to have the amount of such loss set-off against his income assessable for same A.Y. under any other head of income. Exception:-
(i)
Losses from speculation business
(ii)
Losses from the activity of owing and maintaining race horses
(iii)
Losses under the head capital gains
(iv)
Losses under the „PGBP‟ cannot be set off against the
income under the head „Salary‟.
[SEC 71(2A)] Note: - Where there are more than one source for set off under section 71, the assessee can adopt the most beneficial method for set off. [ C B D T c i r c u l a r ]
SEC 58(4) Deduction not allowed for ‘WRC’ No deduction in respect of any expenditure or allowance shall be allowed under any provision of this Act in computing the income by way of any winnings from lotteries, crossword puzzles, races, card games and other games of any sort or from gambling or betting of any form or nature.
SEC 71B Carry Forward & Set-off Loss from House Property
(1) Where the net result of commutation for any assessment year under the head “Income from house property” is a loss which cannot be or is not wholly set off under Sec. 71, Such loss can be carried forward and set-off only against income from house property in the subsequent assessment year.
(2) Carry forward is permissible for 8 A.Y. immediately succeeding the Assessment Year for which the loss was computed.
SEC 72 Carry Forward & Set off of Business Losses
(1)
Business loss other than speculation loss which is not set off under Sec. 71 shall be carried forward and set-off only against the income under the head „PGBP‟ in the subsequent A/Y.
(2) No loss shall be carried forward under this section for more than 8 Assessment years immediately succeeding the assessment year for which the loss was first computed.
B r i g h t P r o f e s s i o n a l s ( P ) L T D. 1/53, Lalita Park, Laxmi nagar, Delhi-92
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Priority of set off
Current year capital expenditure of promotion of Family Planning
Current year capital expenditure of Scientific Research
Current year Depreciation
B/F Business losses
Unabsorbed depreciation
Unabsorbed capital expenditure of promotion of Family Planning
Unabsorbed capital expenditure of Scientific Research
SEC 73 Carry Forward and Set off Speculation Business Loss Where there is unabsorbed speculation business loss, for any A.Y., such loss to the extent not set off shall be carried forward to the next 4 assessment years and set off against the profits from speculation business. Sec 43(5) :- Section 43(5) defines a speculative transaction to mean a transaction in which a contract for purchase or sale of any commodity, including stocks and shares, is periodically or ultimately settled otherwise than by actual delivery or transfer of the commodity or scrip. However, hedging contracts are not speculative transactions.
Any eligible transaction in respect of Trading in Derivate will not be treated as a Speculative Bu siness transaction if following conditions are satisfied. 1.
The transaction is carried out in a RSE
2.
The transaction is in respect of trading in derivative referred to in section 2(ac) of the securities contact (regulation) Act, 1956.
3.
The eligible transaction is carried out electronically on screen-based system through a stock broker/subbroker/other registered intermediary in accordance with the provisions of the securities Contracts (Regulation) Act, /SEBI Act, /Depositories Act.
4.
The eligible transaction is supported by a time stamped contract note issued by such stock broker, etc. to every client. It should indicate in the contract note:a. The unique client identity number allotted under any Act referred to in paint 3 above; and b. Permanent account number (PAN) allotted under the Income tax Act.
SEC 73A Carry forward and set off of losses by Specified Business u/s 35AD (1) Any loss, computed in respect of any specified business referred to in section 35AD shall not be set off except against profits and gains, if any, of any other specified business. (2) Where for any assessment year any loss computed in respect of the specified business referred to in subsection (1) has not been wholly set off under sub-section (1), so much of the loss as is not so set off or the whole loss where the assessee has no income from any other specified business, shall, subject to the other provisions of this Chapter, be carried forward to the following assessment year, and — B r i g h t P r o f e s s i o n a l s ( P ) L T D. 1/53, Lalita Park, Laxmi nagar, Delhi-92
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(i ) it shall be set off against the profits and gains, if any, of any specified business carried on by him assessable for that assessment year; and (ii ) if the loss cannot be wholly so set off, the amount of loss not so set off shall be carried forward to the following assessment year and so on.”.
