For PD | D2H Enquiries : Fo r L i ve E n qu i r i e s :

6290948313 | 8420129525 | 6290935202 | 033 2555 2254 +91 9830741471 | +91 33 2555 1197
[email protected] www.meplclasses.com

Chapter 9
Clubbing of Income

1 Study Mat
Mr. Vaibhav started a proprietary business on 01.04.2020 with a capital of ` 5,00,000. He incurred a
loss of ` 2,00,000 during the year 2020-21. To overcome the financial position, his wife Mrs. Vaishaly,
a software Engineer, gave a gift of ` 5,00,000 on 01.04.2021, which was immediately invested in the
business by Mr. Vaibhav. He earned a profit of ` 4,00,000 during the year 2021-22. Compute the amount
to be clubbed in the hands of Mrs. Vaishaly for the Assessment Year 2022-23. If Mrs. Vaishaly gave the
said amount as loan, what would be the amount to be clubbed?

Answer
Section 64(1)(iv) of the Income-tax Act, 1961 provides for the clubbing of income in the hands of the
individual, if the income earned is from the assets (other than house property) transferred directly or
indirectly to the spouse of the individual, otherwise than for adequate consideration or in connection
with an agreement to live apart.In this case, Mr. Vaibhav received a gift of ` 5,00,000 on 1.4.2021 from
his wife Mrs. Vaishaly, which he invested in his business immediately. The income to be clubbed in the
hands of Mrs. Vaishaly for the AY 2022-23 is computed as under:

Mr. Vaibhav’s capital Capital contribution out of gift

Particulars Total (`)
contribution (`) from Mrs. Vaishaly (`)
Capital as on 1.4.2021 3,00,000 5,00,000 8,00,000
(5,00,000 – 2,00,000)
Profit for PY 2021-22 1,50,000 2,50,000 4,00,000
to be apportioned on
the basis of capital (4,00,000*3/8) (4,00,000*5/8)
employed on the first
day of the previous
year i.e. as on 1.4.2021
(3:5)

Therefore, the income to be clubbed in the hands of Mrs. Vaishaly for the AY 2022-23 is ` 2,50,000.In
case Mrs. Vaishaly gave the said amount of ` 5,00,000 as a bona fide loan, then, clubbing provisions
would not be attracted.
Note: The provisions of section 56(2)(x) would not be attracted in the hands of Mr. Vaibhav, since he
has received a sum of money exceeding ` 50,000 without consideration from a relative i.e., his wife.

Income Tax
Pen Drive can be booked at Saviour 9.1
www.meplclasses.com by Nikunj Goenka
 Fo r Live En q u ir ies : For PD | D2H Enquiries :
+91 9830741471 | +91 33 2555 1197 6290948313 | 8420129525 | 6290935202 | 033 2555 2254
www.meplclasses.com [email protected]

2 Study Mat
Mr. Vasudevan gifted a sum of ` 6 lakhs to his brother’s wife on 14-6-2021. On 12-7-2021, his brother
gifted a sum of ` 5 lakhs to Mr. Vasudevan’s wife. The gifted amounts were invested as fixed deposits
in banks by Mrs. Vasudevan and wife of Mr. Vasudevan’s brother on 01-8-2021 at 9% interest. Examine
the consequences of the above under the provisions of the Income-tax Act, 1961 in the hands of Mr.
Vasudevan and his brother.

Answer
In the given case, Mr. Vasudevan gifted a sum of ` 6 lakhs to his brother’s wife on 14.06.2021 and
simultaneously, his brother gifted a sum of ` 5 lakhs to Mr. Vasudevan’s wife on 12.07.2021. The gifted
amounts were invested as fixed deposits in banks by Mrs. Vasudevan and his brother’s wife. These
transfers are in the nature of cross transfers. Accordingly, the income from the assets transferred would
be assessed in the hands of the deemed transferor because the transfers are so intimately connected
to form part of a single transaction and each transfer constitutes consideration for the other by being
mutual or otherwise.
If two transactions are inter-connected and are part of the same transaction in such a way that it can
be said that the circuitous method was adopted as a device to evade tax, the implication of clubbing
provisions would be attracted. It was so held by the Apex Court in CIT vs. Keshavji Morarji (1967) 66
ITR 142.
Accordingly, the interest income arising to Mrs. Vasudevan in the form of interest on fixed deposits
would be included in the total income of Mr. Vasudevan and interest income arising in the hands of
his brother’s wife would be taxable in the hands of Mr. Vasudevan’s brother as per section 64(1), to the
extent of amount of cross transfers i.e., ` 5 lakhs.
This is because both Mr. Vasudevan and his brother are the indirect transferors of the income to their
respective spouses with an intention to reduce their burden of taxation.
However, the interest income earned by his spouse on fixed deposit of ` 5 lakhs alone would be
included in the hands of Mr. Vasudevan’s brother and not the interest income on the entire fixed
deposit of ` 6 lakhs, since the cross transfer is only to the extent of ` 5 lakhs.

3 Study Mat
During the previous year 2021-22, the following transactions occurred in respect of Mr. A.
(a) Mr. A had a fixed deposit of ` 5,00,000 in Bank of India. He instructed the bank to credit the
interest on the deposit @ 9% from 1-4-2021 to 31-3-2022 to the savings bank account of Mr. B,
son of his brother, to help him in his education.
(b) Mr. A holds 75% profit share in a partnership firm. Mrs. A received a commission of ` 25,000
from the firm for promoting the sales of the firm. Mrs. A possesses no technical or professional
qualification.
(c) Mr. A gifted a flat to Mrs. A on April 1, 2021. During the previous year 2021-22, Mrs. A’s “Income
from house property” (computed) was ` 52,000 from such flat.
(d) Mr. A gifted ` 2,00,000 to his minor son who invested the same in a business and he derived
income of ` 20,000 from the investment.
Income Tax
9.2 Saviour Pen Drive can be booked at
by Nikunj Goenka www.meplclasses.com
 For PD | D2H Enquiries : Fo r L i ve E n qu i r i e s :
6290948313 | 8420129525 | 6290935202 | 033 2555 2254 +91 9830741471 | +91 33 2555 1197
[email protected] www.meplclasses.com

(e) Mr. A’s minor son derived an income of ` 20,000 through a business activity involving application
of his skill and talent.
During the year, Mr. A got a monthly pension of ` 10,000. He had no other income. Mrs. A received
salary of ` 20,000 per month from a part time job.
Examine the tax implications of each transaction and compute the total income of Mr. A, Mrs. A and
their minor child.

Answer
Mr. A Mrs. A Minor Son
Particulars
(`) (`) (`)
Income under the head “Salaries”
Salary income (of Mrs. A) 2,40,000
Pension income (of Mr. A) (` 10,000×12) 1,20,000
Less: Standard deduction under section 16(ia) 50,000 50,000
70,000 1,90,000
Income from House Property [See Note (3) below] 52,000
Income from other sources
Interest on Mr. A’s fixed deposit with Bank of India 45,000
(` 5,00,000×9%) [See Note (1) below]
Commission received by Mrs. A from a partnership
firm, in which Mr. A has substantial interest [See Note
(2) below] 25,000 70,000

Income before including income of minor son under 1,92,000 1,90,000

section 64(1A)
Income of the minor son from the investment made 18,500
in the business out of the amount gifted by Mr. A [See
Note (4) below]
Income of the minor son through a business activity 20,000
involving application of his skill and talent [See Note
(5) below]
Total Income 2,10,500 1,90,000 20,000

Notes:
(1) As per section 60, in case there is a transfer of income without transfer of asset from which such
income is derived, such income shall be treated as income of the transferor. Therefore, the fixed
deposit interest of ` 45,000 transferred by Mr. A to Mr. B shall be included in the total income of Mr. A.
(2) As per section 64(1)(ii), in case the spouse of the individual receives any amount by way of
income from any concern in which the individual has substantial interest (i.e. holding shares
carrying at least 20% voting power or entitled to at least 20% of the profits of the concern), then,
such income shall be included in the total income of the individual. The only exception is in a

Income Tax
Pen Drive can be booked at Saviour 9.3
www.meplclasses.com by Nikunj Goenka
 Fo r Live En q u ir ies : For PD | D2H Enquiries :
+91 9830741471 | +91 33 2555 1197 6290948313 | 8420129525 | 6290935202 | 033 2555 2254
www.meplclasses.com [email protected]

case where the spouse possesses any technical or professional qualifications and the income
earned is solely attributable to the application of her technical or professional knowledge and
experience, in which case, the clubbing provisions would not apply.
In this case, the commission income of ` 25,000 received by Mrs. A from the partnership firm has
to be included in the total income of Mr. A, as Mrs. A does not possess any technical or professional
qualification for earning such commission and Mr. A has substantial interest in the partnership
firm as he holds 75% profit share in the firm.
(3) According to section 27(i), an individual who transfers any house property to his or her spouse
otherwise than for adequate consideration or in connection with an agreement to live apart,
shall be deemed to be the owner of the house property so transferred. Hence, Mr. A shall be
deemed to be the owner of the flat gifted to Mrs. A and hence, the income arising from the same
shall be computed in the hands of Mr. A.
Note: The provisions of section 56(2)(x) would not be attracted in the hands of Mrs. A, since she
has received immovable property without consideration from a relative i.e., her husband.
(4) As per section 64(1A), the income of the minor child is to be included in the total income of the
parent whose total income (excluding the income of minor child to be so clubbed) is greater.
Further, as per section 10(32), income of a minor child which is includible in the income of the
parent shall be exempt to the extent of ` 1,500 per child.
Therefore, the income of ` 20,000 received by minor son from the investment made out of the
sum gifted by Mr. A shall, after providing for exemption of ` 1,500 under section 10(32), be
included in the income of Mr. A, since Mr. A’s income of ` 1,92,000 (before including the income
of the minor child) is greater than Mrs. A’s income of ` 1,90,000. Therefore, ` 18,500 (i.e., ` 20,000
– ` 1,500) shall be included in Mr. A’s income. It is assumed that this is the first year in which
clubbing provisions are attracted.
Note: The provisions of section 56(2)(x) would not be attracted in the hands of the minor son,
since he has received a sum of money exceeding ` 50,000 without consideration from a relative
i.e., his father.
(5) In case the income earned by the minor child is on account of any activity involving application
of any skill or talent, then, such income of the minor child shall not be included in the income of
the parent, but shall be taxable in the hands of the minor child.
Therefore, the income of ` 20,000 derived by Mr. A’s minor son through a business activity
involving application of his skill and talent shall not be clubbed in the hands of the parent. Such
income shall be taxable in the hands of the minor son.

