Having regard to the definitions of terms “capital asset” and “transfer” in sections 2(14) and 2(47), in order to be eligible for carry forward of capital loss, the capital asset should be of the nature defined in s. 2(14) and should be transferred in the manner defined in s. 2(47). Equally, it should be subjected to tax as per s. 45(1) of the Income-tax Act. The advances given to the said two parties and written off are not the capital assets nor there is any transfer. Therefore, they were not allowed to be carried forward to subsequent years. It is a capital loss and should be ignored (Ahmed G.H. Ariff 76 ITR 471 (SC) & Minor Bababhai 128 ITR 1 (Guj) distinguished)
RELATED JUDGEMENT
RELATED JUDGEMENT
1. Mohan Meakin Limited vs. CIT (Delhi High Court)
U/s 28 r.w.s. 29, computation of income has to be in accordance with the provisions contained in s. 30 to 43 which includes s. 37(1). If a loss of a debt does not come within s. 36(1)(vii), a claim can be made u/s 37(1).
2. Nandi Steels Ltd vs. ACIT (ITAT Bangalore Special Bench)
S. 72 (1) allows brought forward business loss to be set-off against the “profits & gains of any business or profession” of the subsequent year. The expression “profits & gains of business” means income earned out of business carried on by the assessee and not just income connected.
3. Hercules Hoists Limited vs. ACIT (ITAT Mumbai)
If the eligible unit has no profit, the loss & depreciation of the eligible unit is entitled to be set-off against the other income. However, despite such set-off, the loss and depreciation has to be aggregated and notionally carried forward for set-off against the future profits.
