Provision applicable for the set-off and carry forward of losses from the activity of owning and maintaining race horses (Section 74A of the Income Tax Act)

Where the losses could not be set off under the same head or different heads of the income in the same assessment year, then such amount of losses are allowed to be carried forward to be claimed as set off from the income of the subsequent assessment years. However, all losses are not allowed to be carried forward to the subsequent assessment years. Only the following losses are allowed to be carried forward and set off in the subsequent assessment years:

1. Loss from House property;

2. Loss from Business;

3. Loss from Speculation;

4. Loss on account of owning and maintaining racehorses.

5. Loss on the transfer of Capital Asset;

6. Loss from a specified business referred to in section 35AD.

Loss from the activity of owning and maintaining racehorses

Loss arising from the activity of owning and maintaining racehorses can be set off only against the income from the activity of owning and maintaining racehorses in the same assessment year. However, where the whole or part of such loss could not be set off in the same assessment year, the same can be carried forward in subsequent assessment years. The loss arriving from this activity can be carry forwarded and claimed as set off only against the income from the same activity (owning and maintaining race horses) in the subsequent assessment years. In addition to this, the set-off of losses is permitted only if the activity of owning and maintaining race horses is carried on by the taxpayer in the previous year in which the loss is sought to be adjusted.

The loss from the activity of owning and maintaining from racehorses can be carried forward up to the next 4 assessment years, immediately succeeding the assessment year for which the loss was computed. 

SUMMARY

  • Any loss from the activity of owning and maintaining racehorses can be set off only against the income from the activity of owning and maintaining racehorses in the same assessment year.
  • The loss arising from the activity of owning and maintaining from racehorses can be carried forward for a maximum period of 4 assessment years.
  • The loss from the activity of owning and maintaining race horses cannot be carried forward unless a return of income is filed within the time specified under section 139(1).
  • The set-off of losses from this activity of owning and maintaining race horses is permitted only if the same activity is carried on by the taxpayer in the previous year in which the loss is sought to be adjusted.
  • The abovementioned provisions under section 74A are only applicable to where the loss is from the activity of owning and maintaining racehorses. Therefore, loss arising from the activity of owning and maintaining other race animals is covered by section 72 and not by section 74A.

For section 74A, the loss shall be calculated as follows—

 Amount of stake money xxxx
Less: Expenditure (revenue nature) incurred by the assessee wholly and exclusively for the purposes of owning and maintaining such race horses xxxx
Balance amount (if the balance is negative, it is taken as loss from the activity of owning and maintaining race horses) xxxx

Read Also:-

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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