4 Study Mat
A proprietary business was started by Smt. Rani in the year 2019. As on 1.4.2020 her capital in business
was ` 3,00,000.
Her husband gifted ` 2,00,000 on 10.4.2020, such sum is invested by Smt. Rani in her business on the
same date. Smt. Rani earned profits from her proprietary business for the Financial year 2020-21, `
1,50,000 and Financial year 2021-22 ` 3,90,000. Compute the income, to be clubbed in the hands of
Rani’s husband for the Assessment year 2022-23 with reasons.

Income Tax
9.4 Saviour Pen Drive can be booked at
by Nikunj Goenka www.meplclasses.com
 For PD | D2H Enquiries : Fo r L i ve E n qu i r i e s :
6290948313 | 8420129525 | 6290935202 | 033 2555 2254 +91 9830741471 | +91 33 2555 1197
[email protected] www.meplclasses.com

Answer
Section 64(1) of the Income-tax Act, 1961 provides for the clubbing of income in the hands of the
individual, if the income earned is from the assets transferred directly or indirectly to the spouse of
the individual, otherwise than for adequate consideration. In this case Smt. Rani received a gift of
` 2,00,000 from her husband which she invested in her business. The income to be clubbed in the
hands of Smt. Rani’s husband for AY 2022-23 is computed as under:

Capital
Smt. Rani’s
Contribution
Capital Total
Particulars Out of gift from
Contribution
husband
` ` `
Capital as at 1.4.2020 3,00,000 -- 3,00,000
Investment on 10.04.2020 out of gift received from 2,00,000 2,00,000
husband
3,00,000 2,00,000 5,00,000
Profit for FY 2020-21 to be apportioned on the basis 1,50,000 1,50,000
of capital employed on the first day of the previous
year i.e., on 1.4.2020
Capital employed as at 1.4.2021 4,50,000 2,00,000 6,50,000
Profit for FY 2021-22 to be apportioned on the basis 2,70,000 1,20,000 1,20,000
of capital employed as at 1.4.2021 (i.e., 45 : 20)

Therefore, the income to be clubbed in the hands of Smt. Rani’s husband for AY 2022-23 is ` 1,20,000.

5 Study Mat
Mr. B is the Karta of a HUF, whose members derive income as given below:

Particulars `
(i) Income from B’ s profession 45,000
(ii) Mrs. B’ s salary as fashion designer 76,000
(iii) Minor son D (interest on fixed deposits with a bank which were gifted to him by
his uncle)
(iv) Minor daughter P’s earnings from sports 95,000
(v) D’s winnings from lottery (gross) 1,95,000

Examine the tax implications in the hands of Mr. and Mrs. B.

Answer
Clubbing of income and other tax implications
As per the provisions of section 64(1A), in case the marriage of the parents subsist, the income of a
minor child shall be clubbed in the hands of the parent whose total income, excluding the income

Income Tax
Pen Drive can be booked at Saviour 9.5
www.meplclasses.com by Nikunj Goenka
 Fo r Live En q u ir ies : For PD | D2H Enquiries :
+91 9830741471 | +91 33 2555 1197 6290948313 | 8420129525 | 6290935202 | 033 2555 2254
www.meplclasses.com [email protected]

of the minor child to be clubbed, is greater. In this problem, it has been assumed that the marriage of
Mr. B and Mrs. B subsists.
Further, in case the income arises to the minor child on account of any manual work done by the child
or as a result of any activity involving application of skill, talent, specialized knowledge or experience
of the child, then, the same shall not be clubbed in the hands of the parent.
Tax implications
(i) Income of ` 45,000 from Mr. B’s profession shall be taxable in the hands of Mr. B under the head
“Profits and gains of business or profession”.
(ii) Salary of ` 26,000 (` 76,000 less standard deduction under section 16(ia) of ` 50,000) shall be
taxable as “Salaries” in the hands of Mrs. B.
(iii) Income from fixed deposit of ` 10,000 arising to the minor son D, shall be clubbed in the hands of
the father, Mr. B as “Income from other sources”, since his income is greater than income of Mrs. B
before including the income of the minor child.
As per section 10(32), income of a minor child which is includible in the income of the parent
shall be exempt to the extent of ` 1,500 per child. The balance income would be clubbed in the
hands of the parent as “Income from other sources”.
(iv) Income of ` 95,000 arising to the minor daughter P from sports shall not be included in the hands
of the parent, since such income has arisen to the minor daughter on account of an activity
involving application of her skill.
(v) Income of ` 1,95,000 arising to minor son D from lottery shall be included in the hands of Mr.
B as “Income from other sources”, since his income is greater than the income of Mrs. B before
including the income of minor child.
Note : Mr. B can reduce the tax deducted at source from such lottery income while computing his net
tax liability.

6 Nov 17 (Old)
Kamal gifted ` 10 lakhs to his wife, Sulochona on her birthday on, 1st January, 2021. Sulochona lent `
5,00,000 out of the gifted amount to Krishna on 1st April, 2021 for six months on which she received
interest of ` 50,000. The said sum of ` 50,000 was invested in shares of a listed company on 15th
October, 2021, which were sold for ` 75,000 on 30th December, 2021. Securities transaction tax was
paid on such sale. The balance amount of gift was invested as capital by Sulochona in a business. She
suffered loss of ` 15,000 in the business in Financial Year 2021-22.
In whose hands the above income and loss shall be included in Assessment Year 2022-23? Support
your answer with brief reasons.

Answer
As per section 64(1)(iv), in computing the total income of any individual, there shall be included all
such income as arises directly or indirectly, to the spouse of such individual from assets transferred
directly or indirectly, to the spouse by such individual otherwise than for adequate consideration or in
connection with an agreement to live apart.

Income Tax
9.6 Saviour Pen Drive can be booked at
by Nikunj Goenka www.meplclasses.com
 For PD | D2H Enquiries : Fo r L i ve E n qu i r i e s :
6290948313 | 8420129525 | 6290935202 | 033 2555 2254 +91 9830741471 | +91 33 2555 1197
[email protected] www.meplclasses.com

Accordingly, ` 50,000, being the amount of interest on loan received by Ms. Sulochana, wife of Mr.
Kamal, would be includible in the total income of Mr. Kamal, since such loan was given by her out of
the sum of money received by her as gift from her husband.
Assuming that the capital was invested in business by Ms. Sulochana on or before 1st April, 2021, and
capital invested was entirely out of the funds gifted by her husband, the entire loss of `15,000 from
the business carried on by Ms. Sulochana would also be includible in the total income of Mr. Kamal [As
per Explanation 3 to section 64(1)(iv)].
If, however, it is assumed that capital invested was partly out of the funds gifted by her husband, the
loss includible in the hands of Mr. Kamal has to be determined by apportioning the loss of ` 15,000
incurred during the year on the basis of the capital employed on 1.4.2021.
Since income includes loss as per Explanation 2 to section 64, clubbing provisions would be attracted
even if there is loss and not income.
The short-term capital gain of ` 25,000 (` 75,000, being the sale consideration less ` 50,000, being the
cost of acquisition) arising in the hands of Ms. Sulochana from sale of shares acquired by investing
the interest income of ` 50,000 earned by her (from the loan given out of the sum gifted to her by her
husband), would not be included in the hands of Mr. Kamal.
Income from the accretion of the transferred asset is not liable to be included in the hands of the
transferor and therefore such income is taxable in the hands of Ms. Sulochana. Since securities
transaction tax has been paid, such short-term capital gain on sale of listed shares is taxable@15% in
the hands of Ms. Sulochana.

7 Nov 17 (Old)
Compute the gross total income of Mr. & Mrs. A from the following information:

Particulars `
(a) Salary income (computed) of Mrs. A 2,30,000
(b) Income from profession of Mr. A 3,90,000
(c) Income of minor son B from company deposit 15,000
(d) Income of minor daughter C from special talent 32,000
(e) Interest from bank received by C on deposit made out of her special talent 3,000
(f ) Gift received by C on 30.09.2021 from friend of Mrs. A 2,500

Brief working is sufficient. Detailed computation under various heads of income is not required.

