“business loss carry forward”
The decision most relied on for business loss carry forward is Velayudhaswamy Spinning Mills (P) Ltd. v. ACIT (340 ITR 477), cited in 213 judgments on BharatTax.
Leading authorities on business loss carry forward
If unabsorbed depreciation or losses from years prior to the initial assessment year for Section 80-IA claim have already been set off against other income, they cannot be notionally carried forward again to reduce the profits of the eligible unit for computing deduction under Section 80-IA. The notional carry forward provision under Section 80-IA(5) applies only to unabsorbed depreciation or losses that have not yet been absorbed.
The Income Tax Act, 1961, does not permit the carry forward of excess expenditure of a charitable trust to be set off against future surpluses, as such trusts are governed by a self-contained code under Sections 11 to 13, not the head 'Profits and Gains of Business'. However, depreciation on fixed assets is allowable to a charitable institution registered under section 12A.
Deduction under Section 10A of the Income-tax Act is to be allowed only after setting off unabsorbed depreciation and brought forward business losses against the profits of the business.
Loss incurred by certain types of companies in trading derivatives is considered speculative loss under the Explanation to Section 73, as the value of stock derivatives depends on shares. Such speculative losses are ineligible for set-off or carry forward against business income.
In a scenario involving amalgamation, the accumulated losses and unabsorbed depreciation of an undertaking can be carried forward by the amalgamating company if it continues the business of the undertaking.
A business concern can still be considered to be carrying on its business even if there are long intervals of inactivity, provided it is kept alive, retains its registered office, and holds meetings. It is not necessary for a business to have work constantly to be considered in existence.
Section 72 of the Income Tax Act, 1961, deals with the carry forward of business losses and does not encompass the carry forward of depreciation, which is provided for under Section 32(2).
Profits of other businesses cannot be notionally brought forward and set off against profits of an eligible business under Section 80-IA(5) as the Income-Tax Act does not provide for such a mandate.
