Handling Losses: Special Provisions For Set Off And Carry Forward

MCQ SELF CHALLENGE # 0068 ON SPECIAL PROVISIONS RELATING TO CARRY FORWARD & SET OFF OF LOSSES

Special Provisions Relating to Carry Forward & Set Off of Losses

Dear Professional Seniors & Friends,

Warm Greeting!

Here is the Next post of #MCQ on concept-based practical professional knowledge on special provisions relating to carrying forward & setting off losses in a unique mariner to be self-answered by participants. The detailed answers to these MCQs shall be posted the next day for the self-assessment of the participants.

MCQ 68.1: XY Pvt Ltd has two shareholders X & Y who carries equal voting rights in the company. During the year ended 2017, XY Pvt. Ltd. had a loss of Rs 50,000. Which among the following is correct about set off & carry forward of loss if on 31.03.2018. Mr. Y retired and transferred his shares to Mr. Z.

A) Loss will be carried forward only.

B) Loss can not be carried forward nor can be set off from future losses.

Loss can be carried forward and can be set off from future losses.

D) None of the above.

MCQ 68.2: What if in the above question, the retirement of Mr. Y was on account of his death?

A) Loss will be carried forward only.

B) Loss can not be carried forward nor can be set off from future losses.

C) Loss can be carried forward and can be set off from future losses.

D) None of the above.

Answer MCQ Self Challenge # 0068

This post of MCQ is on the concept relating to provisions of set off & carry forward of losses in case of change in shareholding pattern.

Answer to MCQ 68.1: B) Loss can not be carried forward nor can be set off from future losses.

Answer to MCQ 68.2: C) Loss can be carried forward and can be set off from future losses.

Practical Analysis for MCQ 68.18 68.2:-

1. Chapter VI(Section 70 to 80) deals with provisions relating to carry forward & set off of losses.

2. But provisions of Section 79 apply notwithstanding anything contained in Chapter VI which provides as follows-

3. Where a change in shareholding has taken place in the case of a company, then no loss incurred in prior years shall be carried forward and set off against the income of the current year unless on the last day of the current year(ie. 31.03.2018 in our question) and on the last day of the year in which loss was incurred e 31.03.2017 in our question), 51% or more of the shares of the company are held by same persons.

4. But the following changes in shareholdings shall not be considered as a change in shareholding for the purpose of section 79-

5. Where the change takes place consequent upon the death of the shareholder

6. Where the change takes place by way of gift of shares to any relative of the shareholder making the gin

7. Based on the above analysis, the correct answer is MCQ 1. B) Loss can not be carried forward nor can be set off from future losses.

8. Correct answer MCQ 68:2:2: C) Loss can be carried forward and can be set off from future losses.

(Disclaimer: The objective of the MCQ post is just to discuss the concept, it may happen, by change of facts, the answer may be different. Please do not treat this as a professional opinion: you can definitely have your own opinion.)

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Sincere Regards!

CA Sanjay Kumar Agrawal

Mobile: 9810116321