Chapter VI

 

Aggregation of income and set off or carry forward of loss

Aggregation of income

 

Total income.

66.       In computing the total income of an assessee, there shall be included all income on which no income-tax is payable under Chapter VII 2[1] [***].

 

Method of computing a partner’s share in the income of the firm.

67.       3[2]  [Omitted by the Finance Act, 1992, w.e.f. 1-4-1993.]

 

4[3] [Method of computing a member’s share in income of association of persons or body of individuals.

67A. (1)           In computing the total income of an assessee who is a member of an association of persons or a body or individuals wherein the shares of the members are determinate and known [other than a company or a cooperative society or a society registered under the Societies Registration Act, 1860 (21 of 1860), or under any law corresponding to that Act in force in any part of India], whether the net result of the computation of the total income of such association or body is a profit or a loss, his share (whether a net profit or net loss) shall be computed as follows, namely :—

 

(a)        any interest, salary, bonus, commission or remuneration by whatever name called, paid to any member in respect of the previous year shall be deducted from the total income of the association or body and the balance ascertained and apportioned among the members in the proportions in which they are entitled to share in the income of the association or body;

 

(b)        where the amount apportioned to a member under clause (a) is a profit, any interest, salary, bonus, commission or remuneration aforesaid paid to the member by the association or body in respect of the previous year shall be added to that amount, and the result shall be treated as the member’s share in the income of the association or body;

 

(c)        where the amount apportioned to a member under clause (a) is a loss, any interest, salary, bonus, commission or remu­neration aforesaid paid to the member by the association or body in respect of the previous year shall be adjusted against that amount, and the result shall be treated as the member’s share in the income of the association or body.

 

(2)           The share of a member in the income or loss of the associa­tion or body, as computed under sub-section (1), shall, for the purposes of assessment, be apportioned under the various heads of income in the same manner in which the income or loss of the asso­ciation or body has been determined under each head of income.

 

(3)           Any interest paid by a member on capital borrowed by him for the purposes of investment in the association or body shall, in computing his share chargeable under the head “Profits and gains of business or profession” in respect of his share in the income of the association or body, be deducted from his share.

 

Explanation.—In this section, “paid” has the same meaning as is assigned to it in clause (2) of section 43.]

 

Cash credits.

5[4] 68.            Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explana­tion offered by him is not, in the opinion of the 6[5] [Assessing] Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year.

 

Unexplained investments.

69.       Where in the financial year immediately preceding the assess­ment year the assessee has made investments which are not record­ed in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation of­fered by him is not, in the opinion of the 6[6] [Assessing] Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year.

 

7[7] [Unexplained money, etc.

69A.    Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the 8[8] [Assessing] Officer, satis­factory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year.]

 

9[9] [Amount of investments, etc., not fully disclosed in books of account.

69B.    Where in any financial year the assessee has made invest­ments or is found to be the owner of any bullion, jewellery or other valuable article, and the 8[10] [Assessing] Officer finds that the amount expended on making such investments or in acquiring such bullion, jewellery or other valuable article exceeds the amount recorded in this behalf in the books of account maintained by the assessee for any source of income, and the assessee offers no explanation about such excess amount or the explanation of­fered by him is not, in the opinion of the 8[11] [Assessing] Officer, satisfactory, the excess amount may be deemed to be the income of the assessee for such financial year.]

 

10[12] [Unexplained expenditure, etc.

69C.    Where in any financial year an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explanation, if any, offered by him is not in the opinion of the 8[13] [Assessing] Officer, satis­factory, the amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the asses­see for such financial year.]

 

11[14] [Amount borrowed or repaid on hundi.

12[15] 69D. Where any amount is borrowed on a hundi from, or any amount due thereon is repaid to, any person otherwise than through an account payee cheque drawn on a bank, the amount so borrowed or repaid shall be deemed to be the income of the person borrowing or repaying the amount aforesaid for the previous year in which the amount was borrowed or repaid, as the case may be:

 

Provided that, if in any case any amount borrowed on a hundi has been deemed under the provisions of this section to be the income of any person, such person shall not be liable to be assessed again in respect of such amount under the provisions of this section on repayment of such amount.

 

Explanation.—For the purposes of this section, the amount repaid shall include the amount of interest paid on the amount borrowed.]Set off, or carry forward and set off

 

13[16] [Set off of loss from one source against income from another source under the same head of income.

