Key Takeaways: - Provisions dealing with set-off and carry forward - Inter-head and Inter-Source Set-off of Losses - Carry Forward and Set-off of Losses in Special Cases

1. Set off and Carry Forward of Losses
CA Jugal Gala

2. Credits & Acknowledgements
Subash R

3. Legends Used in the Presentation
AY Assessment Year
IFHP Income From House Property
LTCG Long Term Capital Gain
LTCL Long Term Capital Loss
PY Previous Year

4. Presentation Schema
Concept of Set Off
and Carry Forward
Inter-Source Set-Off
(Sec-70)
Inter Head Set-Off
(Sec-71)
Carry Forward and
Set Off of Losses from
House Property (Sec
71-B)
Carry Forward and
Set Off of Business
Losses (Sec 72)
Losses in
Speculation
Business (Sec 73)
Carry Forward and
Set Off of Losses by
Specified
Businesses (Sec
73A)
Losses Under the
Head Capital Gains
(Sec 74)
Losses from certain
specified sources
falling under the head
"Income from other
sources” (Sec 74A)
Carry Forward and
Set Off in
Amalgamation or
Demerger etc (Sec
72A)
Carry Forward and
Set Off in Certain
Case of
Amalgamation (Sec
72AA)
Carry Forward and
Set Off in a Business
Re-Organisation of
Co-operative Banks
(Sec 72AB)
Carry Forward and
Set Off of Losses in
Case of Change in
Constitution of Firm
or on Succession (Sec
78)
Carry Forward and
Set Off of Losses in
Case of Certain
Companies. (Sec
79)
Return of Loss (Sec
80)

5. Concept of Set Off and Carry Forward of Losses
• Adjustment of losses against the profits from another
source/head of income in the same AY.
Set Off of Loss
• Where losses cannot be set off in the same year due to
inadequacy of profits/income, then such losses are carried
forward to the next AY for adjustment against the
profits/income of that year
Carry Forward of Loss

6. Structure of Provisions
Chapter VI of
Income Tax Act
Inter Head/Inter
Source Set off
Sections 70-71
Carry-Forward and
Set-off
Sections 71B, 72,
73, 73A, 74, 74A
Carry Forward and
Set-Off- Special
Cases
Sections 72A, 72AA,
72AB, 78, 79
Return of Loss
Section 80

7. Inter- Source and Inter-Head
Set-Off

8. Section 70-Set Off Of Loss from One Source Against
Income from Another Source Under the Same Head of
Income.
Section 70 provides for inter-source set-off of losses within the same head.
Where the net result for an AY in respect of an income is loss, then such loss is eligible to be set-off against the
income from any other source under the same head.
Examples: Loss from one house property can be set-off against income from another house property. Loss from
textile business can be set off against the income from say printing business.
Exceptions
Long Term Capital Loss [70(3)] can be set-off only against long term capital gain and not against short term capital
gain.
Loss in Speculation Business [73(1)] can be set off only against profits of another speculation business and not
against any other business or professional income.
Loss from Activity of Owning and Maintaining Race Horses [74A(3)] can be set off only against the income from the
same activity.
Loss from Specified Business [73A(1)] referred to in Sec 35AD can be set off only against income from any other
specified business. However Losses from other business can be set-off against profits from specified business.

9. Section 71- Set Off Of Loss from One Head Against
Income from Another.
Section 71 provides for inter-head set off of losses.
Loss from one head of income in an AY can be set-off against income from any other head of income.
Examples: Loss from Hotel Business can be set off against income from house property. Loss from IFHP can be set
off against income from Capital Gains.
Exceptions
Loss under the head PGBP cannot be set off against income from salary.
Loss under the head Capital Gains cannot be set off against income from any other head.
Loss under the head IFHP can be set off against income from any other head only to the extent of Rs. 2,00,000.
Loss from specified business referred to in Section 35AD can be set off only against the income from specified
business.