Answer
As per the provisions of section 64(1A) of the Income-tax Act, 1961, all the income of a minor child has
to be clubbed in the hands of that parent whose total income (excluding the income of the minor) is
greater. The income of Mr. A is ` 3,90,000 and income of Mrs. A is ` 2,30,000. Since the income of Mr. A
is greater than that of Mrs. A, the income of the minor children have to be clubbed in the hands of Mr.
A. It is assumed that this is the first year when clubbing provisions are attracted.
Income derived by a minor child from any activity involving application of his/her skill, talent,

Income Tax
Pen Drive can be booked at Saviour 9.7
www.meplclasses.com by Nikunj Goenka
 Fo r Live En q u ir ies : For PD | D2H Enquiries :
+91 9830741471 | +91 33 2555 1197 6290948313 | 8420129525 | 6290935202 | 033 2555 2254
www.meplclasses.com [email protected]

specialised knowledge and experience is not to be clubbed. Hence, the income of minor child C from
exercise of special talent will not be clubbed.
However, interest from bank deposit has to be clubbed even when deposit is made out of income
arising from application of special talent.
The Gross Total Income of Mrs. A is ` 2,30,000. The total income of Mr. A giving effect to the provisions
of section 64(1A) is as follows:
Computation of gross total income of Mr. A for the AY 2022-23

Particulars ` `
Income from profession 3,90,000
Income of minor son B from company deposit 15,000
Less: Exemption under section 10(32) 1,500 13,500
Income of minor daughter C
From special talent – not to be clubbed -
Interest from bank 3,000
Gift of ` 2,500 received from a non-relative is not taxable under section Nil
56(2)(x) being less than the aggregate limit of ` 50,000
3,000
Less : Exemption under section 10(32) 1,500 1,500
Gross Total Income 4,05,000

8 MTP March 18
The following are the details relating to Mr. Raju, a resident Indian, relating to the year ended 31.03.2022

Particulars Amount (`)

Short term capital gain 1,40,000
Income from salaries 2,50,000
Loss from house property 2,20,000
Loss from card games 20,000
Brought forward Long term capital loss of AY 2019-20 86,000
Dividend from Malpani Ltd. 11,00,000
Loss from tea business 96,000

Mr. Raju’s wife, Ishita is employed with Chander Ltd., at a monthly salary of ` 15,000, where Mr. Raju
holds 21% of the shares of the company. Ishita is not adequately qualified for the post held by her in
Chander Ltd.
You are required to compute taxable income of Mr. Raju for the AY 2022-23. Ascertain the amount of
losses which can be carried forward.

Income Tax
9.8 Saviour Pen Drive can be booked at
by Nikunj Goenka www.meplclasses.com
 For PD | D2H Enquiries : Fo r L i ve E n qu i r i e s :
6290948313 | 8420129525 | 6290935202 | 033 2555 2254 +91 9830741471 | +91 33 2555 1197
[email protected] www.meplclasses.com

Answer
Computation of Taxable Income of Mr. Raju for the AY 2022-23

Particulars ` `
Salaries
Income from Salary 2,50,000
Ishita’s salary (` 15,000 x 12) [See Note 1] 1,80,000
4,30,000
Less: Loss from house property set off against salary income as per section 2,00,000 2,30,000
71(3A) [See Note 2]
Capital Gains
Short term capital gain 1,40,000
Less: Loss from tea business (` 96,000 x 40%) [See Note 3 & 4] 38,400 1,01,600
Income from Other Sources
Dividend income [See Note 5] 11,00,000
Taxable Income 14,31,600

The following losses can be carried forward for subsequent assessment years:
(i) Loss from house property to be carried forward and set-off against income from house property
` 20,000
(ii) Long-term capital loss of AY 2019-20 can be carried forward and set-off against long-term capital
gains ` 86,000
(iii) 60% of losses from tea business to be carried forward and set-off against agricultural income. The
agricultural income, after set off of such losses would be considered for the purpose of applying the
concept of partial integration of agricultural income with non-agricultural income → ` 57,600
Notes:
(1) As per section 64(1)(ii), all the income which arises directly or indirectly, to the spouse of any
individual by way of salary, commission, fees or any other form of remuneration from a concern
in which such individual has a substantial interest shall be included in the total income of such
individual. However, where spouse possesses technical or professional qualification and the
income is solely attributable to the application of such knowledge and experience, clubbing
provisions will not apply. Since, Mrs. Ishita is not adequately qualified for the post and Mr. Raju
has substantial interest in Chander Ltd by holding 21% of the shares of the Chander Ltd., the
salary income of Mrs. Ishita to be included in Mr. Raju’s income.
(2) As per section 71(3A), loss from house property can be set off against any other head of income
to the extent of ` 2,00,000 only.
(3) 60% of the losses from tea business is treated as agricultural income and therefore exempt. Loss
from an exempt source cannot be set off against profits from a taxable source.
(4) As per section 71(2A), business loss cannot be set off against salary income. Hence, 40% of the
losses from tea business i.e., ` 38,400 set off against short term capital gains.
(5) Dividend received from Malpani Ltd, an Indian Company is fully taxable.
(6) Loss from Card games can neither be set off against any other income, nor can it be carried
Income Tax
Pen Drive can be booked at Saviour 9.9
www.meplclasses.com by Nikunj Goenka
 Fo r Live En q u ir ies : For PD | D2H Enquiries :
+91 9830741471 | +91 33 2555 1197 6290948313 | 8420129525 | 6290935202 | 033 2555 2254
www.meplclasses.com [email protected]

forward.
(7) As per section 74(1), brought forward Long-term capital loss can be set-off only against long-
term capital gain. Such loss can be carried forward for eight assessment years immediately
succeeding the assessment year for which the loss was first computed. Since, 8 assessment years
has not expired, such loss can be carried forward to AY 2022-23 for set-off against long-term
capital gains.

9 RTP May 18
Compute the income to be included in the hands of Mr. Sharma for the Assessment year 2022-23 with
reasons from the following information:
A proprietary business was started by Mrs. Sharma in the year 2019. As on 1.4.2020 her capital in
business was ` 5,00,000. Her husband gifted ` 3,00,000 on 2.4.2020, which Mrs. Sharma invested in her
business on the same date. Mrs. Sharma earned profits from her proprietory business for the financial
year 2020-21, ` 2,00,000 and financial year 2021-22 ` 4,20,000.

Answer
Section 64(1)(iv) provides for the clubbing of income in the hands of the individual, if the income
earned is from the assets transferred directly or indirectly to the spouse of the individual, otherwise
than for adequate consideration or in connection with an agreement to live apart. In this case, Mrs.
Sharma received a gift of ` 3,00,000 from her husband which she invested in her business. In a case
where gift from spouse has been invested in business, as per Explanation 3 to section 64(1), the income
or loss from such business for any previous year has to be apportioned between the spouses on the
basis of the ratio of their capital employed as on 1st April of the relevant previous year. Accordingly,
the income to be included in the hands of Mr. Sharma for AY 2022-23 has to be computed as under:

Mrs. Sharma’s Capital Contribution

Capital Out of gift from Total
Particulars Contribution husband
` ` `
Capital as on 1.4.2020 5,00,000 -- 5,00,000
Investment on 02.04.2020 out of gift 3,00,000 3,00,000
received from her husband
5,00,000 3,00,000 8,00,000
Profit for FY 2020-21 to be apportioned on 2,00,000 2,00,000
the basis of capital employed on the first
day of the previous year i.e., on 1.4.2020
Capital employed as on 1.4.2021 7,00,000 3,00,000 10,00,000
Profit for FY 2021-22 to be apportioned on 2,94,000 1,26,000 4,20,000
the basis of capital employed as on 1.4.2021
(i.e., 7:3)
Therefore, the income to be included in the hands of Mr. Sharma for AY 2022-23 is ` 1,26,000.

Income Tax
9.10 Saviour Pen Drive can be booked at
by Nikunj Goenka www.meplclasses.com
 For PD | D2H Enquiries : Fo r L i ve E n qu i r i e s :
6290948313 | 8420129525 | 6290935202 | 033 2555 2254 +91 9830741471 | +91 33 2555 1197
[email protected] www.meplclasses.com

10  MTP August 18
Mr. Shashank is an employee of KML (P) Ltd. drawing a monthly salary of ` 30,000. He provides you the
following information for the previous year 2021-22:
(i) He had a fixed deposit of ` 4,00,000 with State Bank of India with interest @10%. He instructed
bank to credit such interest on deposit to the saving account of Mr. Ram, his sister’s son, to help
him in his higher education.
(ii) He gifted a flat to Mrs. Kajal (wife of Mr. Shashank) on April 1, 2021. During the previous year
2021-22, she received a rent of ` 20,000 p.m. from letting out the flat.
(iii) He gifted ` 10,00,000 to Mrs. Kajal on 1st April, 2021 which Mrs. Kajal invested in her business on
the same day. Capital in the business before such investment was ` 20,00,000. She earned profits
from business for the financial year 2021-22 of ` 9,00,000.
(iv) His minor son Sandeep earned income from company deposit of ` 1,50,000.
Mr. Shashank and Mrs. Kajal do not have any other income during the PY 2021-22. Compute the total
income of Mr. Shashank and Mrs. Kajal for AY 2022-23.

Answer
Computation of Total income of Mr. Shashank and Mrs. Kajal for the AY 2022-23

Particulars Mr. Shashank (`) Mrs. Kajal (`)

Salary income (` 30,000 x 12) 3,60,000
Income from house property [` 2,40,000 (` 20,000 x 12) less 1,68,000
standard deduction of 30%] (Note 1)
Income from other sources
Interest on fixed deposit with State bank of India (` 40,000
4,00,000 x 10%) (Note 2)
Profits and gains from business or profession
Profits earned by Mrs. Kajal from her business (Note 3) 3,00,000 6,00,000
Income before including income of minor child u/s 64(1A) 8,68,000 6,00,000
Income from other sources
Minor son Sandeep - Income from company deposit (Note 4) 1,48,500
Total income 10,16,500 6,00,000

Notes:
(1) According to section 27(i), an individual who transfers any house property to his or her spouse
otherwise than for adequate consideration or in connection with an agreement to live apart,
shall be deemed to be the owner of the house property so transferred. Hence, Mr. Shashank shall
be deemed to be the owner of the flat gifted to Mrs. Kajal and hence, the income arising from the
same shall be computed in the hands of Mr. Shashank.
Note: The provisions of section 56(2)(x) would not be attracted in the hands of Mrs. Kajal, since
she has received immovable property without consideration from a relative i.e., her husband.