14[17] 70.        15[18] [***] Save as otherwise provided in this Act, where the net result for any assessment year in respect of any source falling under any head of income 16[19] [***] is a loss, the assessee shall be entitled to have the amount of such loss set off against his income from any other source under the same head.

            17[20] [***]

 

18[21] [Set off of loss from one head against income from another.

19[22] 71. (1)   Where in respect of any assessment year the net result of the computation under any head of income, other than “Capital gains”, is a loss and the assessee has no income under the head “Capital gains”, he shall subject to the provisions of this Chapter, be entitled to have the amount of such loss set off against his income, if any, assessable for that assessment year under any other head.

 

(2)           Where in respect of any assessment year, the net result of the computation under any head of income, other than “Capital gains”, is a loss and the assessee has income assessable under the head “Capital gains”, such loss may, subject to the provisions of this Chapter, be set off against his income, if any, assessable for that assessment year under any head of income including the head “Capital gains” (whether relating to short-term capital assets or any other capital assets).

 

(3)           Where in respect any assessment year, the net result of the computation under the head “Capital gains” is a loss and the assessee has income assessable under any other head of income the assessee shall not be entitled to have such loss set off against income under the other head.]

 

19a[23] [(4)         Notwithstanding anything contained in sub-sections (1) and (2),where in respect of any assessment year the net result of the computation, in relation to any property [other than the property referred to in sub-clause (i) of clause (a) of sub-section (2) of section 23], under the head “Income from house property” is a loss and the assessee has income assessable under any other head of income, the assessee shall not be entitled to have such loss set off against income under the other head.]

 

19a [24] [Carry forward of losses under the head “Income from house property”.

71A.    Where in respect of any assessment year, the net result of the computation under the head “Income from house property” is a loss, the loss in so far as it relates to interest on borrowed capital referred to in clause (vi) of sub-section (1) of section 24 shall be carried forward by the assessee to the following as­sessment year or years and set off against the income under that head.]

 

Carry forward and set off of business losses.

20[25] 72. 21[26] [(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, 22[27] [***] 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 beset off against the profits and gains, if any, of any business or profession carried on by him and assessa­ble for that assessment year:

 

Provided that the business or profession for which the loss was originally computed continued to be carried on by him in the previous year relevant for the assessment 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 assessment year and so on:]

 

23[28] [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 24[29] [(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.

 

25[30] [Provisions relating to carry forward and set off of accumulated loss and unabsorbed depreciation allowance in certain cases of amalgamation.

26[31] 72A.(1) Where there has been an amalgamation of a company owning an industrial undertaking or a ship with another company and the Central Government, on the recommendation of the speci­fied authority, is satisfied that the following conditions are fulfilled, namely:—

 

(a)        the amalgamating company was not, immediately before such amalgamation, financially viable by reason of its liabili­ties, losses and other relevant factors;

(b)        the amalgamation was in the public interest; and

(c)        such other conditions as the Central Government may, by notification in the Office Gazette, specify, to ensure that the benefit under this section is restricted to amalgamations which would facilitate the rehabilitation or revival of the business of the amalgamating company,then, the Central Government may make a declaration to that effect, and, thereupon, notwithstanding anything contained in any other provision of this Act, the accumulated loss and the unabsorbed depreciation of the amalgamating company shall be deemed to be the loss or, as the case may be, allowance for depreciation of the amalgamated company for the previous year in which the amalgamation was effected, and the other provisions of this Act relating to set off and carry forward of loss and allow­ance for depreciation shall apply accordingly.

 

(2)        Notwithstanding anything contained in sub-section (1), 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 the following conditions are fulfilled, namely:—

 

(i)         during the previous year relevant to the assessment year for which such set off or allowance is claimed, the business of the amalgamating company is carried on by the amalgamated company without any modification or reorganisation or with such modification or reorganisation as may be approved by the Central Government to enable the amalgamated company to carry on such business more economically or more efficiently;

(ii)        the amalgamated company furnishes, along with its return of income for the said assessment year, a certificate from the specified authority to the effect that adequate steps have been taken by that company for the rehabilitation or revival of the business of the amalgamating company.