10. Illustration- Inter-Head Set off
Loss from IFHP: Rs. 10,00,000
Income from Business: Rs. 25,00,000
Income from Long Term Capital: Rs. 4,00,000
Particulars Amount (Rs.) Amount (Rs.)
I) PGBP 25,00,000
Less: Loss from IFHP to be set-off (2,00,000) 23,00,000
II) Capital Gains 4,00,000
Less: Loss from IFHP to be set-off (2,00,000) 2,00,000
Net Total Income 25,00,000
Remaining Loss to be Carried Forward 6,00,000

11. Summary
Loss from
IFHP PGBP Capital Gains
Activity of
Owning &
Maintaining
Race horse
Any Other Source
without limit or Any
Other Head to the
extent of Rs.
2,00,000;
Any Other Source
or Any Other Head,
except Salaries.
Loss from
Speculation/
Specified Business
can be set off only
against similar
losses.
Only against
income from
Capital Gains.
LTLCL to be set off
only against LTCG.
Only against
income from
Activity of Owning
and Maintaining
Race Horses

12. Carry Forward and Set-off

13. Section 71B- Carry Forward and Set Off of
Losses from House Property
Loss under the head IFHP can be carried forward for setting off against income from house property
for eight AYs immediately succeeding the AY in which the loss was initially computed.
Example: For AY 2020-21 Loss from House Property is Rs. 8 lakhs. Income from Business is Rs. 25 lakhs.
Loss set- off during the year against Business is Rs. 2 lakhs. Remaining loss of Rs. 6 lakhs from House
Property can be carried forward for the next eight Ays i.e. upto AY 2028-29 for setting off against other
heads of income or other sources of income under the same head.
But subsequent set-off can be made only against income from house property.

14. Sec 72- Carry Forward and Set Off of Business
Losses
Loss under the head PGBP, other than loss from speculation business, computed with respect to an AY,
can be set off against any other head of income and any other source of income.for that AY except for
salaries
As per Sec 72(1), Where loss under PGBP cannot be fully set off in the initial AY or where the assessee
has no other heads of income, then such loss can be carried forward to the next AY and so on upto
eight immediately succeeding AYs. However the loss so carried forward can be set off only against
income from sources under the head PGBP.
Effect of allowances carried forward w.r.t. unabsorbed depreciation [32(2)] and Capital Expenditure on
Scientific Research [35(4)] shall be given effect only after the loss that is to be set off under Section 72.

15. Sec 72- Contd- Loss from Discontinued
Business
The loss arising from discontinued business of an industrial undertaking, as referred to in Section 33B
(Rehabilitation Allowance) which is re-established within a period of three years from the year of
discontinuance, shall be carried forward to the AY relevant to the PY in which the business is so re-
established and 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 the remaining loss if any shall
be set off or carried forward for not more than seven immediately succeeding AYs.
No loss other than the loss from discontinued business shall be carried forward under Sec-72 for more
than eight AYs immediately succeeding the AY for which the loss was first computed.
For the purposes of Section 33B "industrial undertaking" means any undertaking which is mainly
engaged in the business of generation or distribution of electricity or any other form of power or in the
construction of ships or in the manufacture or processing of goods or in mining.

16. Illustration for Loss from Discontinued Business
ABC Ltd, which is engaged in the business of mining, suffered heavy damage from floods in FY 2020-
21, due to which all its extractors were damaged.
Plans were made by ABC Ltd to revive the business in 2021-22 and the business was again revived in
FY 2022-23 and mining resumed.
Since, the business was again re-established within a period of three years from the year of
discontinuance, the loss incurred by ABC Ltd in the FY 2020-21 can be set off against the income if any
from the same business in the AY 2023-24 (i.e. FY 2022-23)