Income Tax
Pen Drive can be booked at Saviour 9.11
www.meplclasses.com by Nikunj Goenka
 Fo r Live En q u ir ies : For PD | D2H Enquiries :
+91 9830741471 | +91 33 2555 1197 6290948313 | 8420129525 | 6290935202 | 033 2555 2254
www.meplclasses.com [email protected]

(2) As per section 60, in case there is a transfer of income without transfer of asset from which such
income is derived, such income shall be treated as income of the transferor. Therefore, the fixed
deposit interest of ` 40,000 transferred by Mr. Shashank to Mr. Ram shall be included in the total
income of Mr. Shashank.
(3) Section 64(1)(iv) provides for the clubbing of income in the hands of the individual, if the
income earned is from the assets transferred directly or indirectly to the spouse of the individual,
otherwise than for adequate consideration or in connection with an agreement to live apart.
In this case Mrs. Kajal received a gift of ` 10,00,000 on 1.4.2021 from her husband which she
invested in her business on the same day. The income to be clubbed in the hands of Mr. Shashank
for the AY 2022-23 is computed as under:
Capital contribution
Mrs. Kajal’s capital
Particulars out of gift from Mr. Total (`)
contribution (`)
Shashank (`)
Capital as on 1.4.2021 20,00,000 10,00,000 30,00,000
Profit for PY 2021-22 to be 6,00,000 3,00,000 9,00,000
apportioned on the basis of
capital employed on the first (9,00,000 x 2/3) (9,00,000 x 1/3)
day of the previous year i.e. as
on 1.4.2021 (2:1)
Therefore, the income to be clubbed in the hands of Mr. Shashank for the AY 2022-23 is ` 3,00,000.
Note: The provisions of section 56(2)(x) would not be attracted in the hands of Mrs. Kajal, since
she has received a sum of money exceeding ` 50,000 without consideration from a relative i.e,
her husband.
(4) As per section 64(1A), the income of the minor child is to be included in the total income of the
parent whose total income (excluding the income of minor child to be so clubbed) is greater.
Further, as per section 10(32), income of a minor child which is includible in the income of the
parent shall be exempt to the extent of ` 1,500 per child.
Therefore, the income of `1,50,000 received by minor son Sandeep from company deposit shall,
after providing for exemption of ` 1,500 under section 10(32), be included in the income of Mr.
Shashank, since Mr. Shashank’s income of ` 8,68,000 (before including the income of the minor
child) is greater than Mrs. Kajal’s income of ` 6,00,000. Therefore, ` 1,48,500 (i.e., ` 1,50,000 – `
1,500) shall be included in Mr. Shashank’s income. It is assumed that this is the first year in which
clubbing provisions are attracted.

11  MTP October 18
Mr. Raju gifted a sum of `10 lacs to his brother’s minor daughter on 07-04-2021. On 16-04-2021, his
brother gifted debentures worth ` 12 lacs to the wife of Mr. Raju. Daughter of Mr. Raju’s brother
invested the amount in fixed deposit with Bank of India @ 9% p.a. interest and Mrs. Raju received
interest of ` 90,000 on debentures received by her.
Examine the implications under the provisions of the Income-tax Act, 1961

Income Tax
9.12 Saviour Pen Drive can be booked at
by Nikunj Goenka www.meplclasses.com
 For PD | D2H Enquiries : Fo r L i ve E n qu i r i e s :
6290948313 | 8420129525 | 6290935202 | 033 2555 2254 +91 9830741471 | +91 33 2555 1197
[email protected] www.meplclasses.com

Answer
In the given case, Mr. Raju gifted a sum of `10 lacs to his brother’s minor daughter on 7.4.2021 and
simultaneously, his brother gifted debentures worth `12 lacs to Mr. Raju’s wife on 16.4.2021. Mr. Raju’s
brother’s minor daughter invested the gifted amount of `10 lacs in fixed deposit with Bank of India.
These transfers are in the nature of cross transfers. Accordingly, the income from the assets transferred
would be assessed in the hands of the deemed transferor because the transfers are so intimately
connected to form part of a single transaction and each transfer constitutes consideration for the
other by being mutual or otherwise.
If two transactions are inter-connected and are part of the same transaction in such a way that it can
be said that the circuitous method was adopted as a device to evade tax, the implication of clubbing
provisions would be attracted†.
As per section 64(1A), all income of a minor child is includible in the hands of the parent, whose
total income, before including minor’s income is higher. Accordingly, the interest income arising to
Mr. Raju’s brother’s daughter from fixed deposits would be included in the total income of Mr. Raju’s
brother, assuming that Mr. Raju’s brother’s total income is higher than his wife’s total income, before
including minor’s income. Mr. Raju’s brother can claim exemption of ` 1,500 under section 10(32).
Interest on debentures arising in the hands of Mrs. Raju would be taxable in the hands of Mr. Raju
as per section 64(1)(iv).
This is because both Mr. Raju and his brother are the indirect transferors of the income to their spouse
and minor daughter, respectively, with an intention to reduce their burden of taxation.
In the hands of Mr. Raju, interest received by his spouse on debentures of `10 lacs alone would be
included and not the entire interest income on the debentures of `12 lacs, since the cross transfer is
only to the extent of `10 lacs.
Hence, only proportional interest (i.e., 10/12th of ` 90,000, being interest on debentures received) `
75,000 would be includible in the hands of Mr. Raju.
The provisions of section 56(2)(x) are not attracted in respect of sum of money transferred or value of
debentures transferred, since in both the cases, the transfer is from a relative.

12  RTP Nov 18
Saharsh gifted ` 12 lakhs to his wife, Sandhya on her birthday on, 1st February, 2021. Sandhya lent `
6,00,000 out of the gifted amount to Karuna on 1st April, 2021 for six months on which she received
interest of ` 60,000. The said sum of ` 60,000 was invested in shares of a listed company on 3rd October,
2021, which were sold for ` 85,000 on 30th March, 2022. Securities transactions tax was paid on such
sale. The balance amount of gift was invested on 1st April 2021, as capital by Sandhya in her new
business. She suffered loss of ` 25,000 in the business in Financial Year 2021-22.
In whose hands the above income and loss shall be included in Assessment Year 2022-23, assume that
capital invested in the business was entirely out of the funds gifted by her husband. Support your
answer with brief reasons.

Income Tax
Pen Drive can be booked at Saviour 9.13
www.meplclasses.com by Nikunj Goenka
 Fo r Live En q u ir ies : For PD | D2H Enquiries :
+91 9830741471 | +91 33 2555 1197 6290948313 | 8420129525 | 6290935202 | 033 2555 2254
www.meplclasses.com [email protected]

Answer
In computing the total income of any individual, there shall be included all such income as arises
directly or indirectly, to the spouse of such individual from assets transferred directly or indirectly, to
the spouse by such individual otherwise than for adequate consideration or in connection with an
agreement to live apart.
Interest on loan: Accordingly, ` 60,000, being the amount of interest on loan received by Mrs. Sandhya,
wife of Mr. Saharsh, would be includible in the total income of Mr. Saharsh, since such loan was given
by her out of the sum of money received as gift from her husband.
Loss from business: As per Explanation 2 to section 64, income includes loss. Thus, clubbing provisions
would be attracted even if there is loss and not income.
Thus, the entire loss of ` 25,000 from the business carried on by Mrs. Sandhya would be includible in
the total income of Mr. Saharsh, since as on 1st April 2021, the capital invested was entirely out of the
funds gifted by her husband.
Short-term capital gain: The short-term capital gain of ` 25,000 (` 85,000, being the sale consideration
less ` 60,000, being the cost of acquisition) arising in the hands of Mrs. Sandhya from sale of shares
acquired by investing the interest income of ` 60,000 earned by her (from the loan given out of the
sum gifted to her by her husband), would not be included in the hands of Mr. Saharsh. Since securities
transaction tax has been paid, such short-term capital gain on sale of listed shares is taxable@15%
Income from the accretion of the transferred asset is not liable to be included in the hands of the
transferor and, therefore, such income is taxable in the hands of Mrs. Sandhya.

13  MTP March 19
Akash gifted ` 5 lakhs to his wife, Suman on her birthday on, 1st March, 2021. Suman lent such amount
of ` 5,00,000 to Karuna on 1st April, 2021 for six months on which she received interest of ` 50,000. The
said sum of ` 50,000 was invested in shares of a listed company on 13th October, 2021, which were
sold for ` 70,000 on 30th March, 2022. Securities transactions tax was paid on such sale.
In whose hands the above income and loss shall be included in Assessment Year 2022-23.

Answer
In computing the total income of any individual, there shall be included all such income as arises
directly or indirectly, to the spouse of such individual from assets transferred directly or indirectly, to
the spouse by such individual otherwise than for adequate consideration or in connection with an
agreement to live apart.
Interest on loan: Accordingly, ` 50,000, being the amount of interest on loan received by Mrs.
Suman, wife of Mr. Akash, would be includible in the total income of Mr. Akash, since such loan was
given by her out of the sum of money received by her as gift from her husband.
Short-term capital gain: The short-term capital gain of ` 20,000 (` 70,000, being the sale consideration
less `50,000, being the cost of acquisition) arising in the hands of Ms. Suman from sale of shares
acquired by investing the interest income of ` 50,000 earned by her (from the loan given out of the
sum gifted to her by her husband), would not be included in the hands of Mr. Akash. Since securities

Income Tax
9.14 Saviour Pen Drive can be booked at
by Nikunj Goenka www.meplclasses.com
 For PD | D2H Enquiries : Fo r L i ve E n qu i r i e s :
6290948313 | 8420129525 | 6290935202 | 033 2555 2254 +91 9830741471 | +91 33 2555 1197
[email protected] www.meplclasses.com

transaction tax has been paid, such short-term capital gain on sale of listed shares is taxable@15%
Income from the accretion of the transferred asset is not liable to be included in the hands of the
transferor and, therefore, such income is taxable in the hands of Ms. Suman.

