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 1) Loss of firm can be carry forward by firm only

(2) It cannot be carry forward by partners

(3) In case of change in constitution of firm then that much portion cannot be carry forward, which exceeds retired/deceased partner’s profits share.

However,it does not apply to Unaborbed Depreciation

QUESTION 1

M/s. Vivitha & Co., a partnership firm, with four partners A, B, C and D having equal shares, furnishes the following details, summarized from the valid returns of income filed by it:

Assessment year Item eligible for carry forward and set off
2014-15 Unabsorbed business loss Rs.  1,20,000
2015-16 Unabsorbed business loss Rs.  1,90,000
2015-16 Unabsorbed depreciation Rs.  1,20,000
2015-16 Unabsorbed long-term capital losses: 300000
(from shares  Rs 1,10,000; -from building Rs 1,90,000

 

C  who  was  a  partner  during  the  last  three  years,  retired  from  the  firm  with  effect  from 1.4.2015.

What is amount of loss to be carry forward?

-a-

Since all partners had equal share

Share of C=1/4

Hence Partnership firm cannot carry forward 1/4  of business loss and LTCL

However, unabsorbed depreciation can be fully carry forward 

 

Assessment year

Item eligible for 

carry forward and set off

Amount not

eligible

Amount which can

be carry forwarded

2014-15

Unabsorbed business loss

Rs.  1,20,000

120000*1/4=30000 120000-30000=90000
2015-16

Unabsorbed business loss

Rs.  1,90,000

190000*1/4=47500 190000-47500=142500
2015-16

Unabsorbed depreciation

Rs.  1,20,000

0 120000-30000=90000
2015-16 Unabsorbed long-term capital losses: 300000 300000*1/4=75000 300000-75000=225000
(from shares  Rs 1,10,000; -from building Rs 1,90,000    

 

-ea-

 

  1. Income Tax
  2. Set off and Carry Forward of Losses
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CA Maninder Singh
CA Maninder Singh is a Chartered Accountant for the past 6 years. He provides courses for Practical Accounts, Taxation and Efiling at teachoo.com .
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