17. Section 73- Losses in Speculation Business
As per Section 45(5), "speculative transaction" means a transaction in which a contract for the purchase or sale
of any commodity, including stocks and shares, is periodically or ultimately settled otherwise than by the actual
delivery or transfer of the commodity or scrips.
As per Explanation 2 to Section 28 (PGBP), “Where speculative transactions carried on by an assessee are of
such a nature as to constitute a business, the business (hereinafter referred to as "speculation business") shall
be deemed to be distinct and separate from any other business.”
The Explanation to Section 73 provides that where any part of the business of a company consists in the
purchase and sale of the shares of other companies, such a company shall be deemed to be carrying on
speculation business to the extent to which the business consists of the purchase and sale of such shares.
However, this deeming provision does not apply to the following companies –
• A company whose gross total income consists of mainly income chargeable under the heads “Income
from house property”, “Capital gains” and “Income from other sources”;
• A company, the principal business of which is –
• the business of trading in shares; or
• the business of banking; or
• the granting of loans and advances.
Thus, these companies would be exempted from the operation of this Explanation. Accordingly, if these
companies carry on the business of purchase and sale of shares of other companies, they would not be
deemed to be carrying on speculation business.

18. Set-off/ Carry Forward of Losses in Speculation
Business
Loss from speculation business can be set off only against income from that or any other
speculation business.
Loss from speculation business as is not so set off shall be carried forward to the following
AYs and the loss so carried forward shall be set off against the income from speculation
business of that AY and the remaining loss if any shall be carried forward to the next AY.
No loss shall be carried forward under this section for more than four AYs immediately
succeeding the AY for which the loss was initially computed.
Allowance on account of depreciation or capital expenditure on scientific research, shall be
given effect only after set off of speculation loss under this section.

19. Sec 73A- Carry Forward and Set Off of Losses by
Specified Businesses
(i) setting up and operating a cold chain facility;
(ii) setting up and operating a warehousing facility for
storage of agricultural produce;
(iii) laying and operating a cross-country natural gas or crude
or petroleum oil pipeline network for distribution, including
storage facilities being an integral part of such network;
(iv) building and operating, anywhere in India, a hotel of
two-star or above category as classified by the CG;
(v) building and operating, anywhere in India, a hospital
with at least one hundred beds for patients;
(vi) developing and building a housing project under a
scheme for slum redevelopment or rehabilitation framed
by the CG or SG
(vii) developing and building a housing project under a
scheme for affordable housing framed by the CG or SG
As per section 35AD(8)"specified business" means any one or more of the following businesses, namely
(viii) production of fertilizer in India;
(ix) setting up and operating an inland container depot or
a container freight station notified or approved under the
Customs Act, 1962 (52 of 1962);
(x) bee-keeping and production of honey and beeswax;
(xi) setting up and operating a warehousing facility for
storage of sugar;
(xii) laying and operating a slurry pipeline for the
transportation of iron ore;
(xiii) setting up and operating a semi-conductor wafer
fabrication manufacturing unit notified by the Board in
accordance with such guidelines as may be prescribed;
(xiv) developing or maintaining and operating or
developing, maintaining and operating a new
infrastructure facility;

20. Carry Forward and Set Off of Losses by
Specified Businesses
Loss from specified business as referred to in Sec 35AD shall be set off only against income from any
other specified business.
Loss from specified business which has not been wholly set off or the whole of such loss where the
assessee has no other income from any other specified business shall be carried forward and set off
against the income from specified business of the following AY.
Example: Income from textile business, Rs. 30 lakhs and loss from operating warehouse facility for
storage of agricultural produce (specified business) Rs. 25 lakhs. Since loss from specified business
cannot be set off against any other source other than income from specified business, the loss of Rs.
25 lakhs has to be carried forward to the next AY for set off
Loss from specified business that is not set off can be carried forward indefinitely.

21. Sec-74- Losses Under the Head Capital Gains-
Set off and Carry Forward
Capital Loss
Set off of STCL
STCG LTCG
Set off of LTCL
LTCG
Remaining loss if any shall be carried forward for not more than 8 AYs.