14  MTP April 19
A proprietary business was started by Mrs. Kapoor in the year 2019. As on 1.4.2020 her capital in
business was ` 3,00,000. Her husband gifted ` 2,00,000 on 10.4.2020, which amount Mrs. Kapoor
invested in her business on the same date. Mrs. Kapoor earned profits from her proprietary business
for the Financial year 2020-21, `1,50,000 and Financial year 2021-22 `3,90,000. Compute the income,
to be clubbed in the hands of Mrs. Kapoor’s husband for the Assessment year 2022-23 with reasons.

Answer
Section 64(1) of the Income-tax Act, 1961 provides for the clubbing of income in the hands of the
individual, if the income earned is from the assets transferred directly or indirectly to the spouse of
the individual, otherwise than for adequate consideration. In this case Mrs. Kapoor received a gift
of `2,00,000 from her husband which she invested in her business. The income to be clubbed in the
hands of Mrs. Kapoor’s husband for AY 2022-23 is computed as under:

Mrs. Kapoor’s Capital

Capital Contribution
Particulars Total (`)
Contribution Out of gift from
(`) husband (`)
Capital as at 1.4.2020 3,00,000 -- 3,00,000
Investment on 10.04.2020 out of gift received from 2,00,000 2,00,000
her husband
3,00,000 2,00,000 5,00,000
Profit for FY 2020-21 to be apportioned on the basis 1,50,000 1,50,000
of capital employed on the first day of the previous
year i.e., on 1.4.2020
Capital employed as at 1.4.2021 4,50,000 2,00,000 6,50,000
Profit for FY 2021-22 to be apportioned on the 2,70,000 1,20,000 3,90,000
basis of capital employed as at 1.4.2021 (i.e., 45 : 20)

Therefore, the income to be clubbed in the hands of Mrs. Kapoor’s husband for AY 2022-23 is ` 1,20,000.

Income Tax
Pen Drive can be booked at Saviour 9.15
www.meplclasses.com by Nikunj Goenka
 Fo r Live En q u ir ies : For PD | D2H Enquiries :
+91 9830741471 | +91 33 2555 1197 6290948313 | 8420129525 | 6290935202 | 033 2555 2254
www.meplclasses.com [email protected]

15  May 19 (Old)
Briefly explain with example, the meaning of Cross Transfer, the objective to make such transactions
and implications thereof under the Income-tax Laws

Answer
Meaning of Cross Transfer and tax implications thereof-
Cross transfer means transfer of income-yielding assets whether directly or indirectly so as to reduce
the burden of taxation on the transferors.
If two transactions are inter-connected and are part of the same transaction in such a way that it can
be said that the circuitous method was adopted as a device to evade tax, the implication of clubbing
provisions would be attracted.(It was so held by the Apex Court in CIT vs. Keshavji Morarji (1967) 66
ITR 142)
In such a case, the income from the assets transferred would be assessed in the hands of the deemed
transferor because the transfers are so intimately connected as to form part of a single transaction,
and each transfer constitutes consideration for the other by being mutual or otherwise.
Example: If Mr. A makes a gift of ` 5,00,000 to the wife of his brother B for the purchase of a house by
her and simultaneously, Mr. B makes a gift of shares in a foreign company worth ` 5,00,000 owned by
him to Mr. A’s minor son, the income from the assets trans- ferred would be assessed in the hands of
the deemed transferor. This is because both Mr. A and Mr. B are the indirect transferors of the income
to their minor son and spouse, respectively, with an intention to reduce their burden of taxation.
Accordingly, dividend from shares accruing to Mr. A’s minor son is taxable in the hands of Mr. A and
rental income from house property accruing to Mrs. B is taxable in the hands of Mr. B.

16  RTP Nov 19
Mr. Raghav is a chartered accountant and his income from profession for the year 2020-21 is `
15,00,000. He provides you with the following information for the year 2021-22.

Particulars `
Income of minor son Rahul from company deposit 1,75,000
Income of minor daughter Riya (professional dancer) from her dance performances 20,00,000
Interest from Canara bank received by Riya on fixed deposit made in 2017 out of 20,000
income earned from her dance performances
Gift received by Riya from friends of Mr. Raghav on winning National award 45,000
Loss from house property (computed) 2,50,000
Short term capital loss 6,00,000
Long term capital gain under section 112 4,00,000
Short term capital loss under section 111A 10,00,000

Income Tax
9.16 Saviour Pen Drive can be booked at
by Nikunj Goenka www.meplclasses.com
 For PD | D2H Enquiries : Fo r L i ve E n qu i r i e s :
6290948313 | 8420129525 | 6290935202 | 033 2555 2254 +91 9830741471 | +91 33 2555 1197
[email protected] www.meplclasses.com

Mr. Raghav income before considering clubbing provisions is higher than that of his wife.
Compute the Total Income of Mr. Raghav for Assessment Year 2022-23 and the losses to be carried
forward assuming that he files his income tax returns every year before due date.

Answer
Particulars ` ` `
Profits and gains from business and profession
Income from chartered accountancy profession 15,00,000
Less: Loss from house property (can be set-off to the extent of ` 2,00,000 13,00,000
2,00,000, as per section 71(3A).
Capital gains
Long term capital gain under section 112 4,00,000
Less: Short term capital loss set off against long-term capital (4,00,000) Nil
gain as per section 74
Income from other sources
Income of minor son Rahul 1,75,000
Income from company deposit includible in the hands of Mr.
Raghav as per section 64(1A)
Less: Exemption in respect of income of minor child u/s 10(32) 1,500 1,73,500
Income of minor daughter Riya Nil
- Income of ` 20,00,000 of minor daughter Riya (professional
dancer) not includible in the hands of parent, since such
income is earned on account of her special skills
- Interest received on deposit with Canara Bank made out of 20,000
amount earned on account of her special talent is includible
as per section 64(1A), since interest income arises out of
deposit made and not on account of her special skills
- Gift of ` 45,000 received by her from friends of Mr. Raghav Nil
is not taxable under section 56(2)(x), since the aggregate
amount from non-relatives does not exceed ` 50,000
Less: Exemption in respect of income of minor child u/s 10(32) 1,500 18,500 1,92,000
Total Income 14,92,000
Losses to be carried forward to AY 2022-23

Particulars `
Loss from house property [` 2.50,000 – ` 2,00,000] 50,000
Short term capital loss under section 111A 10,00,000
Short term capital loss (other than above) [` 6,00,000 – ` 4,00,000] 2,00,000

Note: Short-term capital loss under section 111A can also be set-off against long-term capital gains
under section 112. In such a case, the losses to be carried forward to AY 2022-23 would be as under –

Income Tax
Pen Drive can be booked at Saviour 9.17
www.meplclasses.com by Nikunj Goenka
 Fo r Live En q u ir ies : For PD | D2H Enquiries :
+91 9830741471 | +91 33 2555 1197 6290948313 | 8420129525 | 6290935202 | 033 2555 2254
www.meplclasses.com [email protected]

Particulars `
Loss from house property [` 2.50,000 – ` 2,00,000] 50,000
Short term capital loss under section 111A [` 10,00,000 – ` 4,00,000] 6,00,000
Short term capital loss (other than above) 6,00,000

17  Nov 19 (New)
Mr. Mahadev, a noted bhajan singer of Rajasthan and his wife Mrs. Dariya furnish the following
information relating to the Assessment Year 2022-23.

`
1 Income of Mr. Mahadev - professional bhajan singer (computed) 5,65,000
2 Salary income of Mrs. Dariya (computed) 3,80,000
3 Loan received by Mrs. Dariya from Ramu & Jay (Pvt) Ltd. (Mrs. Dariya holds 35% 2,50,000
shares of the Co. The Co. has incurred losses since its inception 2 years back)
4 Income of their minor son Golu from winning singing reality show on T.V. 2,50,000
5 Cash gift received by Golu from friend of Mr. Mahadev on winning the show 21,000
6 Interest income received by minor married daughter Gudia from deposit with 40,000
Ramu & Jay Pvt Ltd.

Compute total taxable income of Mr. Mahadev & Mrs. Dariya for the Assessment Year 2022-23.

Answer
Computation of Taxable income of Mr. Mahadev for AY 2022-23

Particulars `
Professional income (bhajan singer) 5,65,000
Income of minor son – Golu
- Income from winning singing reality show on T.V.
Income derived by a minor child from any activity involving application of his/ Nil
her skill, talent, specialized knowledge and experience is not to be included in the
hands of parent. Hence, ` 2,50,000 earned by minor son Golu from reality show on
TV would not be included in the income of either parent.
- Cash gift received by Golu from friend of Mr. Mahadev on winning the show
The cash gift received by his minor son Golu (not on account of her skill) from his Nil
friends would not be taxable, since its value does not exceed ` 50,000.
Income of minor married daughter – Gudia
Interest income on deposit with Ramu & Jay Pvt. Ltd. 40,000
Less: Exempt under section 10(32) 1,500
(Income of minor daughter would be included in the hands of Mr. Mahadev, since his 38,500
income, before including minor daughter’s income, is higher than his wife’s income).
Taxable Income 6,03,500

Income Tax
9.18 Saviour Pen Drive can be booked at
by Nikunj Goenka www.meplclasses.com
 For PD | D2H Enquiries : Fo r L i ve E n qu i r i e s :
6290948313 | 8420129525 | 6290935202 | 033 2555 2254 +91 9830741471 | +91 33 2555 1197
[email protected] www.meplclasses.com

Computation of Taxable income of Mrs. Dariya for AY 2022-23

Particulars `
Salary income (computed) 3,80,000
Loan received from Ramu & Jay (Pvt.) Ltd.
[Such loan amount would not be considered as deemed dividend under section 2(22) Nil
(e), even though Mrs. Dariya has substantial interest (holding 20% shares or more) in
the Ramu & Jay (Pvt.) Ltd., a closely held company, since the company does not have
any accumulated profits on account of losses incurred in last 2 years from inception]
Taxable Income 3,80,000

18  MTP May 20
Mr. Vijay gifted a sum of ` 4 lakhs to his brother’s wife on 19-6-2021. On 21-7-2021, his brother gifted
a sum of ` 3 lakhs to Mr. Vijay’s wife. The gifted amounts were invested as fixed deposits in banks by
Mrs. Vijay and wife of Mr. Vijay’s brother on 01-8-2021 at 9% interest. Examine the consequences of
the above under the provisions of the Income-tax Act, 1961 in the hands of Mr. Vijay and his brother.