SEC 74 Carry Forward and Set off of Losses under the head Capital Gains Where there is unabsorbed short term or long term capital Losses under the head “capital gains” for any A.Y. shall be entitled to carry forward for 8 A.Y. and set off as follows:(a) Short term capital loss can be set off against long term capital gains as well as short term capital gains. (b) Long term capital loss can be set off against long term capital gains.
SEC 74A Carry Forward and Set off of Losses from the Activity of Owing and Maintaining Race-Horses (1) An assessee who is the owner of horses, maintained by him for running in horse races upon which wagering or betting may be lawfully made, is entitled to claim the setoff and carried forward of any loss incurred by him in the activity of owning and maintaining race horses. Note:- It may be noted that if an assessee who owns and maintains horses for running in horse races
upon which wagering or betting cannot be lawfully made, any loss incurred in the activity in the activity of owning and maintaining such horses neither can be claimed to be set-off nor allowed to be carried forward. (2) The unabsorbed Losses from the activity of owing and maintaining race horses shall be carried forward and set off against the income from the activity of owing and maintaining race horses. (3) Such carry forward is permissible for 4 A.Y. immediately succeeding the A.Y. for which the loss was computed.
SEC 78 Carry Forward and Set Off of Losses in case of Change in Constitution of Firm or on Succession. (1) Where a change has occurred in the constitution of a firm, nothing in this Chapter shall entitle the firm to have carried forward and set off so much of the loss proportionate to the share of a retired or deceased partner as exceeds his share of profits, if any, in the firm in respect of the previous year. (2) Where any person carrying on any business or profession has been succeeded in such capacity by another person otherwise than by inheritance, nothing in this Chapter shall entitle any person other than the person incurring the loss to have it carried forward and set off against his income. In other words, the assessee, who has suffered the loss and in whose hands the loss has been assessed, is the person who can carry forward the loss and set off the same against his business income of the subsequent year. Note: - Unabsorbed Depreciation is not covered by chapter VI but is governed by sec 32(2), so unabsorbed
depreciation of the deceased will not be carried forward by the legal heir on inheritance. B r i g h t P r o f e s s i o n a l s ( P ) L T D. 1/53, Lalita Park, Laxmi nagar, Delhi-92
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SOME SPECIAL PROVISIONS REGARDING THIS CHAPTER SEC 79 Carry Forward and Set Off of Losses in the case of Closely held Company (1)
This section will apply to a company in which public are not substantially interested.
(2)
Where a change in shareholding has taken place in previous year,
then no loss, incurred in any year prior to that P.Y.
shall be carried forward and set off against the income of the previous year, unless,
on the last day of the P.Y. the shares of the company
carrying not less than 51% of the voting power
were beneficially held by persons
who beneficially held shares of the company carrying not less than 51% of the voting power
on the last day of the year in which the loss was incurred.
Exceptions:-
Where the change in shareholding has taken place due to the following reasons, then such change shall not be considered as a change in shareholding for the purpose of section 79. (a)
death of the shareholder
(b)
gift by a shareholder to his relative Shri Subhulaxmi Mills Ltd. (1995) (SC)
The provisions of section 79 are applicable only in case of carry forward of losses. The carry forward of depreciation is covered u/s 32(2) and therefore sec.79 will not restrict the carry forward and setoff of depreciation. J.H. Gotla [1985] 156 ITR 323 (SC)
Loss can be set off against income included under section 64.