22. Sec 74A- Losses from certain specified sources
falling under the head "Income from other
sources
Loss from activity of owning and maintaining race horses cannot be set off against income from any
other source other than income arising from the activity of owning and maintaining race horses.
Loss that is not so set-off shall be carried forward for not more than four AYs immediately succeeding
the AY in respect of which the loss was so computed.

23. Illustration- Carry Forward and Set-off
Mr. D has the following income for the P.Y.2019-20- What is the total income in the hands of Mr. D for
the A.Y. 2020-21?
Particulars Amount (Rs.)
Income from the activity of owning and maintaining the race
horses
75,000
Income from textile business 85,000
Brought forward textile business loss (relating to AY 2018-19) (50,000)
Brought forward loss from the activity of owning and maintaining
the race horses (relating to A.Y.2017-18)
(96,000)

24. Solution
Particulars Amount (Rs.) Amount (Rs.)
Income from the activity of owning and maintaining the race
horses
75,000
Less: Loss from Activity of Owning and Maintaining Race Horse
brought forward- Rs. 96,000
(75,000) 0
Income from Textile Business 85,000
Less: Textile Business Loss brought forward Rs. 85,000 (50,000) 35,000
Net Total Income 35,000
Loss to be Carried Forward:
Textile Business: Rs. 35,000 (eligible to be carried forward upto AY
2026-27)
Loss from Owning and Maintaining Race Horse: Rs. 21,000
(eligible to be carried forward upto AY 2021-22)

25. Summary
Loss from
IFHP PGBP Capital Gains
Activity of
Owning &
Maintaining
Race horse
Set-Off only against
IFHP;
Set-Off against any
Business Income;
Loss from
Speculation/
Specified Business
can be set off only
against similar
losses.
Set-Off only against
Capital Gains;
Set-off only against
Income from Owning
and Maintaining
Race Horses;
Carry Forward-
Normal- 8AYs
Speculation- 4AYs
Specified- No limit
Carry Forward-
8 AYs
Carry Forward-
8 AYs
Carry Forward-
4 AYs

26. Carry Forward or Set-Off in Case
of Business Re-Organisation

27. Section 72A- Carry Forward and Set Off of Accumulated Loss
and Unabsorbed Depreciation Allowance in Amalgamation or
Demerger, Etc.
This section applies where there has been an amalgamation of –
• a company owning an industrial undertaking or a ship or a hotel with another company; or
• an amalgamation of a banking company with a specified bank; or
• public sector companies engaged in the business of operation of aircrafts.
In case of amalgamation of above mentioned companies, then the accumulated business loss or unabsorbed
depreciation of the amalgamating company shall be deemed to be the loss or as the case maybe unabsorbed
depreciation of amalgamated company and all provisions of set-off and carry forward of losses shall apply
accordingly.
In case the conditions for eligibility of carry forward are not met, 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.
As per clause (aa) of Sec 72A(7)- “Industrial Undertaking means any undertaking which is engaged in manufacture
or processing of goods, manufacture of computer software, or engaged in the business of generation or
distribution of electricity or any other form of power, or business of providing telecommunication services, mining,
or construction of ships, aircrafts or rail systems.”
As per Section 2(1B)- the company or companies which so merge being referred to as the amalgamating company
or companies and the company with which they merge or which is formed as a result of the merger, as the
amalgamated company

28. Condition for Carry Forward and Set Off of Loss in
Case of Amalgamation [72A(2)]
Company Condition to be satisfied for carry forward of Business Loss
By
Amalgamating
Company
• The amalgamating company should have been engaged in the business, in which the
accumulated loss occurred or depreciation remains unabsorbed, for 3 or more years.
• The amalgamating company has held continuously as on the date of amalgamation, at least
3/4th of the book value of the fixed assets held by it, 2 years prior to the date of
amalgamation.
By Amalgamated
Company
• To hold at least 3/4th in the book value of fixed assets of the amalgamating company
acquired as a result of amalgamation for a minimum period of 5 years from the effective date
of amalgamation.
• To continue the business of the amalgamating company for at least 5 years.
• In case of industrial undertaking obtained from amalgamating company, to achieve the level of
production of at least 50% of the installed capacity of the said undertaking before the end of
four years from the date of amalgamation and continue to maintain the said minimum level of
production till the end of 5 years from the date of amalgamation
• The amalgamated company shall furnish to the Assessing Officer a certificate in Form No. 62 as
provided in rule 9C.

