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Issue/Justification

The underlying idea behind allowing the investment linked incentive granted under Section 35AD of the Act is to enable the taxpayer to set-off the business losses incurred by this write-off against the taxable profits from their existing businesses and reduce their tax liability in the year of deduction and thereby to provide part of the resources of investment required for setting up of the businesses. However, the incentive so intended cannot be achieved owing to the insertion of Section 73A of the Act, which restricts the set-off/ carry forward of losses by specified business only against the profits and gains, if any, of any other specified business carried on by the taxpayer in that AY and the amount of loss not so set-off can only be carried forward and set-off against profits from specified business in the subsequent AYs.

Suggestion

The losses from the specified business under Section 35AD of the Act ought to be made eligible for setoff against profits from other businesses of the taxpayer, and not restricted to be set-off against only the specified businesses, as it is not always the case that the taxpayer would only be carrying on the ‘specified business’. In light of the above, Section 73A of the Act should be deleted.

Source-  ICAI Pre-Budget Memorandum–2018 (Direct Taxes and International Tax)

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One Comment

  1. SREELATHA S KUMAR FCA says:

    sir
    regarding 35AD THERE IS ONE MORE ISSUE – SUPPOSE THE COMPANY HAVING BOOK PROFIT AND THEN THE COMPANY IS LIABLE FORMAT CALCULATION
    UNDER MAT COMPANY IS NOT ABLE TO DEDUCT 35 AD BUSINESS LOSS AS IT RESTRICTS – BUSINESS LOSS OR DEPRECIATION LOSS WHICHEVER IS LOWER
    SO PLEASE CONSIDER THAT POINT ALOS IN THE PREBUDGET MEMORANDA MENTIONED

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