B r i g h t P r o f e s s i o n a l s ( P ) L T D. 1/53, Lalita Park, Laxmi nagar, Delhi-92
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SEC 72A Provisions relating to Carry Forward and Set off of Accumulated loss and Unabsorbed Depreciation allowance in Amalgamation or Demerger, etc. (1) Where an Amalgamation has been taken place of a company owning an industrial undertaking or a ship or a hotel or a banking company with a Specified Bank or one or more public sector company engaged in the business of operation of aircraft with one or more public sector company engaged in similar business, then, the Accumulated Loss and the Unabsorbed Depreciation/Allowance of the amalgamating company shall be deemed to be the Current Year Loss or, Unabsorbed Depreciation/Allowance as the case may be, of the amalgamated company for the previous year in which the amalgamation was effected, and other provisions of this Act relating to set off and carry forward of loss and unabsorbed depreciation shall apply accordingly. (2)
Condition for availing benefit mention in sub-section (1) (a) the amalgamating company— (i) has been engaged in the business, in which the accumulated loss occurred or depreciation remains unabsorbed, for three or more years; (ii) has held continuously as on the date of the amalgamation at least three-fourths of the book value of fixed assets held by it two years prior to the date of amalgamation; (b) the amalgamated company— (i) should hold at least three-fourths of the book value of the assets of the amalgamating company acquired as a result of amalgamation for 5 years from the effective date of amalgamation. (ii) (iii)
continues the business of the amalgamating company for a minimum period of five years from the date of amalgamation; fulfils such other conditions as may be prescribed to ensure the revival of the business of the amalgamating company or to ensure that the amalgamation is for genuine business purpose.
(3)
In a case where any of the conditions laid down in sub-section (2) are not complied with, the set off of loss or allowance of depreciation made in any previous year in the hands of the amalgamated company shall be deemed to be the income of the amalgamated company chargeable to tax for the year in which such conditions are not complied with.
(4)
In the case of a Demerger, the Accumulated Loss and the Unabsorbed Depreciation of the Demerged company shall be set off and carried forward as under — (a) Where such loss or unabsorbed depreciation is directly relatable to the undertakings transferred to the resulting company, be allowed to be carried forward and set off in the hands of the Resulting company; (b) Where such loss or unabsorbed depreciation is not directly relatable to the undertakings transferred to the resulting company, be apportioned between the Demerged company and the Resulting
B r i g h t P r o f e s s i o n a l s ( P ) L T D. 1/53, Lalita Park, Laxmi nagar, Delhi-92
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company in the same proportion in which the assets of the undertakings have been retained by the demerged company and transferred to the resulting company, and be allowed to be carried forward and set off in the hands of the demerged company or the resulting company, as the case may be. (5)
The Central Government may, for the purposes of this Act, by notification in the Official Gazette, specify such conditions as it considers necessary to ensure that the demerger is for genuine business purposes.
Note : - The carry forward and set off of loss and unabsorbed depreciation as per above provisions shall be
allowed only when;
(6)
Amalgamation is as per the section 2(1B) of the Income Tax Act;
Demerger is as per the section 2(19AA) of the Income Tax Act.
Where there has been reorganisation of business, whereby, a firm is succeeded by a company fulfilling the conditions laid down in section 47 (xiii) or a proprietary concern is succeeded by a company fulfilling the conditions laid down in section 47(xiv), then, the Accumulated Loss and the Unabsorbed depreciation of the Predecessor firm or the proprietary concern, as the case may be, shall be deemed to be the Current Year Loss or depreciation of the successor company for the purpose of previous year in which business reorganisation was effected and other provisions of this Act relating to set off and carry forward of loss and allowance for depreciation shall apply accordingly: Provided that if any of the conditions laid down in the proviso to clause (xiii) or the proviso to clause (xiv) to section 47 are not complied with, the set off of loss or allowance of depreciation made in any previous year in the hands of the successor company, shall be deemed to be the income of the company chargeable to tax in the year in which such conditions are not complied with.
(6A)
Where there has been reorganisation of business whereby a private company or unlisted public company is succeeded by a limited liability partnership fulfilling the conditions laid down in the proviso to section 47(xiiib), then, notwithstanding anything contained in any other provision of this Act, the accumulated loss and the unabsorbed depreciation of the predecessor company, shall be deemed to be the loss or allowance for depreciation of the successor limited liability partnership for the purpose of the previous year in which business reorganisation was effected and other provisions of this Act relating to set off and carry forward of loss and allowance for depreciation shall apply accordingly : Provided that if any of the conditions laid down in the proviso to section 47(xiiib) are not complied with, the set off of loss or allowance of depreciation made in any previous year in the hands of the successor limited liability partnership, shall be deemed to be the income of the limited liability partnership chargeable to tax in the year in which such conditions are not complied with.