Answer
In the given case, Mr. Vijay gifted a sum of `4 lakhs to his brother’s wife on 19.06.2021 and simultaneously,
his brother gifted a sum of ` 3 lakhs to Mr. Vijay’s wife on 21.07.2021. The gifted amounts were invested
as fixed deposits in banks by Mrs. Vijay and his brother’s wife. These transfers are in the nature of
cross transfers. Accordingly, the income from the assets transferred would be assessed in the hands
of the deemed transferor because the transfers are so intimately connected to form part of a single
transaction and each transfer constitutes consideration for the other by being mutual or otherwise.
If two transactions are inter-connected and are part of the same transaction in such a way that it can
be said that the circuitous method was adopted as a device to evade tax, the implication of clubbing
provisions would be attracted. It was so held by the Apex Court in CIT vs. Keshavji Morarji (1967) 66
ITR 142.
Accordingly, the interest income arising to Mrs. Vijay in the form of interest on fixed deposits would
be included in the total income of Mr. Vijay and interest income arising in the hands of his brother’s
wife would be taxable in the hands of Mr. Vijay’s brother as per section 64(1), to the extent of amount
of cross transfers i.e., ` 3 lakhs.
This is because both Mr. Vijay and his brother are the indirect transferors of the income to their
respective spouses with an intention to reduce their burden of taxation.
However, the interest income earned by his spouse on fixed deposit of ` 3 lakhs alone would be
included in the hands of Mr. Vijay’s brother and not the interest income on the entire fixed deposit of
` 4 lakhs, since the cross transfer is only to the extent of ` 3 lakhs.

Income Tax
Pen Drive can be booked at Saviour 9.19
www.meplclasses.com by Nikunj Goenka
 Fo r Live En q u ir ies : For PD | D2H Enquiries :
+91 9830741471 | +91 33 2555 1197 6290948313 | 8420129525 | 6290935202 | 033 2555 2254
www.meplclasses.com [email protected]

19  RTP May 20
Rayaan gifted ` 15 lakhs to his wife, Sargam on her birthday on, 23rd February, 2021. Sargam lent `
8,00,000 out of the gifted amount to Karuna on 1st April, 2021 for six months on which she received
interest of ` 80,000. The said sum of ` 80,000 was invested in shares of a listed company on 5th
October, 2021, which were sold for ` 96,000 on 28th March, 2022. Securities transactions tax was paid
on purchase and sale of such shares. The balance amount of gift was invested on 1st April 2021, as
capital by Sargam in her new business. She suffered loss of ` 52,000 in the business in Financial Year
2021-22.
In whose hands the above income and loss shall be included in Assessment Year 2022-23, assuming
that capital invested in the business was entirely out of the funds gifted by her husband. Support your
answer with brief reasons.

Answer
In computing the total income of any individual, there shall be included all such income as arises
directly or indirectly, to the spouse of such individual from assets transferred directly or indirectly, to
the spouse by such individual otherwise than for adequate consideration or in connection with an
agreement to live apart.
Interest on loan: Accordingly, ` 80,000, being the amount of interest on loan received by Mrs. Sargam,
wife of Mr. Rayaan, would be includible in the total income of Mr. Rayaan, since such loan was given
out of the sum of money received by her as gift from her husband.
Loss from business: As per Explanation 2 to section 64, income includes loss. Thus, clubbing provisions
would be attracted even if there is loss and not income.
Thus, the entire loss of ` 52,000 from the business carried on by Mrs. Sargam would also be includible
in the total income of Mr. Rayaan, since as on 1st April 2021, the capital invested was entirely out of
the funds gifted by her husband.
Short-term capital gain: Income from the accretion of the transferred asset is not liable to be included
in the hands of the transferor and, therefore, short-term capital gain of ` 16,000 (` 96,000, being the
sale consideration less ` 80,000, being the cost of acquisition) arising in the hands of Mrs. Sargam from
sale of shares acquired by investing the interest income of ` 80,000 earned by her (from the loan given
out of the sum gifted by her husband), would not be included in the hands of Mr. Rayaan. Thus, such
income is taxable in the hands of Mrs. Sargam.

20  RTP Nov 20
Mr. Karan gifted a sum of ` 9 lakhs to his brother’s minor son on 1-5-2021. On the same date, his
brother gifted debentures worth ` 10 lakhs to Mrs. Karan. Son of Mr. Karan’s brother invested the
amount in fixed deposit with Canara Bank @ 9% p.a. interest and Mrs. Karan received interest of `
81,000 on these debentures during the previous year 2021-22. Discuss the tax implications under the
provisions of the Income-tax Act, 1961.

Income Tax
9.20 Saviour Pen Drive can be booked at
by Nikunj Goenka www.meplclasses.com
 For PD | D2H Enquiries : Fo r L i ve E n qu i r i e s :
6290948313 | 8420129525 | 6290935202 | 033 2555 2254 +91 9830741471 | +91 33 2555 1197
[email protected] www.meplclasses.com

Answer
In the given case, Mr. Karan gifted a sum of ` 9 lakhs to his brother’s minor son on 1.5.2021 and
simultaneously, his brother gifted debentures worth ` 10 lakhs to Mr. Karan’s wife on the same date.
Mr. Karan’s brother’s minor son invested the gifted amount of ` 9 lakhs in fixed deposit with Canara
Bank.
These transfers are in the nature of cross transfers. Accordingly, the income from the assets transferred
would be assessed in the hands of the deemed transferor because the transfers are so intimately
connected to form part of a single transaction and each transfer constitutes consideration for the
other by being mutual or otherwise.
If two transactions are inter-connected and are part of the same transaction in such a way that it can
be said that the circuitous method was adopted as a device to evade tax, the implication of clubbing
provisions would be attracted2.
As per section 64(1A), all income of a minor child is includible in the hands of the parent, whose
total income, before including minor’s income is higher. Accordingly, the interest income arising to
Mr. Karan’s brother’s son from fixed deposits would be included in the total income of Mr. Karan’s
brother, assuming that Mr. Karan’s brother’s total income is higher than his wife’s total income, before
including minor’s income. Mr. Karan’s brother can claim exemption of ` 1,500 under section 10(32).
Interest on debentures arising in the hands of Mrs. Karan would be taxable in the hands of Mr. Karan
as per section 64(1)(iv).
This is because both Mr. Karan and his brother are the indirect transferors of the income to their spouse
and minor son, respectively, with an intention to reduce their burden of taxation.
In the hands of Mr. Karan, interest received by his spouse on debentures of ` 9 lakhs alone would be
included and not the entire interest income on the debentures of `10 lakhs, since the cross transfer is
only to the extent of ` 9 lakhs.
Hence, only proportional interest (i.e., 9/10th of interest on debentures received) ` 72,900 would be
includible in the hands of Mr. Karan.
The provisions of section 56(2)(x) are not attracted in respect of sum of money transferred or value of
debentures transferred, since in both the cases, the transfer is from a relative.

21  Nov 20 (New)
Determine the Gross total income of Shri Ram Kumar and Smt Ram Kumar for the assessment year
2022-23 from the following :
(i) Salary received by Shri Ram Kumar from a company ` 1,80,000 per annum and Smt Ram Kumar
also doing job in a company and getting salary of ` 2,40,000 per annum.
(ii) Shri Ram Kumar transferred a flat to his wife Smt Ram Kumar on 1st September, 2021 for adequate
consideration. The rent received from this let-out flat is ` 9,000 per month.
(iii) Shri Ram Kumar and his wife Smt. Ram Kumar both are partners in a firm. Shri Ram Kumar received
` 36,000 and Smt. Ram Kumar received ` 64,000 as interest from the firm and also had a share of
profit of ` 12,000 and ` 26,000 respectively.

Income Tax
Pen Drive can be booked at Saviour 9.21
www.meplclasses.com by Nikunj Goenka
 Fo r Live En q u ir ies : For PD | D2H Enquiries :
+91 9830741471 | +91 33 2555 1197 6290948313 | 8420129525 | 6290935202 | 033 2555 2254
www.meplclasses.com [email protected]

(iv) Smt. Ram Kumar transferred 10% debentures worth ` 3,00,000 to Shri Ram Kumar. The whole
amount of ` 3,30,000 invested by Shri Ram Kumar in the similar investments and earned income
of ` 39,000.
(v) Mother of Shri Ram Kumar transferred a property to Master Rohit (son of Shri Ram Kumar) in the
year 2019. Master Rohit (Aged 13 years) received of ` 15,000 as income from this property on
20th February, 2022.

