T Pvt Ltd. a Closely Held Company not being an eligible startup referred to in Section 80-IAC submits the following information: Particulars FY…

CA Final · Direct Tax Laws and International Taxation · PYQS · May 2026
T Pvt Ltd. a Closely Held Company not being an eligible startup referred to in Section 80-IAC submits the following information: Particulars FY 23-24 FY 24-25 FY 25-26 Business Income/ loss (-) ₹ 1,50,000 (-) ₹ 2,50,000 (+) ₹ 5,00,000 (before unabsorbed depreciation and business losses of FY 23-24 and 24-25 Unabsorbed Depreciation 40,000 80,000 Shareholding as on last day of financial year P-35% P-35% P-35% Q-20% Q-20% Z-20% R-15% T-15% T-15% S-30% U-30% U-30% Considering the above facts, explain whether the losses of FY 23-24 and 2024-25 can be set off against the income of FY 25-26 assuming that Income-tax Return for AY 24-25 and 25-26 were filed before the due date applicable for relevant assessment year.

Suggested Answer and Working Notes:

As per section 79, in case of a closely held company not being an eligible start up referred to in section 80-IAC, no loss incurred in the previous year shall be carried forward and set off against the income of the subsequent previous year unless the shares carrying at least 51% of the voting power of the company are beneficially held on the last day of the previous year in which the loss is sought to be set off, by the same shareholders, who beneficially held the shares carrying at least 51% of the voting power on the last day of the previous year in which the loss was incurred. Since shareholders holding at least 51% of the voting power (65%, in the present case) on 31st March 2024 are not same as shareholder holding at least 51% of the voting power on 31st March 2026, the business loss of 1,50,000 of P.Y. 2023-24 cannot be set-off against business income of the P.Y. 2025-26. Since shareholders holding at least 51% of the voting power (80%, in the present case) are the same on 31st March 2025 and 31st March 2026, the loss of 2,50,000 of P.Y. 2024-25 can be set-off against business income of the P.Y.2025-26. Section 79 is not applicable in case of carry forward of unabsorbed depreciation. Hence, unabsorbed depreciation of 40,000 of P.Y. 2023-24 and of 80,000 of P.Y. 2024-25 can be set off against business income of P.Y. 2025-26.

Topics: Aggregation of income, set-off or carry forward of Losses

Open in Interactive Practice Hub · Full Practice Hub · Chapter Weightage · More in this subject

Related Questions in this Topic