Rule 9C C o n d i t i o n s f o r c a r r y i n g f o r w a r d o r s e t - o f f o f a c c u m u l a t ed l o s s a n d u n a b s o r b e d d e p r e c i a t io n a l l o w a n c e i n c a s e o f a m a l g am a t i o n .
The conditions referred to in section 72A(2)(iii) be the following, namely:(a ) the amalgamated company, owning an industrial undertaking of the amalgamating company by way of
amalgamation, shall achieve the level of production of at least 50% of the installed capacity of the said undertaking before the end of 4 years from the date of amalgamation and continue to maintain the said minimum level of production till the end of five years from the date of amalgamation: B r i g h t P r o f e s s i o n a l s ( P ) L T D. 1/53, Lalita Park, Laxmi nagar, Delhi-92
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Provided that the Central Government, on an application made by the amalgamated company, may relax the condition of achieving the level of production or the period during which the same is to be achieved or both in suitable cases having regard to the genuine efforts made by the amalgamated company to attain the prescribed level of production and the circumstances preventing such efforts from achieving the same; (b ) the amalgamated company shall furnish to the Assessing Officer a certificate in Form No.62, duly verified
by an chartered accountant, with reference to the books of accounts and other documents showing particulars of production, along with the return of income for the assessment year relevant to the previous year during which the prescribed level of production is achieved and for subsequent assessment years relevant to the previous year falling within five years from the date of amalgamation. E x p l a n a t i o n : - For the purposes of this rule, -
"installed capacity" means the capacity of production existing on the date of amalgamation;
SEC 72AA Provisions relating to carry forward and set-off of accumulated loss and unabsorbed depreciation allowance in scheme of amalgamation of banking company in certain cases.
Notwithstanding anything contained in section 2(1B) or section 72A,
where there has been an amalgamation of a banking company with any other banking institution under a scheme sanctioned and brought into force by the Central Government under sub-section (7) of section 45 of the Banking Regulation Act, 1949,
the accumulated loss and the unabsorbed depreciation of such banking company
shall be deemed to be the loss or, as the case may be, allowance for depreciation of such banking institution for the previous year
in which the scheme of amalgamation was brought into force and other provisions of this Act relating to set-off and carry forward of loss and allowance for depreciation shall apply accordingly.
E x p l a n a t i o n .— For the purposes of this section,—
(i) “accumulated loss” means so much of the loss of the amalgamating banking company under the head “Profits and gains of business or profession” (not being a loss sustained in a speculation business) which such amalgamating banking company, would have been entitled to carry forward and set-off under the provisions of section 72 if the amalgamation had not taken place; (ii) “banking company” shall have the same meaning assigned to it in section 5(c) of the Banking Regulation Act, 1949; (iii) “banking institution” shall have the same meaning assigned to it in section 45(15) of the Banking Regulation Act, 1949; (iv) “unabsorbed depreciation” means so much of the allowance for d epreciation of the amalgamating banking company which remains to be allowed and which would have been allowed to such banking company if amalgamation had not taken place.
