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Carry forward and set off of business loss other than speculation loss – Sec 72

U.C Date : 25 Feb 2015

If there is a loss from a business/profession and it cannot be set off or only partially set off under the same head or other head of income u/s 71 then  such loss can be carried forward to subsequent years. The loss so carried forward can be set off from profits and gains of any business or profession (not from income under other heads).

Loss can be carried forward for a period of eight years from the year in which the loss is occurred.

Loss can be set off even if the business to which the loss relates is not in existence in the year of set off.

These provisions doesn’t apply to speculation loss.

Loss can be carried forward only when a return is filed by assessee under sec 139 within due date. If return is submitted after due date the delay may be condoned if a few conditions are satisfied. Circular no. 8/2001 dated may 16 2001

Loss u/s 35AD can be set off only from profits of businesses referred to in sec 35AD.

Bare Act for Sec 72

Bare Act for Sec 72

(1) Where for any assessment year, the net result of the computation under the head “Profits and gains of business or profession” is a loss to the assessee, not being a loss sustained in a speculation business, and such loss cannot be or is not wholly set off against income under any head of income in accordance with the provisions of section 71, so much of the loss as has not been so set off or,  where he has no income under any other head, the whole loss shall, subject to the other provisions of this Chapter, be carried forward to the following assessment year, and—

(i)  it shall be set off against the profits and gains, if any, of any business or profession carried on by him and assessable for that assessment year ;

(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 :] [Provided that where the whole or any part of such loss is sustained in any such business as is referred to in section 33B which is discontinued in the circumstances specified in that section, and, thereafter, at any time before the expiry of the period of three years referred to in that section, such business is re-established, reconstructed or revived by the assessee, so much of the loss as is attributable to such business shall be carried forward to the assessment year relevant to the previous year in which the business is so re-established, reconstructed or revived, and—

(a)  it shall be set off against the profits and gains, if any, of that business or any other business carried on by him and assessable for that assessment year; and

(b)  if the loss cannot be wholly so set off, the amount of loss not so set off shall, in case the business so re-established, reconstructed or revived continues to be carried on by the assessee, be carried forward to the following assessment year and so on for seven assessment years immediately succeeding.]

(2) Where any allowance or part thereof is, under sub-section (2) of section 32 or sub-section (4) of section 35, to be carried forward, effect shall first be given to the provisions of this section.

(3) No loss [(other than the loss referred to in the proviso to sub-section (1) of this section)] shall be carried forward under this section for more than eight assessment years immediately succeeding the assessment year for which the loss was first computed.

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