Income Tax Act

Official PDF pages 171–175

SOURCE PDF PAGE 171
payee cheque, or through any mode as specified by the Board in this behalf, the
amount so borrowed or repaid (including interest paid on the borrowed amount)
shall be deemed to be the income of the person borrowing or repaying, as the case
may be, for the tax year in which the amount was borrowed or repaid.
(2) Where the amount borrowed under sub-section (1) has been deemed to be the
income of any person, such person shall not be liable to be assessed again in respect
of such amount under that sub-section on repayment of such amount.
Charge of tax.
107.   Income referred to in sections 102, 103, 104, 105 and 106 shall be charged
to tax as per the provisions of section 195.
CHAPTER VII
SET OFF, OR CARRY FORWARD AND SET OFF OF LOSSES
Set off of losses under same head of income.
108.   (1) Unless provided otherwise in this Act, for any tax year, if net result of
computation from any source under any head of income (other than
“Capital gains”) is a loss, then assessee shall be entitled to set off such loss against
his income from any other source under the same head for that tax year.
(2) Where the net result of computation of income made for any tax year under
sections 72 to 90 in respect of—
( a )   any short-term capital asset is a loss, such loss shall be set off against
the income, computed in respect of any other capital asset for that year;
( b )   any long-term capital asset is a loss, such loss shall be set off against the
income computed in respect of any other long-term capital asset for that
year.
Set off of losses under any other head of income.
109.   (1) Subject to the provisions of this Chapter, for any tax year, if income com-
puted under any head of income (other than “Capital gains”) is a loss,
such loss shall be set off against income of the assessee under any other head,
including “Capital gains”, if any, assessable for that tax year, subject to the following
conditions:—
( a )   loss under the head “Profits and gains of business or profession” shall
not be set off against income assessable under the head “Salaries”; and
( b )   loss under the head “Income from house property” shall be set off to the
extent of   `   200000 against income under any other head.
(2) For any tax year, the loss under the head “Capital gains” shall not be set off
against income under any other head.
Carry forward and set off of loss from house property.
110.   (1) Where for any tax year, loss computed under the head “Income from
house property” cannot be wholly set off against the income under any other
head as per section 109, so much of the loss not so set off or the whole loss, as the
case may be, shall be carried forward to the following tax year and—

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( a )   be set off only against the income from house property, if any, assessable
for that tax year; and
( b )   if the loss cannot be wholly so set off, the amount of loss not so set off
shall be carried forward to the following tax year and so on.
(2) No loss shall be carried forward under this section for more than eight tax years
immediately succeeding the tax year for which the loss was first computed.
Carry forward and set off of loss from Capital gains.
111.   (1)( a ) Where for any tax year, loss computed under the head “Capital gains”
cannot be wholly set off against the income under the head “Capital gains”
as per section 108, so much of the loss not so set off or the whole loss, as the case
may be, shall be carried forward to the following tax year and shall be set off in the
following manner—
( i )   if such loss relates to a short-term capital asset, it shall be set off only
against the income under the head “Capital gains”, if any, assessable for
that tax year in respect of any other capital asset;
( ii )   if such loss relates to a long-term capital asset, it shall be set off only
against the income under the head “Capital gains”, if any, assessable for
that tax year in respect of any other long-term capital asset; and
( b ) if the loss cannot be wholly so set off under clause ( a ), the amount of loss not so
set off shall be carried forward to the following tax year and so on.
(2) No loss shall be carried forward under this section for more than eight tax years
immediately succeeding the tax year for which the loss was first computed.
Carry forward and set off of business loss.
112.   (1) Where for any tax year, loss computed under the head “Profits and gains
of business or profession” (not being a loss sustained in a speculation business)
cannot be wholly set off against the income under any other head as per section
109, so much of the loss not so set off or the whole loss, as the case may be, shall
be carried forward to the following tax year and—
( i )   be set off against the profits and gains, if any, of any business or profes -
sion carried on by him for that tax 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 tax year and so on.
(2) No loss shall be carried forward under this section for more than eight tax years
immediately succeeding the tax year for which the loss was first computed.
(3) Where any allowance of part thereof under section 33(11) or 45(7) is to be carried
forward, effect shall first be given to the provision of this section.
Set off and carry forward of losses computed in respect of speculation
business.
113.   (1) Any loss, computed in respect of a speculation business carried on by
the assessee shall be set off only against profits and gains of another spec -
ulation business.
(2) Where for any tax year, loss computed in respect of a speculation business cannot
be wholly set off under sub-section (1), so much of the loss not so set off or the whole
loss, as the case may be, shall be carried forward to the following tax year and—