29. Carry Forward and Set off of Loss in Case of
Demerger [72A(4)]
Situation Accumulated Losses and Unabsorbed Depreciation
Where loss or unabsorbed depreciation
is directly relatable to the undertakings
transferred to the resulting company
Allowed to be carried forward and set off in the hands of the
resulting company
Where such loss or unabsorbed
depreciation is not directly relatable to
the undertakings transferred to the
resulting company
Apportioned between the demerged company and the resulting
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

30. Carry Forward and Set-Off of Loss in Case of
Reorganization [72A(6)]
Situation Accumulated Losses and Unabsorbed Depreciation
Succession of Firm by a company
as per clause (xiii) of section 47 or
of a Proprietary Concern as per
clause (xiv) of Section 47.
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 loss or allowance for
depreciation of the successor company
However, if the conditions prescribed in clause (xiii) or as the case maybe clause (xiv) of Section 47 are not
satisfied, then 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.

31. Illustration- Set off or Carry Forward of Business loss
and Unabsorbed Depreciation
ABC Limited was amalgamated with XYZ Limited on 01.04.2019. All the conditions of section 2(1B)
were satisfied.
ABC Limited has the following carried forward losses as assessed till the Assessment Year 2019-20:
Particulars Amount (Rs. In lacs)
Speculative Loss 4
Unabsorbed Depreciation 18
Unabsorbed expenditure of capital
nature on scientific research
2
Business loss 120
XYZ Limited has computed a profit of ` 140 lacs for the financial year 2019-20. The above profit of XYZ
Limited includes speculative profit of ` 10 lacs.
Compute the total income of XYZ Limited for Assessment Year 2020-21 and indicate the losses/ other
allowances to be carried forward by it.

32. Solution
Particulars Amount (Rs. In Lacs)
Business income before setting-off brought forward losses of ABC Ltd. 140
Less: Set-off of brought forward business loss of ABC Ltd. (120)
Less: Set-off of unabsorbed depreciation under section 32(2) read with
section 72A
(18)
Less: Set-off of unabsorbed capital expenditure under section 35(1)(iv) read
with section 35(4)
(2)
Total Income 0
As per section 72A(7), the accumulated loss to be carried forward specifically excludes loss sustained in a
speculative business. Therefore, speculative loss of ` 4 lacs of ABC Ltd. cannot be carried forward by XYZ
Ltd.
Section 72(2) provides that where any allowance or part thereof unabsorbed under section 32(2) (i.e.,
unabsorbed depreciation) or section 35(4) (i.e., unabsorbed scientific research capital expenditure) is to
be carried forward, effect has to be first given to brought forward business losses under section 72.
there is no restriction under the Income-tax Act, 1961 regarding set-off of normal business losses against
speculative income. Therefore, normal business losses can be set-off against profits of a speculative
business.
Note

33. Sec 72AA- Carry Forward And Set Off of Accumulated Loss And
Unabsorbed Depreciation Allowance In Scheme Of Amalgamation
In Certain Cases
one or more Government company or companies with any other Government company u/s 16 of the General
Insurance Business (Nationalisation) Act,
one or more corresponding new bank or banks with any other corresponding new bank u/s 9 of the Banking
Companies (Acquisition and Transfer of Undertakings) Act, 1970 or 1980 or both
one or more banking company with any other banking institution u/s 45(7) of Banking Regulation Act, 1949
This section applies to amalgamation of
The accumulated loss and the unabsorbed depreciation of such banking company or
amalgamating corresponding new bank or amalgamating Government company shall be
deemed to be the loss or allowance for depreciation of the resulting institution.