Answer
Computation of Gross Total Income of Shri Ram Kumar and Smt. Ram Kumar for A.Y. 2022-23

Particulars Shri Ram Kumar Smt. Ram Kumar

` ` ` `
Salary 1,80,000 2,40,000
Less: Standard deduction 50,000 1,30,000 50,000 1,90,000
Income from house property
Rent received (taken as annual value in the 45,000 63,000
absence of other information)
Less: Deduction u/s 24(a)@30% of Annual Value 13,500 31,500 18,900 44,100
Note – Clubbing provisions are not attracted
since the transfer to spouse is for adequate
consideration.
Therefore, the rent for the 5 months
upto the date of transfer is taxable in the hands
of Ram Kumar and thereafter, in the hands of his
wife.
Profits and gains of business or profession
Share of profit from firm [Exempt under section - -
10(2A)]
Interest from firm (assumed that the same is fully 36,000 36,000 64,000 64,000
deductible in the hands of the firm)
Income from other sources
Interest on debentures (interest@10% on - 30,000
debentures transferred to Shri Ram Kumar
without consideration to be included in the
hands of the transferor-spouse, Smt. Ram Kumar)
= 10% of ` 3 lakh (See Note 1 below)
Income from investments [` 39,000 x 3,00,000 3,545 3,545 35,455 65,455
/ 3,30,000] (The clubbing provisions will apply
even if the form of the asset is changed. If the
debentures are redeemed and invested in similar
investments, income from ` 3 lakh invested (being
the value of debentures transferred) alone will be
included in the hands of the transferor-spouse,

Income Tax
9.22 Saviour Pen Drive can be booked at
by Nikunj Goenka www.meplclasses.com
 For PD | D2H Enquiries : Fo r L i ve E n qu i r i e s :
6290948313 | 8420129525 | 6290935202 | 033 2555 2254 +91 9830741471 | +91 33 2555 1197
[email protected] www.meplclasses.com

Smt. Ram Kumar. Income from accretion to such

debentures (i.e., income earned by investing
debenture interest of ` 30,000 will not be included
in the hands of Smt. Ram Kumar. The same i.e., `
3,545, will be taxable in the hands of the Shri Ram
Kumar himself ) (See Note 1 below)
Total income (before including minor’s income) 2,01,045 3,63,555
Income of minor son Rohit to be
included in Smt. Ram Kumar’s income, since her - 13,500
total income before including minor’s income is
higher than that of her husband. She is eligible
for exemption of ` 1,500 u/s 10(32) in respect of
the income so included. Therefore, income to be
included in her income is ` 13,500 (` 15,000 – `
1,500) (See Note 2 below)
Total Income 2,01,045 3,77,055

Note –
1. In respect of transfer of debentures by Smt. Ram Kumar to Shri Ram Kumar, it is not mentioned
whether the transfer is for adequate consideration or not. Moreover, the date of transfer is
also not given. The above solution is given on the assumption that transfer is for inadequate
consideration. However, if it is assumed that transfer is for adequate consideration, the clubbing
provisions would not be attracted. In such case, the interest on Debentures of ` 30,000 as well as
income from investment of ` 39,000 will be taxable in the hands of Shri Ram Kumar.
2. In respect of property transferred to Rohit, the question simply states ` 15,000 as the income
from property, without mentioning the nature of income (whether rental income or otherwise)
or nature of property (whether house property or otherwise). Therefore, the said amount has not
been treated as income from house property and deduction u/s 24(a) has not been provided in
the above solution.
However, if such sum is treated as income from house property, the income to be included in
Smt. Ram Kumar’s income would be ` 9,000 [` 15,000 – ` 4,500 (30% of ` 15,000 allowable as
deduction u/s 24(a)) – ` 1,500 (exemption u/s 10(32)], and the same would be included under the
head “Income from house property”. Consequently, her total income would be ` 3,72,555.

22  Jan 21 (Old)
Mr. Gupta and his wife Mrs. Gupta are partners in a partnership firm holding 25% share each. During
the FY 2021-22 the firm paid ` 2,50,000 to each of them as remuneration. Apart from this, they provide
you the following information in respect of FY 2021-22:
(i) Salary received by Mr. Gupta from his employer ` 12,50,000.
(ii) Interest on fixed deposit earned by Mrs. Gupta ` 14,00,000. (The fixed deposit was opened by
using her “Stridhan”)
(iii) Income of their three minor children Neeta, Meeta and Seeta was ` 15,000; ` 10,000 and ` 2,000
respectively.
Income Tax
Pen Drive can be booked at Saviour 9.23
www.meplclasses.com by Nikunj Goenka
 Fo r Live En q u ir ies : For PD | D2H Enquiries :
+91 9830741471 | +91 33 2555 1197 6290948313 | 8420129525 | 6290935202 | 033 2555 2254
www.meplclasses.com [email protected]

You are required to compute the gross total income of Mr. and Mrs. Gupta as per the provisions of
Income Tax Act for the AY 2022-23.

Answer
Computation of Gross Total Income of Mr. Gupta and Mrs. Gupta for A.Y. 2022 -23

Particulars Mr. Gupta Mrs. Gupta

` ` ` `
Salary 12,50,000 -
Less: Standard deduction under section 16(ia) 50,000
12,00,000
Interest on Fixed Deposit earned by Mrs. Gupta - 14,00,000
Total income (before including remuneration 12,00,000 14,00,000
from firm and minor’s income)
Remuneration from firm (assumed that the same 2,50,000
is fully deductible in the hands of the firm)
Remuneration of ` 2,50,000 received by Mr. 2,50,000 5,00,000
Gupta has to be included in the total income of
Mrs. Gupta, since both of them have substantial
interest in the concern (i.e., each having 25%
share in the firm, in the present case), and her
total income of `14 lakh exceeds the total income
of her spouse excluding this income (i.e., ` 12
lakh). It is assumed that such remuneration is fully
deductible in the hands of the firm.
Total Income (before including minor’s income) 19,00,000
Income of three minor children to be included
in Mrs. Gupta’s income1, since her total income
before including minor’s income is higher than
that of her husband.
- Neeta 15,000
- Meeta 10,000
- Seeta 2,000
27,000
Less: Exemption of ` 1,500 u/s 10(32) in respect of 4,500 22,500
the income each child so included.
Gross Total Income 12,00,000 19,22,500

1 It is assumed that the income of the minor children are not on account of their skills.

Income Tax
9.24 Saviour Pen Drive can be booked at
by Nikunj Goenka www.meplclasses.com
 For PD | D2H Enquiries : Fo r L i ve E n qu i r i e s :
6290948313 | 8420129525 | 6290935202 | 033 2555 2254 +91 9830741471 | +91 33 2555 1197
[email protected] www.meplclasses.com

23  May 21 (New)
Mr. Dharmesh who is 45 years old and his wife Mrs. Anandi who is 42 years old furnished the following
information:

S. Amount
Particulars
No. (₹)
(i) Salary income (computed) of Mrs. Anandi 9,60,000
(ii) Income of minor son "A" who suffers from disability specified in section 80U 3,08,000
(iii) Income of minor daughter "C" from script writing for Television Serials 1,86,000
(iv) Income from garment trading business of Mr. Dharmesh 17,50,000
(v) Cash gift received by minor daughter "C" on 02-10-2021 from friend of Mrs. 45,000
Anandi, on winning of a story writing competition
(vi) Income of minor son "B" form scholarship received from his school 1,00,000
(vii) Income of minor son "B" from fixed deposit with Punjab National Bank, made out 5,000
of income earned from scholarship

Compute the total income of Mr. Dharmesh and his wife Mrs. Anandi for Assessment Year 2022-23
assuming that they have not opted to be taxed under section 115BAC

Answer
Computation of Total Income of Mr. Dharmesh and Mrs. Anandi for A.Y. 2022-23

Particulars Mr. Dharmesh Mrs. Anandi

Amount (₹) Amount (₹)
Salary income (computed) 9,60,000
Income from garment trading business 17,50,000
Total Income before including income of minor children 17,50,000 9,60,000
Income of minor son “A”
Income of ₹ 3,08,000 of minor son A who suffers from disability
specified in section 80U [Since minor child A is suffering from
disability specified under section 80U, hence, his income would not
be included in the income of the parent but would be
taxable in the hands of the minor child]
Income of minor son “B”
Income of ₹ 1,00,000 from scholarship [Exempt u/s 10(16)] -
Income from fixed deposit with PNB 5,000
[Since Mr. Dharmesh’s income is greater than that of
Mrs. Anandi, income of minor son B from fixed deposit
would be included in the hands of Mr. Dharmesh. Interest
from bank deposit has to be included in Mr. Dharmesh’s
income, even if deposit is made out of income earned
from scholarship]

Income Tax
Pen Drive can be booked at Saviour 9.25
www.meplclasses.com by Nikunj Goenka
 Fo r Live En q u ir ies : For PD | D2H Enquiries :
+91 9830741471 | +91 33 2555 1197 6290948313 | 8420129525 | 6290935202 | 033 2555 2254
www.meplclasses.com [email protected]

Less: Exemption under section 10(32) 1,500 3,500

Income of minor daughter “C”
Income of ₹ 1,86,000 from script writing for television Nil
serials [Income derived by a minor child from any activity
involving application of his/her skill, talent, specialized
knowledge and experience is not to be included in the
hands of the parent]
Hence, clubbing provisions will not apply in this case/no
adjustment is required.
Cash gifts of ₹ 45,000 received from friend of Mrs. Anandi
[Gift not exceeding ₹ 50,000 received from a non-relative
is not taxable under section 56(2)(x)]
Hence, clubbing provisions will not apply in this case / no Nil
adjustment is required.
Gross Total Income/ Total Income 17,53,500 9,60,000

Note - As per section 10(16), scholarships granted to meet the cost of education is exempt from
tax. The purpose of scholarship received by minor son B is explicitly not mentioned in the question.
However, scholarships given by schools are generally in the form of financial assistance for meeting
the cost of education. Hence, it is logical to assume that the scholarship to B has been granted to him
to meet his cost of education. Based on this assumption, the same has been treated as exempt from
tax u/s 10(16).
Alternate view - However, in absence of specific information, it is possible to assume that such
scholarship has been granted on account of B’s exceptional academic achievements i.e., involving
application of his skill, talent, specialised knowledge and experience and hence would be covered
under the proviso to section 64(1A) and thus should not be included in the income of parent.