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( i )   be set off against the profits and gains, if any, of any speculation business
carried on by him for such tax 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 tax year and so on.
(3) No loss shall be carried forward under this section for more than four tax years
immediately succeeding the tax year for which the loss was first computed.
(4) Where any allowance of part thereof under section 33(11) or 45(7) related to
the speculation business is to be carried forward, effect shall first be given to the
provision of this section.
(5) In this section, where any part of the business of the assessee (being a compa -
ny) consists of purchase and sale of shares of other companies, then the assessee
shall be deemed to be carrying on a speculation business, to the extent to which its
business consists of purchase and sale of such shares.
(6) The provisions of sub-section (5) shall not apply to an assessee, being a company,
if—
( a )   its gross total income consists mainly of income which is chargeable
under the heads “Income from house property”, “Capital gains” or
“Income from other sources”; or
( b )   its principal business is of trading in shares or banking or the granting
of loans and advances.
Set off and carry forward of losses computed in respect of specified business.
114.   (1) Any loss, computed in respect of a specified business, referred to in section
46, shall be set off only against profits and gains of another specified business.
(2) Where for any tax year, loss computed in respect of a specified business cannot
be wholly set off under sub-section (1), so much of the loss not so set off or the whole
loss, as the case may be, shall be carried forward to the following tax year and—
( i )   be set off against the profits and gains, if any, of any specified business
carried on by him for such tax 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 tax year and so on.
Set off and carry forward of losses from specified activity.
115.   (1) Any loss incurred by the assessee in specified activity in any tax year shall
be set off only against income from specified activity.
(2) Where for any tax year, loss computed in respect of a specified activity cannot be
wholly set off under sub-section (1), so much of the loss not so set off or the whole
loss, as the case may be, shall be carried forward to the following tax year and—
( i )   be set off against the income, if any, of the specified activity carried on
by him for such tax 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 tax year and so on.
(3) No loss shall be carried forward under this section for more than four tax years
immediately succeeding the tax year for which the loss was first computed.

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(4) For the purposes of this section—
( a )   “horse race” means a horse race upon which wagering or betting may
be lawfully made;
( b )   “income by way of stake money” means the gross amount of prize money
received on a race horse or race horses by the owner thereof on account
of the horse or horses or any one or more of the horses winning a par -
ticular position in horse race;
( c )   “loss incurred by the assessee in specified activity” means the amount
by which the income by way of stake money, if any, falls short of the
expenditure, not being capital expenditure, incurred wholly and exclu -
sively for maintaining race horses;
( d )   “race horses” means horses owned and maintained by assessee for run -
ning in a horse race;
( e )   “specified activity” means the activity of owning and maintaining race
horses.
Treatment of accumulated losses and unabsorbed depreciation in amalgamation
or demerger, etc.
116.   (1) Where there has been an amalgamation of,—
( a )   a company owning an industrial undertaking or a ship or a hotel with
another company; or
( b )   a banking company referred to in section 5( c ) of the Banking Regulation
Act, 1949 (10 of 1949) with a specified bank; or
( c )   one or more public sector company with one or more other public sector
company; or
( d )   an erstwhile public sector company with one or more company or com -
panies, if the share purchase agreement entered into under strategic
disinvestment restricted immediate amalgamation of the said public
sector company and the amalgamation is carried out within five years
from the end of the tax year in which the restriction on amalgamation
in the share purchase agreement ends,
then, irrespective of anything contained in any other provision of this Act, the accu -
mulated loss and unabsorbed depreciation of the amalgamating company shall be
deemed to be the loss or, allowance for unabsorbed depreciation of the amalgam -
ated company for the tax year in which the amalgamation was effected, and other
provisions of this Act relating to set off and carry forward of loss and allowance for
depreciation shall apply accordingly.
(2) The accumulated loss and the unabsorbed depreciation of the amalgamating
company, in case of an amalgamation referred to in sub-section (1)( d ), which is
deemed to be the loss or, as the case may be, the unabsorbed depreciation of the
amalgamated company, shall not exceed the accumulated loss and unabsorbed
depreciation of the public sector company as on the date on which it ceases to be
a public sector company due to such strategic disinvestment.

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(3) For the purposes of sub-section (1)( d ),—
( a )   “control” shall have the same meaning as assigned to it in section 2( 27 )
of the Companies Act, 2013 (18 of 2013);
( b )   “erstwhile public sector company” means a company which was a public
sector company in earlier tax years and ceases to be so due to strategic
disinvestment by the Government;
( c )   ( i )   “strategic disinvestment” means sale of shareholding by the Central
Government or State Government or a public sector company, in
a public sector company or in a company, which results in—
( A )   reduction of its shareholding to below 51%; and
( B )   transfer of control to the buyer;
( ii )   for clause ( c )( i )( A ), the reduction of shareholding shall apply
only where shareholding of the Central Government or the State
Government or the public sector company exceeded 51% before
the sale of shareholding;
( iii )   the transfer of control referred to in clause ( c )( i )( B ) may be effected
by the Central Government or the State Government or the public
sector company or any two or all of them.
(4) Irrespective of anything contained in sub-sections (1), (2) and (3), the accumulated
loss shall not be set off or carried forward and the unabsorbed depreciation shall
not be allowed in the assessment of the amalgamated company unless,—
( 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
preceding the date of amalgamation;
( b )   the amalgamated company—
( i )   holds continuously for a minimum of five years from the date of
amalgamation at least three-fourths of the book value of fixed assets
of the amalgamating company acquired in a scheme of amalgama -
tion;
( ii )   continues the business of the amalgamating company for a mini -
mum of five years from the date of amalgamation;
( iii )   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.
(5) If any of the conditions laid down in sub-section (4) are not complied with, the
set off of loss or allowance of depreciation made in any tax year in the hands of