Specified Business under section 35AD of the Income Tax Act:

Section 35AD of the Income Tax Act provides for an investment-linked incentive to the assessee carrying on the specified business. Section 35AD provides deduction to the extent of 100% to assessee carrying on “Specified Business” as specified under the act. 

Set off and carry forward of losses of Specified Business

Any loss arising from any specified business (businesses specified under section 35AD of the Income Tax Act) shall not be set off except against profits, if any, of any other specified business. Where in any assessment year any loss of the specified business has not been wholly set off, so much of the unadjusted loss shall, subject to the other provisions of this Chapter, be carried forward to the subsequent assessment year, and it shall be set off against the profits of any specified business carried on by the assessee assessable for that assessment year.

Example: Following are the particulars of XYZ Associates (Partnership firm). Compute the income chargeable to tax for the AY 19-20.

Particulars Amount
Loss from the Specified Business 1 50000
Profit from Specified Buisness 2 20000
Profit from Normal Business 40000
Total Profit Earned 10000

Income chargeable to tax for the Assessment Year 2019-2020

Particulars Amount
PGBP Income
Profit from Normal Business 40000
Loss from Speculative Business 1 50000
Profit from Speculative Business 2 20000
Balance Loss to be carry forwarded to the next year 30000
Gross Income Chargeable to Tax 40000

No Double Deduction:

Once the taxpayer has claimed the deduction allowed under section 35AD of the Income Tax Act for a particular assessment year in respect of a specified business (business specified under section 35AD), the taxpayer cannot claim any benefit under Chapter VI-A under the heading “C. Assessee also cannot claim the deductions in respect of certain incomes” or section 10AA, for the same or any other year and vice versa.

SUMMARY

Loss under Specified Business (Business Under Section 35AD) :

  • There is no time limit prescribed under the law to carry forward the losses from the specified business under 35AD
  • It is not mandatory requirement to continue the business at the time of set off in future assessment years
  • Carry forward and claim of the same shall not be allowed if the return of income is not filed within the original due date as specified under section 139(1)
  • The loss of the specified business can be adjusted only against Income from specified business under 35AD

The loss from a specified business under section 35AD in respect of any assessment year can be set off against the profit of another specified business under section 73A, irrespective of whether the latter is eligible for deduction under section 35AD.

Also Read:-

S. No. Provisions of Set of and Carry Forward of Losses under Income Tax Act, 1961
1 Clubbing of Your Income with Income of your Spouse
2 Clubbing of income from assets transferred to Son’s Wife
3 Clubbing of income from the asset transferred to Spouse
4 Clubbing of Income on Revocable Transfer of Asset
5 Clubbing of remuneration income of Spouse from a Concern in which other Spouse has Substantial Interest
6 Set Off & Carry Forward of Loss under the head House Property
7 Clubbing of income of a Minor Child with Income of parent
8 Clubbing of Income from Self-acquired Property converted to Joint Family Property & subsequent Partition
9 Clubbing of Income from assets transferred to a person for benefit of spouse
10 Clubbing of Income from Assets Transferred to a Person for the Benefit of Son’s Wife
11 Carry forward & set off of Business Losses other than Speculation Loss
12 Set off and Carry Forward of Capital Loss
13 Set-off and carry forward of Speculative Business Loss
14 Set-off & carry forward of Loss from owning & maintaining racehorses
15 Set off and carry forward of losses of Specified Business | Section 73A

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