 

27[32] [(3)        Where a company owning an industrial undertaking or a ship proposes to amalgamate with any other company and such other company submits the proposed scheme of amalgamation to the speci­fied authority and that authority is satisfied, after examining the scheme and taking into account all relevant facts, that the conditions referred to in sub-section (1) would be fulfilled if such amalgamation is effected in accordance with such scheme or, as the case may be, in accordance with such scheme as modified in such manner as that authority may specify, it shall intimate such other company that, after the amalgamation is effected in accord­ance with such scheme or, as the case may be, such scheme as so modified, it would make (unless there is any material change in the relevant facts) a recommendation to the Central Government under sub-section (1).]

 

            Explanation.—In this section,—

 

(a)        “accumulated loss” means so much of the loss of the amalgamating company under the head “Profits and gains of busi­ness or profession” (not being a loss sustained in a speculation business) which the amalgamating company would have been entitled to carry forward and set off under the provisions of section 72 if the amalgama­tion had not been effected;

 

28[33] (b)         “specified authority” means such authority as the Central Government may, by notification in the Official Gazette, specify for the purposes of this section;

 

(c)        “unabsorbed depreciation” means so much of the allow­ance for depreciation of the amalgamating company which remains to be allowed and which would have been allowed to the amalgamat­ing company under the provisions of this Act if the amalgamation had not been effected.]

 

Losses in speculation business.

29[34] 73. (1)   Any loss, computed in respect of a speculation business carried on by the assessee, shall not be set off except against profits and gains, if any, of another speculation business.

 (2)          Where for any assessment year any loss computed in respect of a speculation business has not been wholly set off under sub-section (1), so much of the loss as is not so set off or the whole loss where the assessee had no income from any other specu­lation business, 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 speculation business carried on by him assessable for that assessment 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 assessment year and so on.

 

 (3)          In respect of allowance on account of depreciation or capital expenditure on scientific research, the provisions of sub-section (2) of section 72 shall apply in relation to speculation business as they apply in relation to any other business.

 

 (4)          No loss 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.

 

30[35] [Explanation.—Where any part of the business of a company (31[36] [other than a company whose gross total income consists mainly of income which is chargeable under the heads “Interest on secu­rities”, “Income from house property”, “Capital gains” and “Income from other sources”,] or a company the principal business of which is the business of banking or the granting of loans and advances) consists in the purchase and sale of shares of other companies, such company shall, for the purposes of this sec­tion, be deemed to be carrying on a speculation business to the extent to which the business consists of the purchase and sale of such shares.]

 

32[37] [Losses under the head “Capital gains”.

74. (1)  Where in respect of any assessment year, the net result of the computation under the head “Capital gains” is a loss to the assessee 33[38] [***], the whole loss shall, subject to the other provisions of this Chapter, be carried forward to the following assessment year, and—

 

(a)        it shall be set off against income, if any, under the head “Capital gains” 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 be carried forward to the following assessment year, and so on.

 

(2) No loss 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.

 

(3) Any loss computed under the head “Capital gains” in respect of the assessment year commencing on the 1st day of April, 1987, or any earlier assessment year which is carried forward in accord­ance with the provisions of this section as it stood before the 1st day of April, 1988, shall be dealt with in the assessment year commencing on the 1st day of April, 1988, or any subsequent assessment year as follows :—

 

(a)        in so for as such loss relates to short-term capital assets, it shall be carried forward and set off n accordance with the provisions of sub-sections (1) and (2);

(b)        in so far as such loss relates to long-term capital assets, it shall be reduced by the deductions specified in sub-section (2) of section 48 and the reduced amount shall be carried forward and set off in accordance with the provisions of sub-section (1) but such carry forward shall not be allowed beyond the fourth assessment year immediately succeeding the assessment year for which the loss was first computed.]

 

34[39] [Losses from certain specified sources falling under the head “Income from other sources”.

 

74A.    (1)        35[40] [***]

            (2)        36[41] [***]

37[42]   (3) 38[43] [***] In the case of an assessee, being the owner of horses maintained by him for running in horse races (such horses being hereafter in this sub-section referred to as race horses), 39[44] [the amount of loss incurred by the assessee in the activity of owning and maintaining race horses in any assessment year shall not be set off against income, if any, from any source other than the activity of owning and maintaining race horses in that year and] shall, subject to the other provisions of this Chapter, be carried forward to the following assessment year and—

 

(a)        it shall be set off against the income, if any, 40[45] [from the activity of owning and maintaining race horses] assessable for that assessment year :

 

Provided that the activity of owning and maintaining race horses is carried on by him in the previous year relevant for that assessment 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 assessment year and so on; so, however, that no portion of the loss shall be carried forward for more than four assessment years immediately succeeding the assessment year for which the loss was first computed.

