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Business losses cannot be set off against salary income

Friday, August 13, 2010
By Anand Tibrewala

I am an employee of a large company looking after administration. I have also started my own business in the last financial year for supplying of vehicles on hire. I had acquired two Toyato Innova cars in the last year. Due to the short period available to me I have incurred loss in the said business. Can I set off this business loss against my salary income? Will any other benefit be available to me?
-Imtiaz Khan, Thane

The loss incurred by you in the last financial year cannot be set off against your salary income since section 74 specifically bars you from setting off business loss against salary income. Hence, no set off in the current year would be available to you. However, the current year business loss could be carried forward and can be set off over the next 8 assessment years. But the loss can be set off only against the business profits in these years.

A few days ago due to a burst in our office’s overhead tank our entire office became waterlogged. Since this happened on a Friday night and our office is closed on Saturday and Sunday we only came to know of it on a Monday. By that time the damage had been done and apart from the office furniture a lot of important documents were destroyed. Amongst this all our Income tax files for the past ten years and the account books for the past two years was completely destroyed. What do we do now? Do we have to inform the Income tax department and how should it be done? Can we get duplicate copies of returns filed in the earlier years?
-Mayur Shah, Mumbai

In the given circumstances very little can be done. I would suggest that in case the fire brigade and police were informed about the incidence then obtain a certificate from both of them independently that such incident had taken place and records were lost. The copies of return submitted by you can be obtained from the department. As regards the books, if they are computerized and computer is working then you may reprint the books. Else you may make effort to re-enter the data in the computer and make fresh books of account.

My father after staying in Mumbai for over 30 years has retired and shifted to our native village in Dhule. He was filing his returns from Mumbai. His bank accounts are still in Mumbai... I would like to know as to where he should file his current returns from: Mumbai or Dhule?
-Nitin Inamdar, Mumbai

Your father was based in Mumbai and filing his return of income from Mumbai. Hence, he would have furnished the Mumbai address for his PAN Records. Thus if he tries to file his return from Dhule, then the local income tax office would decline to accept it since no antecedent of the case would be available to them. Hence, the return would be required to be filed at Mumbai. You need to make changes in PAN Records and furnish a request for transfer of case records from the Mumbai office. Once the records are transferred to Dhule, you can start filing the return for your father at Dhule.


(The Author is a CA and specializes in taxation matters. He is a Senior Partner at the leading Chartered Accountancy firm, AD & Company)

If you have any Tax Query email it to us at [email protected] and we will find you a solution.


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