B r i g h t P r o f e s s i o n a l s ( P ) L T D. 1/53, Lalita Park, Laxmi nagar, Delhi-92
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SEC 72AB Provisions of carry forward and set off of accumulated loss and unabsorbed depreciation allowance in business reorganisation of co-operative banks (1) The assessee, being a successor co-operative bank, shall, in a case where the amalgamation has taken place during the previous year, be allowed to set off the accumulated loss and the unabsorbed depreciation, if any, of the predecessor co-operative bank as if the amalgamation had not taken place, and all the other provisions of this Act relating to set off and carry forward of loss and allowance for depreciation shall apply accordingly. (2) The provisions of this section shall apply if — (a) the predecessor co-operative bank— (i) has been engaged in the business of banking for three or more years; and (ii) has held at least three-fourths of the book value of fixed assets as on the date of the business reorganisation, continuously for two years prior to the date of business reorganisation; (b) the successor co-operative bank— (i) holds at least three-fourths of the book value of fixed assets of the predecessor co-operative bank acquired through business reorganisation, continuously for a minimum period of five years immediately succeeding the date of business reorganisation; (ii) continues the business of the predecessor co-operative bank for a minimum period of five years from the date of business reorganisation; and (iii) fulfils such other conditions as may be prescribed to ensure the revival of the business of the predecessor co-operative bank or to ensure that the business reorganisation is for genuine business purpose. (3) The amount of set-off of the accumulated loss and unabsorbed depreciation, if any, allowable to the assessee being a resulting co-operative bank shall be,— (i) the accumulated loss or unabsorbed depreciation of the demerged co-operative bank if the whole of the amount of such loss or unabsorbed depreciation is directly relatable to the undertakings transferred to the resulting co-operative bank; or (ii) the amount which bears the same proportion to the accumulated loss or unabsorbed depreciation of the demerged co-operative bank as the assets of the undertaking transferred to the resulting cooperative bank bears to the assets of the demerged co-operative bank if such accumulated loss or unabsorbed depreciation is not directly relatable to the undertakings transferred to the resulting cooperative bank. (4)
The Central Government may, for the purposes of this section, by notification in the Official Gazette, specify such other conditions as it considers necessary, other than those prescribed under sub-clause (iii) of clause (b) of sub-section (2), to ensure that the business reorganisation is for genuine business purposes.
(5) The period commencing from the beginning of the previous year and ending on the date immediately preceding the date of business reorganisa-tion, and the period commencing from the date of such business reorganisa-tion and ending with the previous year shall be deemed to be two different previous years for the purposes of set off and carry forward of loss and allowance for depreciation. (6)
In a case where the conditions specified in sub-section (2) or notified under sub-section (4) are not complied with, the set off of accumulated loss or unabsorbed depreciation allowed in any previous year
B r i g h t P r o f e s s i o n a l s ( P ) L T D. 1/53, Lalita Park, Laxmi nagar, Delhi-92
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to the successor co-operative bank shall be deemed to be the income of the successor co-operative bank chargeable to tax for the year in which the conditions are not complied with. (7) For the purposes of this section,— (a) “accumulated loss” means so much of loss of the amalgamating co-operative bank or the demerged co-operative bank, as the case may be, under the head “Profits and gains of business or profession” (not being a loss sustained in a speculation business) which such amalgamating co-operative bank or the demerged co-operative bank, would have been entitled to carry forward and set-off under the provisions of section 72 as if the business reorganisation had not taken place; (b) “unabsorbed depreciation” means so much of the allow ance for depreciation of the amalgamating co-operative bank or the demerged co-operative bank, as the case may be, which remains to be allowed and which would have been allowed to such bank as if the business reorganisation had not taken place; (c) the expressions “amalgamated co-operative bank”, “amalgamating co-operative bank”, “amalgamation”, “business reorganisation”, “co-operative bank”, “demerged co-operative bank”, “demerger”, “predecessor co-operative bank”, “successor co-operative bank” and “resulting cooperative bank” shall have the meanings respectively assigned to them in section 44DB.‟
SEC 80 Submission of Return for Losses Notwithstanding anything contained in this Chapter, no loss which has not been determined in pursuance of a return filed in accordance with the provisions of sub-section (3) of section 139, shall be carried forward and set off under sub-section (1) of section 72 or sub-section (2) of section 73 or sub-section (1) or sub-section (3) of section 74 or sub-section (3) of section 74A.
SEC 94(7) Dividend Stripping Where— (a) any person buys or acquires any securities or unit withi n a period of 3 months prior to the record date; (b) such person sells or transfers such securities within a period of 3 months or unit within a period of 9 months after such date; (c) the dividend or income on such securities or unit received or receivable by such person is exempt, then, the loss, if any, arising to him on account of such purchase and sale of securities or unit, to the extent such loss does not exceed the amount of dividend or income received or receivable on such securities or unit, shall be ignored for the purposes of computing his income chargeable to tax.