34. Sec 72AB- Provisions Relating to Carry Forward and Set-off of
Accumulated Loss and Unabsorbed Depreciation Allowance in
Business Re-Organisation of Co-operative Banks.
Under this section, in a case where the amalgamation has taken place during the previous year, set-off of
accumulated loss and the unabsorbed depreciation of the predecessor co-operative bank will be allowed in
the hands of the successor co-operative bank as if the amalgamation had not taken place.
Condition Quantum of Accumulated Loss and Unabsorbed Depreciation
If the whole of the amount of such
loss or unabsorbed depreciation is
directly relatable to the undertakings
transferred
Whole of the accumulated loss or unabsorbed depreciation of
the demerged co-operative bank is allowed for set off
If the accumulated loss or
unabsorbed depreciation is not
directly relatable to the undertakings
transferred to the resulting co-
operative bank
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 co-operative bank bears to the assets of the
demerged co-operative bank.

35. Contd-
If A Co-op Bank is the demerged co-operative bank (predecessor) and B Co-op Bank is the resulting co-
operative bank (successor), the amount of set-off of the accumulated loss and unabsorbed depreciation
allowable to B Co-op. bank would be as under
{Unabsorbed Business loss or Depreciation of A} X {Assets of the undertaking transferred to B/ Assets of A}

36. Conditions to be fulfilled in case of re-organization
of Co-operative Banks [72AB(2)]
Bank Conditions to be fulfilled for carry forward of Loss and Unabsorbed Depreciation
By Predecessor Co-
operative Bank
• Should have been engaged in the business of banking for three or more years
• Has held 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;
By Successor Co-
operative Bank
• 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 reorganization
• Continues the business of the predecessor co-operative bank for a minimum period of five years
from the date of business reorganization
• 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.
The Central Government may, for the purposes of this section, by notification in the Official Gazette, specify such other
conditions as it considers necessary, to ensure that the business re-organisation is for genuine business purposes.
In a case where the above conditions are not complied with, the set off of accumulated loss or unabsorbed
depreciation allowed in any previous year 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.

37. Sec 78- Carry Forward and Set Off of Losses In Case
of Change in Constitution of Firm or on Succession
Where there is a change in the constitution of a firm, then so much of the loss proportionate to the
share of a retired or deceased partner remaining unabsorbed shall not be allowed to be carried
forward by the firm.
Where a person’s capacity as a partner has been succeeded by another person otherwise than by
inheritance, then such other person shall not be allowed to carry forward or set off the loss of his
predecessor against his income.
Where there is a succession by inheritance, the legal heirs are entitled to set off the business loss of
the predecessor.
However unabsorbed depreciation can be carried forward by the firm as well as the succeeding -
partner.

38. Sec 79- Carry Forward and Set Off of Losses in Case
of Certain Companies.
Where in any previous year, a change in shareholding has taken place, the loss can be carried forward for set off
against the income of the previous year in which shareholding has changed only if the following condition is satisfied:
In case of a Closely Held Company
• On the last day of the previous year, the shares of the company carrying not less than 51% of the voting power
are 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 or years in which the loss was incurred
In case of Eligible Start Up under Section 80IAC:
• On the last day of the previous year, the shares of the company carrying not less than 51% of the voting power
are 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 or years in which the loss was incurred (or if that is not satisfied)
• Such loss has been incurred during the period of seven years beginning from the year in which such company is
incorporated (and) All the shareholders of such company who held shares carrying voting power on the last day
of the year or years in which the loss was incurred, continue to hold those shares on the last day of such
previous year