 

            Explanation.—For the purposes of this sub-section—

(a)        “amount of loss incurred by the assessee in the activi­ty of owning and maintaining race horses” means—

 

(i)         in a case where the assessee has no income by way of stake money, the amount of expenditure (not being in the nature of capital expenditure) laid out or expended by him wholly and exclusively for the purposes of maintaining race horses;

(ii)        in a case where the assessee has income by way of stake money the amount by which such income falls short of the amount of expenditure (not being in the nature of capital expenditure) laid out or expended by the assessee wholly and exclusively for the purposes of maintaining race horses;

 

(b)        “horse race” means a horse race upon which wagering or betting may be lawfully made;

 

(c)        “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 or being placed second or in any lower position in horse races.]

 

41[46] [Losses of firms.

 

75.       Where the assessee is a firm, any loss in relation to the assessment year commencing on or before the 1st day of April, 1992, which could not to be set off against any other income of the firm and which had been apportioned to a partner of the firm but could not be set off by such partner prior to the assessment year commencing on the 1st day of April, 1993, then, such loss shall be allowed to be set off against the income of the firms subject to the condition that the partner continues in the said firm and to be carried forward for set off under sections 70, 71, 73, and 74A.]

 

Carry forward and set off of losses in case of change in consti­tution of firm or on succession.

78. 42[47] [(1) Where a change has occurred in the constitution of a firm, nothing in this Chapter shall entitle the firm to have carried forward and set off so much of the loss proportionate to the share of a retired or deceased partner as exceeds his share of profits, if any, in the firm in respect of the previous year.]

 

(2)        Where any person carrying on any business or profession has been succeeded in such capacity by another person otherwise than by inheritance, nothing in this Chapter shall entitle any person other than the person incurring the loss to have it carried forward and set off against his income.

 

Carry forward and set off of losses in the case of certain compa­nies.

43[48] 79. Notwithstanding anything contained in this Chapter, where a change in shareholding has taken place in a previous year in the case of a company, not being a company in which the public are substantially interested, no loss incurred in any year prior to the previous year shall be carried forward and set off against the income of the previous year unless—

 

(a)        on the last day of the previous year the shares of the company carrying not less than fifty-one per cent of the voting power were beneficially held by persons who beneficially held shares of the company carrying not less than fifty-one per cent of the voting power on the last day of the year or years in which the loss was incurred 44[49] [* * *] :

 

45[50] [Provided that nothing contained in this section shall apply to a case where a change in the said voting power takes place in a previous year consequent upon 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.]

 

46[51] [(b)  [Omitted by the Finance Act, 1988, w.e.f. 1-4-1989.]

 

Submission of return for losses.

47[52] 80.        Notwithstanding anything contained in this Chapter, no loss which has not been determined in pursuance of a return filed 48[53] [in accordance with the provisions of sub-section (3) of sec­tion 139], shall be carried forward and set off under sub-section (1) of section 72 or sub-section (2) of section 73 or sub-section (1) 49[54] [or sub-section (3)] of section 74 50[55] [or sub-section (3) of section 74A].

 

 [1]“and any amount in respect of which the assessee is entitled to a deduction from the amount of income-tax on his total income with which he is chargeable for any assessment year in accordance with, and to the extent provided in, section 87, 87A and 88” omitted by the Finance (No.2) Act, 1967, w.e.f. 1-4-1968. Earlier “87A” was inserted in the omitted portion by the Finance Act, 1964, w.e.f. 1-4-1964.

 [2]Prior to omission, section 67, as amended by the Fi­nance Act, 1968, w.e.f. 1-4-1969, the Finance (No.2) Act, 1971, w.e.f. 1-4-1971, the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989 and the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989, read as under:

“67, Method of computing a partner’s share in the income of the firm.—(1) In computing the total income of an assessee who is a partner of a firm, whether the net result of the computation of total income of the firm is a profit or a loss, his share (whether a net profit or a net loss) shall be computed as fol­lows:—

(a) any interest, salary, commission or other remuneration paid to any partner in respect of the previous year, and, where the firm is a registered firm or an unregistered firm assessed as a registered firm under clause (b) of section 183, the income-tax, if any, payable by it in respect of the total income of the previous year, shall be deducted from the total income of the firm and the balance ascertained and apportioned among the part­ners;

(b) where the amount apportioned to the partner under clause (a) is a profit, any salary, interest, commission or other remuneration paid to the partner by the firm in respect of the previous year shall be added to that amount, and the result shall be treated as the partner’s share in the income of the firm;

(c) where the amount apportioned to the partner under clause (a) is a loss, any salary, interest, commission or other remuneration paid to the partner by the firm in respect of the previous year shall be adjusted against that amount, and the result shall be treated as the partner’s share in the income of the firm.

