Karnataka High Court Allows Set-Off Of Past Business Loss Against Gain From Sale Of Capital Asset: EY
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This tax alert summarises a Karnataka High Court decision, dated February 23, 2021, in the case of Nandi Steels Ltd. versus ACIT (Taxpayer), wherein the issue was whether business losses of earlier years (past business losses) can be set off against capital gains which arose on sale of capital assets used for business purposes under the provisions of the Indian Tax Laws.
The ITL provides for a mechanism of set off and carry forward of losses incurred in the course of business.
As per the provisions of the ITL, past business loss can be set off only against profits and gains of any business or profession carried on by a taxpayer.
Furthermore, any income on transfer of capital asset which is used for business purposes, is taxed under a separate head of capital gains, whereas income from regular business transactions is taxed under the head profits and gains from business or profession.
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