39. Illustration- Change in Shareholding
XYZ Lts has a business loss of Rs. 20,00,000 in FY 2019-20 (brought forward from FY 2016-17).
On 31st March 2017, the shareholding pattern of XYZ Ltd is as follows:
Shareholder Shareholding %
ABC Ltd 25%
BCD Ltd 54%
LCD Ltd 21%
There was a change in shareholding of XYZ Ltd in the year 2018-19 due to which BCD Ltd lost majority
holding. However as on 31st March 2020, there was another change in shareholding of XYZ Ltd as
follows:
Shareholder Shareholding %
ABC Ltd 25%
BCD Ltd 51%
LCD Ltd 24%

40. Solution
The loss brought forward from FY 2016-17 cannot be set-off against the income during the period
2018-19 as the holding of BCD Ltd which held 51% of the shares in the year the loss was incurred has
fallen below 51% in the year 2018-19.
However in the year 2019-20 the loss can be set-off as the holding of BCD Ltd has risen again to 51%.

41. Exception to Section 79
The conditions for carry forward of loss in case of change in shareholding do not apply in
the following cases:
Change in shareholding due to the death of a shareholder or on account of transfer of shares by way of gift to any
relative of the shareholder making such gift
any change in the shareholding of an Indian company which is a subsidiary of a foreign company as a result of
amalgamation or demerger of a foreign company subject to the condition that 51% shareholders of amalgamating or
demerged foreign company continue to be the shareholders of the amalgamated or the resulting foreign company;
Change in the shareholding pursuant to a resolution plan approved under the Insolvency and Bankruptcy Code, 2016
to a company, and its subsidiary and the subsidiary of such subsidiary, where,—
• the Tribunal, on an application moved by the CG under section 241 of the Companies Act, 2013, has suspended
the Board of Directors of such company and has appointed new directors u/s 242 of the said Act; and
• a change in shareholding of such company, and its subsidiary and the subsidiary of such subsidiary, has taken
place in a previous year pursuant to a resolution plan approved by the Tribunal u/s 242 of the Companies Act,
2013

42. Sec 80- Submission of Return for Losses
Section 80 stipulates that, the following losses computed under the head PGBP or Capital Gains shall
be allowed to be carry forward only when such loss has been computed in pursuance of return to be
filed u/s 139(3):
• business loss to be carried forward under section 72(1)
• speculation business loss to be carried forward under section 73(2)
• loss from specified business to carried forward under section 73A(2)
• loss under the head “Capital Gains” to be carried forward under section 74(1) and
• loss incurred in the activity of owning and maintaining race horses to be carried forward under
section 74A(3).
In general, if an assessee has incurred loss during the previous year, then he may choose not to file his
return of income.
However as per Section 139(3), in order to claim carry forward of loss computed under the head
“PGBP” or “Capital Gains” a return of loss in the prescribed form shall be filed by the assesse, and all
the provisions of this Act shall apply as if it were a return under sub-section (1) of Section 139.
Unabsorbed depreciation and loss from specified business can also be carried forward even if the
return of loss is submitted after the due date, as it is not covered under Chapter VI of set off or carry
forward of losses but covered under section 32(2) and section 35AD respectively.

43. Illustration- Return of Loss
An assessee sustained a loss under the head “Income from house property” in the previous year
relevant to the assessment year 2019-20, which could not be set off against income from any other
head in that assessment year. The assessee did not furnish the return of loss within the time allowed
under section 139(1) in respect of the relevant assessment year. However, the assessee filed the return
within the time allowed under section 139(4). Can the assessee carry forward such loss for set off
against income from house property of the assessment year 2020-21?
Section 139(3) stipulates that an assessee claiming carry forward of loss under the heads “Profits and
gains of business or profession” or “Capital gains” should furnish the return of loss within the time
stipulated under section 139(1).
There is no reference to loss under the head “Income from house property” in section 139(3).
The assessee, in the instant case, has filed the return showing loss from property within the time
prescribed under section 139(4). The assessee is, therefore, entitled to carry forward such loss for set
off against the income from house property of the subsequent assessment year.

44. Thank You!
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