(2) The share of a partner in the income or loss of the firm, as computed under sub-section (1) shall, for the purposes of assess­ment, be apportioned under the various heads of income in the same manner in which the income or loss of the firm has been determined under each head of income.

(3) Any interest paid by a partner on capital borrowed by him for the purposes of investment in the firm shall, in computing his income chargeable under the head “Profits and gains of business or profession” in respect of his share in the income of the firm, be deducted from the share.

(4) If the share of a partner in the income of a registered firm or an unregistered firm assessed as a registered firm under clause (b) of section 183, as computed under this section, is a loss, such loss may be set off, or carried forward and set off, in accordance with the provisions of this Chapter.

Explanation.—In this section, “paid” has the same meaning as is assigned to it in clause (2) of section 43.”

 [3]Inserted by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.

 [4]See also Circular No. 5, dated 20-2-1969 and Letter [F.No. 222/7/70-IT (A-I)], dated 5-8-1971.

 [5]Substituted for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.

 [6]Substituted for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.

 [7]Inserted by the Finance Act, 1964, w.e.f. 1-4-1964.

 [8]Substituted for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.

 [9]Inserted by the Finance Act, 1965, w.e.f. 1-4-1965.

 [10]Substituted for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.

 [11]Substituted for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.

 [12]Inserted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976.

 [13]Substituted for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.

 [14]Inserted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1977.

 [15]See also Circular No. 221, dated 6-6-1977 and Circular No. 208, dated 15-11-1976.

 [16]Substituted by the Finance (No.2) Act, 1962, w.e.f. 1-4-1962.

 [17]See also Circular No. 14-D (XXV-27), dated 2-8-1967, Circular No. 26 (LXXVI-3), dated 7-7-1955, Circular No. 104, dated 19-2-1973 and Circular No. 587, dated 11-12-1990.

 [18]“(1)” omitted by the Finance Act, 1987, w.e.f. 1-4-1988.

 [19]“other than capital gains” omitted by the Finance Act, 1987, w.e.f. 1-4-1988.

 [20]Omitted, ibid. Prior to its omission sub-section (2) stood as under:

(2) (i) Where the result of the computation made for any assessment year under sections 48 to 55 in respect of any short-term capital asset is a loss, the assessee shall be entitled to have the amount of such loss set off against the income, if any, as arrived at under a similar computation made for the assessment year in respect of any other capital asset.

(ii) Where the result of the computation made for any as­sessment year under sections 48 to 55 in respect of any capital asset other than a short-term capital asset is a loss, the asses­see shall be entitled to have the amount of such loss set off against the income, if any, as arrived at under a similar compu­tation made for the assessment year in respect of any other capi­tal asset not being a short-term capital asset.”

 [21]Substituted by the Finance (No.2) Act, 1991, w.e.f. 1-4-1992. Prior to substitution, section 71, as substituted by the Finance (No.2) Act, 1962, w.e.f. 1-4-1962 and Finance Act, 1987, w.e.f. 1-4-1988 and as amended by the Finance (No.2) Act, 1967, w.e.f. 1-4-1968, read as under:

“71. Set off of loss from one head against income from another.—Where in respect of any assessment year, the net result of the computation under any head of income is a loss, the asses­see shall, subject to the provisions of this Chapter, be entitled to have the amount of such loss set off against his income, if any, assessable for that assessment year under any other head.”

 [22]See also Circular No. 14-D (XXV-27), dated 2-8-1967, Circular No. 26 (LXXVI-3), dated 7-7-1955, Circular No. 104, dated 19-12-1973 and Circular No. 587, dated 11-12-1990.

 [23]Inserted by the Finance Act, 1992, w.e.f. 1-4-1993.

 [24]Inserted by the Finance Act, 1992, w.e.f. 1-4-1993.