B r i g h t P r o f e s s i o n a l s ( P ) L T D. 1/53, Lalita Park, Laxmi nagar, Delhi-92
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Example 1:Mr. Raghupati furnishes you the following information for P.Y. 2009-10:(a)
Shares of Ram Ltd. purchased on 15-04-2009 for Rs. 2,00,000;
(b)
Dividend of Rs. 40,000 received on 20-06-2009 from the above shares;
(c)
Record date of distribution of dividend is 25-05-2009;
(d)
The entire shares of Ram Ltd. are sold on 20-07-2009 for Rs.
Case I :- Rs. 2,10,000 Case II :- Rs. 1,75,000 Case III :-Rs. 1,40,000 Answer :Case I : Dividend of Rs. 40,000/- will be exempt under section 10(34).
Short term capital gain on the sale of shares will be computed as under:Sales consideration Less :- cost of acquisition
Rs. 2,10,000 Rs. 2,00,000
STCG (profits) Rs. 10,000 Since there is no loss on the sale of shares, section 94(7) shall not apply.
Case II:
Dividend of Rs. 40,000/- will be exempt under section 10(34)
Short term capital gain on the sale of shares will be computed as under:Sales consideration Less :- cost of acquisition STCG (loss)
Rs. 1,75,000 Rs. 2,00,000 Rs.
25,000
The short term capital loss of Rs. 25,000/- shall not be allowed to be set off or carried forward by virtue of section 94(7).
Case III :
Dividend of Rs. 40,000/- will be exempt under section 10(34)
Short term capital gain on the sale of shares will be computed as under:-
Sales consideration
Rs. 1,40,000
Less :- cost of acquisition STCG (loss)
Rs. 2,00,000 Rs. 60,000
Out of the short term capital loss of Rs. 60,000/-, loss to the extent of dividend i.e. Rs. 40,000/- shall not be allowed to be set off or carried forward as per the provisions of section 94(7).
B r i g h t P r o f e s s i o n a l s ( P ) L T D. 1/53, Lalita Park, Laxmi nagar, Delhi-92
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SEC 94(8) Bonus Stripping Where— (a) any person buys or acquires any units (original unit) within a period of 3 months prior to the record date; (b) such person is allotted additional units (Bonus units) without any payment on the basis of holding of such units on such date; (c) such person sells or transfers all or any of the aforesaid original units within a period of 9 months after such date, while continuing to hold all or any of the Bonus units, then, the loss, if any, arising to him on account of such purchase and sale of all or any of original units shall be ignored for the purposes of computing his income chargeable to tax and notwithstanding anything contained in any other provision of this Act, the amount of loss so ignored shall be deemed to be the cost of purchase or acquisition of Bonus units as are held by him on the date of such sale or transfer. Note:-
“Record date” means such date as may be fixed by— (i) a company for the purposes of entitlement of the holder of the securities to receive dividend; or (ii) a Mutual Fund or the Administrator of the specified undertaking or the specified company as referred to in the Explanation to clause (35) of section 10, for the purposes of entitlement of the holder of the units to receive income, or Bonus unit, as the case may be;
Bond Washing Transaction A bond-washing transaction is a transaction where securities are sold sometime before the due date of interest and reacquired after the due date is over. This practice is adopted by persons in the higher income group to avoid tax by transferring the securities to their relatives/friends in the lower income group just before the due date of payment of interest. In such a case, interest would be taxable in the hands of the transferee, who is the legal owner of securities. In order to discourage such practice, section 94(1) provides that where the owner of a security transfers the security just before the due date of interest and buys back the same immediately after the due date and interest is received by the transferee, such interest income will be deemed to be the income of the transferor and would be taxable in his hands. In order to prevent the practice of sale of securities-cum-interest, section 94(2) provides that if an assessee who has beneficial interest in securities sells such securities in such a manner that either no income is received or income received is less than the sum he would have received if such interest had accrued from day to day, then income from such securities for the whole year would be deemed to be the income of the assessee.
B r i g h t P r o f e s s i o n a l s ( P ) L T D. 1/53, Lalita Park, Laxmi nagar, Delhi-92
P h o n e – 4 7 6 6 5 5 5 5 ( 3 0 L i n e s ) , 9 8 1 1 1 3 6 9 8 7 , 9 8 1 1 0 4 2 4 5 8
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