Page 93 - DCOM508_CORPORATE_TAX_PLANNING

Corporate Tax Planning

Notes Expenses deductions under section 30 to 37 are of two types. The first is specifi c deductions

which are covered under section 30 to 35 and second is general deductions which are
covered under section 36 and 37. Specific deductions are allowed only to some of the

businesses while general deductions are allowed to all the businesses.

Example: Mr. B, a resident individual, furnishes the following particulars for the P. Y.
2012-13:

Income from salary (Net) 45,000
Income from house property (24,000)
Income from business – non-speculative (22,000)
Income from speculative business (4,000)
Short-term capital gains (25,000)
Long-term capital gains 19,000

The total taxable income of Mr. B for assessment year 2013-14 in this case can be computed as:
Income from salaries 45,000
Income from house property (24,000) 21,000

Profits and gains of business and profession
Business loss to be carried forward (Note 1) (22,000)
Speculative loss to be carried forward (Note 2) (4,000)
Capital Gains

Long-term capital gain 19,000
Short-term capital loss (25,000)
Short-term capital loss to be carried forward (Note 3) (6,000)
Taxable Income 21,000
Note 1: Business loss cannot be set-off against salary income. Therefore, loss of ` 22,000 from the
non-speculative business cannot be set off against the income from salaries. Hence, such loss has
to be carried forward to the next year for set-off against business profits, if any.

Note 2: Loss of ` 4,000 from the speculative business can be set off only against the income from
the speculative business. Hence, such loss has to be carried forward.
Note 3: Short-term capital loss can be set off against both short-term capital gain and long-term
capital gain. Therefore, short-term capital loss of ` 25,000 can be set-off against long-term capital
gains to the extent of ` 19,000. The balance short-term capital loss of ` 6,000 cannot be set-off
against any other income and has to be carried forward to the next year for set-off against capital
gains, if any.
!

Caution Where more than one tax year’s losses are being carried forward, the loss of the
earliest tax year shall be set off fi rst.
Any amount of unabsorbed depreciation shall be allowed as deduction against the incomes of
following tax years. There is no limit of six tax years for carry forward of unabsorbed depreciation.
Where losses and unabsorbed depreciation occur together, the losses shall be adjusted fi rst and
depreciation shall be adjusted last.

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