 [25]See also Circular No. 14-D (XXV-27), dated 2-8-1967, Circular No. 26 (LXXVI-3), dated 7-7-1955, Circular No. 104, dated 19-2-1973 and Circular No. 587, dated 11-12-1990.

 [26]Substituted by the Finance (No.2) Act, 1962, w.e.f. 1-4-1962.

 [27]‘where the assessee has income only under the head “Capital gains” relating to capital assets other than short-term capital assets and has exercised the option under sub-section (2) of that section or’ omitted by the Finance Act, 1987, w.e.f. 1-4-1988. In the omitted portion, expression in italics was inserted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968.

 [28]Inserted by the Finance (No.2) Act, 1967, w.e.f. 1-4-1967.

 [29]Inserted, ibid.

 [30]Inserted by the Finance (No.2) Act, 1977, w.e.f. 1-4-1978.

 [31]See also Circular No. 350, dated 29-9-1982.

 [32]Inserted by the Finance Act, 1978, w.e.f. 1-4-1978.

 [33]For specified authority, refer Circulars, 1991.

 [34]See also circular No. 13 (102)-IT/53, dated 8-9-1954 and Circular No. 23(XXXIX-4)-D, dated 12-9-1960.

 [35]Inserted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1977.

 [36]Substituted for “other than an investment company, as defined in clause (ii) of section 109” by the Finance Act, 1987, w.e.f. 1-4-1988.

 [37]Substituted by the Finance Act, 1987, w.e.f. 1-4-1988. Earlier, section 74 was substituted by the Finance (No.2) Act, 1962, w.e.f. 1-4-1962, and amended by the Finance (No.2) Act, 1967, w.e.f.1-4-1968 and the Finance Act, 1986, w.e.f. 1-4-1987. Prior to its substitution section 74 stood as under :

‘74. Losses under the head “Capital gains”.—(1)(a) Where in respect of any assessment year, the net result of the computation under the head “Capital gains” is a loss, such loss shall, sub­ject to the other provisions of this Chapter, be dealt with as follows :—

(i) such portion of the net loss relating to short-term capital assets as cannot be or is not wholly set off against income under any head in accordance with the provisions of sec­tion 71 shall be carried forward to the following assessment year and set off against the capital gains, if any, relating to short-term capital assets assessable for that assessment year and, if it cannot be so set off, the amount thereof not so set off shall be carried forward to the following assessment year and so on;

(ii) such portion of the net loss as relates to capital assets other than short-term capital assets shall be carried forward to the following assessment year and set off against the capital gains, if any relating to capital assets other than short-term capital assets assessable for that assessment year and, if it cannot be so set off, the amount thereof not so set off shall be carried forward to the following assessment year and so on :

Provided that where, in the case of any assessee not being a company, the net loss computed in respect of such capital assets for any assessment year does not exceed ten thousand rupees, it shall not be carried forward under this section.

(b) Notwithstanding anything contained in the Indian Income-tax Act, 1922 (11 of 1922), any loss computed under the head “Capital gains” in respect of the assessment year commencing on the 1st day of April, 1961, or any earlier assessment year which is carried forward in accordance with the provisions of sub-section (2B) of section 24 of that Act, shall be dealt with in the as­sessment year commencing on the 1st day of April, 1962, or any subsequent assessment year as follows :—

(i) in so far as it relates to short-term capital assets, it shall be carried forward and set off in accordance with the provisions of sub-clause (i) of clause (a) and sub-section (2); and

(ii) in so far as it relates to capital assets other than short-term capital assets, it shall be carried forward and set off in accordance with the provisions of sub-clause (ii) of clause (a) and sub-section (2).

(2)(a) No loss referred to in sub-clause (i) of clause (a) of sub-section (1) or sub-clause (i) or sub-clause (ii) of clause (b) of that sub-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 under this Act or, as the case may be, the Indian Income-tax Act, 1922 (11 of 1922).

(b) No loss referred to in sub-clause (ii) of clause (a) of sub-section (1) shall be carried forward under this section for more than four assessment years immediately succeeding the assessment year for which the loss was first computed under this Act.’

 [38]Words “and such loss cannot be or is not wholly set off against income under any other 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” omitted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1992.

 [39]Inserted by the Finance Act, 1972, w.e.f. 1-4-1972.

 [40]Omitted by the Finance Act, 1986, w.e.f. 1-4-1987. Earlier, it was amended by the Finance Act, 1974, w.e.f. 1-4-1975.

 [41]Omitted by the Finance Act, 1986, w.e.f. 1-4-1987.

 [42]Inserted by the Finance Act, 1974, w.e.f. 1-4-1975.

 [43]“Where for any assessment year” omitted by the Finance Act, 1986, w.e.f. 1-4-1987.

 [44]Substituted for “the net result of the computation in respect of the source, specified in clause (c) of sub-section (2) is a loss, then, so much of the amount of such loss as does not exceed the amount of loss incurred by the assessee in the activi­ty of owning and maintaining race horses” by the Finance Act, 1986, w.e.f. 1-4-1987.

 [45]Substituted for “from the source specified in clause (c) of sub-section (2)”, ibid.

 [46]Substituted for existing sections 75, 76 and 77 by the Finance Act, 1992, w.e.f. 1-4-1993. Prior to substitution, sec­tions 75, 76 and 77, as amended by the Finance Act, 1972, w.e.f. 1-4-1972, the Finance Act, 1974, w.e.f. 1-4-1975, the Finance Act, 1987, w.e.f. 1-4-1988, the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989 and the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989, read respectively, as under :

“75. Losses of registered firms.—(1) Where the assessee is a registered firm, any loss which cannot be set off against any other income of the firm shall be apportioned between the part­ners of the firm, and they alone shall be entitled to have the amount of the loss set off and carried forward for set off under sections 70, 71, 72, 73, 74 and 74A.

(2) Nothing contained in sub-section (1) of section 72, sub-section (2) of section 73, sub-section (1) or sub-section (3) of section 74 or sub-section (3) of section 74A shall entitle any assessee, being a registered firm, to have its loss carried for­ward and set off under the provisions of the aforesaid sections.

76. Losses of unregistered firms assessed as registered firms.—In the case of an unregistered firm assessed under the provisions of clause (b) of section 183 in respect of any assess­ment year, its losses for that assessment year shall be dealt with as if it were a registered firm.

77. Losses of unregistered firms or their partners.—(1) Where the assessee is an unregistered firm which has not been assessed as a registered firm under the provisions of clause (b) of section 183, any loss of the firm shall be set off or carried forward and set off only against the income of the firm.

(2) Where the assessee is a partner of an unregistered firm which has not been assessed as a registered firm under the provisions of clause (b) of section 183 and his share in the income of the firm is a loss, then, whether the firm has already been assessed or not—

(a) such loss shall not be set off under the provisions of section 70, section 71, sub-section (1) of section 73 or section 74A;

(b) nothing contained in sub-section (1) of section 72 or sub-section (2) of section 73 or sub-section (1) or sub-section (3) of section 74 or sub-section (3) of section 74A shall entitle the assessee to have such loss carried forward and set off against his own income.”

 [47]Substituted for existing sub-section (1) by the Finance Act, 1992, w.e.f. 1-4-1993. Prior to substitution, sub-section (1), as amended by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989 and the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989, read as under :

“(1) Where a change has occurred in the constitution of a firm, nothing in this Chapter shall entitle the firm to have carried forward and set off so much of the loss proportionate to the share of a retired or deceased partner computed in accordance with section 67 as exceeds his share of profits, if any, of the previous year in the firm, or entitle any partner to the benefit of any portion of the said loss which is not apportionable to him under section 67.”

 [48]See also Circular No. 523, dated 5-10-1988.

 [49]“or” omitted by the Finance Act, 1988, w.e.f. 1-4-1989.

 [50]Inserted, ibid.

 [51]Prior to its omission, it read as under :

“(b) The *Assessing Officer is satisfied that the change in the shareholding was not effected with a view to avoiding or reducing or reducing any liability to tax.”

*Substituted for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.

 [52]See also Circular No. 576, dated 31-8-1990.

 [53]Substituted for “within the time allowed under sub-section (1) of section 139 or within such further time as may be allowed by the Income-tax Officer” by the Direct Tax Laws (Amend­ment) Act, 1987, w.e.f. 1-4-1989. Earlier, the said expression was substituted for “under section 139” by the Taxation Laws (Amendment) Act, 1984, w.e.f. 1-4-1985.

 [54]Inserted by the Finance Act, 1987, w.e.f. 1-4-1988.

 [55]Inserted by the Finance Act, 1974, w.e.f. 1-4-1975.