24  May 21 (Old)
During the previous year 2021-22, Mr. B’s HUF comprising of Mr. B, Mrs. B, his minor son and his major
daughter, sold listed equity shares thrown by Mr. B, in the common stock of the family. The said shares
were equally divided among the members of the family and subsequently sold, earning an aggregate
LTCG of ₹ 3,00,000.
Compute the amount of income to be included in the hands of Mr. B. Mr. B is the sole earning member
in the family. What would your answer be if the said shares were inherited by the HUF of Mr. B?

Answer
(i) Mr. B, who is a member of the HUF, throws his individual property (i.e., listed equity shares) into
the common stock of the family. It is presumed that the same is otherwise than for adequate
consideration. In such a case, the income from such property shall continue to be included in the
total income of Mr. B. Accordingly, the long-term capital gains of ₹ 3 lakh arising on sale of shares
is includible in the total income of Mr. B and not Mr. B’s HUF.
(ii) If the said shares were inherited by B’s HUF, then the long-term capital gains of ₹ 3 lakh arising on
sale of shares would be included in the total income of Mr. B’s HUF and not Mr. B.
Income Tax
9.26 Saviour Pen Drive can be booked at
by Nikunj Goenka www.meplclasses.com
 For PD | D2H Enquiries : Fo r L i ve E n qu i r i e s :
6290948313 | 8420129525 | 6290935202 | 033 2555 2254 +91 9830741471 | +91 33 2555 1197
[email protected] www.meplclasses.com

Note – The first sentence in the question states that during the P.Y.2021-22, Mr. B’s HUF sold listed
equity shares thrown by Mr. B in the common stock of the family. However, the second sentence states
that the said shares were equally divided among the members of the family and subsequently sold.
Two alternatives are possible on account of these two sentences. The above answer is based on the
facts as contained in the first sentence.
Considering the facts contained in the second sentence and assume that there has been a partial
partition, then, it may be possible to answer the question on the following lines -
ALTERNATIVE SOLUTION
(i) Where the converted property has been partitioned, either by way of total or partial partition,
the income derived from such converted property as is received by Mrs. B (i.e., ₹ 75,000, being
1/4th of ₹ 3 lakh) will be deemed to arise from assets transferred indirectly by Mr. B to Mrs. B and
consequently, included in the total income of Mr. B. Further, minor son’s share of ₹ 75,000 less ₹
1,500 deduction u/s 10(32) will also be included in the total income of Mr. B as per section 64(1A),
since the total i ncome of Mr. B, being the sole earning member, would naturally be higher than
that of Mrs. B. Therefore, ₹ 2,23,500, being LTCG arising to self, spouse and minor son would be
included in the total income of Mr. B.
(ii) If the said shares were inherited by B’s HUF, equally divided amongst the members and then sold,
then, the share of long-term capital gains of ₹ 75,000 [less ₹ 1,500 deduction u/s 10(32)] arising
to minor son alone would be included in the total income of Mr. B by virtue of section 64(1A), in
addition to B’s own share of ₹ 75,000.

25  Nov 21 (New)
Details of Income of Mr. R and his wife Mrs. R for the previous year 2021-22 are as under :
(i) Mr. R transferred his self-occupied property without any consideration to the HUF of which he is
a member. During the previous year 2021-22 the HUF earned an income of ₹ 50,000 from such
property.
(ii) Mr. R transferred ₹ 4,00,000 to his wife Mrs. R on 01.04.2007 without any consideration which was
given as a loan by her to Mr. Girish. She earned ₹ 3,50,000 as interest during the earlier previous
years which was also given as a loan to Mr. Girish. During the previous year 2021-22, she earned
interest @11% per annum.
(iii) Mr. R and Mrs. R both hold equity shares of 27% and 25% respectively in AMG Limited. They
are also working as employees in such Company. During the financial year 2021-22 they have
withdrawn a salary of ₹ 3,20,000 and 2,70,000 respectively.
(iv) Mrs. R transferred 5,000 equity shares of RSB Ltd. on 17.09.2014 to Mr. R without any consideration.
The Company issued 3,000 bonus shares to Mr. R in 2017. On 04.03.2022, Mr. R sold entire share
holdings and earned ₹ 5,20,000 as capital gains.
Apart from above income, Mr. R has income from commission ₹ 4,00,000 and Mrs. R has interest
income of ₹ 3,30,000.
Compute Gross Total income of Mr. R and Mrs. R for the assessment year 2022-23.

Income Tax
Pen Drive can be booked at Saviour 9.27
www.meplclasses.com by Nikunj Goenka
 Fo r Live En q u ir ies : For PD | D2H Enquiries :
+91 9830741471 | +91 33 2555 1197 6290948313 | 8420129525 | 6290935202 | 033 2555 2254
www.meplclasses.com [email protected]

Answer
Computation of Gross Total Income of Mr. R and Mrs. R for A.Y. 2021-22

Particulars Mr. R Mrs. R

Amount (₹)
I. Income from house property
Income from property transferred to HUF without consideration
Since Mr. R has transferred his property to his HUF without 50,000
consideration, income of ₹ 50,0001 from such property would be
included in the total income of Mr. R as per section 64(2).
II. Capital Gains
Income from equity shares transferred by Mrs. R to Mr. R without
consideration
Capital gains arising to Mr. R from transfer of equity shares of RSB 3,25,000
Ltd. gifted to him by Mrs. R would be included in the hands of Mrs. R
[₹ 5,20,000 x 5,000/8,000]
Capital gains arising to Mr. R from transfer of bonus shares issued by 1,95,000
RSB Ltd. on the basis of holding of the said equity shares would be
included in the income of Mr. R and not Mrs. R, since income derived
from accretion of the transferred asset cannot be clubbed with the
income of transferor of the original asset i.e., Mrs. R [₹ 5,20,000 x
3,000/8,000]2
III. Income from Other Sources
Income from commission 4,00,000
Interest income 3,30,000
Interest income on ₹ 4 lakh transferred by Mr. R to Mrs. R without
consideration
Income of ₹ 44,000, i.e., 11% of ₹4,00,000, being the amount transferred 44,000
by Mr. R to Mrs. R without any consideration and loaned by her to Mr.
Girish, would be included in the income of Mr. R
Income of ₹ 38,500 i.e., 11% of ₹ 3,50,000, being the interest earned 38,500
by Mrs. R out of amount gifted by Mr. R and thereafter, given by her
as loan to Mr. Girish, would be included in the income of Mrs. R, as
income derived by Mrs. R from accretion of the amount gifted by Mr.
R (i.e., interest income) cannot be included in the income of Mr. R.
Total income [before considering adjustment on account of item (iii) 6,89,000 6,93,500
i.e., salary income from a company in which both Mr. R and Mrs. R have
substantial interest]
IV. Salary income from a company in which both Mr. R and Mrs. R
have substantial interest

1 Assumed as computed figure.

2 In the absence of any other information, the capital gains has been apportioned on the basis of number of original shares
to number of bonus shares.

Income Tax
9.28 Saviour Pen Drive can be booked at
by Nikunj Goenka www.meplclasses.com
 For PD | D2H Enquiries : Fo r L i ve E n qu i r i e s :
6290948313 | 8420129525 | 6290935202 | 033 2555 2254 +91 9830741471 | +91 33 2555 1197
[email protected] www.meplclasses.com

Since both Mr. R and Mrs. R have substantial interest in AMG Ltd. (on
account of holding equity shares carrying 20% or more of voting
power) and both are in receipt of income by way of salary from AMG
Ltd., such salary income would be includible in the hands of that
spouse, whose total income, before including such salary income, is
higher. Accordingly, the salary income of both Mr. R and Mrs. R would
be included in the hands of Mrs. R in this case, since her total income,
before including such income, is higher than that of Mr. R.
Salary income of Mr. R = ₹ 3,20,000 – ₹ 50,000 (standard deduction) 2,70,000
Salary income of Mrs. R = ₹ 2,70,000 – ₹ 50,000 (standard deduction) 2,20,000
Gross Total Income 6,89,000 11,83,500

26  MTP Oct 21
Suresh gifted ₹10 lakhs to his wife, Shagun on her birthday on, 29th February, 2021. Shagun lent such
amount to Kinjal on 1st April, 2021 for six months on which she received interest of ₹75,000. The said
sum of ₹ 75,000 was invested in shares of a listed company on 5th October, 2021, which were sold
for ₹ 90,000 on 30th March, 2022. Securities transactions tax was paid on purchase and sale of such
shares.
In whose hands the above income shall be included in A.Y.2022-23. Support your answer with brief
reasons.

Answer
In computing the total income of any individual, there shall be included all such income as arises
directly or indirectly, to the spouse of such individual from assets transferred directly or indirectly, to
the spouse by such individual otherwise than for adequate consideration or in connection with an
agreement to live apart.
Interest on loan: Accordingly, ₹ 75,000, being the amount of interest on loan received by Mrs. Shagun,
wife of Mr. Suresh, would be includible in the total income of Mr. Suresh, since such loan was given out
of the sum of money received by her as gift from her husband.
Short-term capital gain: Income from the accretion of the transferred asset is not liable to be included
in the hands of the transferor and, therefore, short-term capital gain of ₹ 15,000 (₹ 90,000, being the
sale consideration less ₹ 75,000, being the cost of acquisition) arising in the hands of Mrs. Shagun from
sale of shares acquired by investing the interest income of ₹ 75,000 earned by her (from the loan given
out of the sum gifted by her husband), would not be included in the hands of Mr. Suresh. Thus, such
income is taxable in the hands of Mrs. Shagun.

Income Tax
Pen Drive can be booked at Saviour 9.29
www.meplclasses.com by Nikunj Goenka
 Fo r Live En q u ir ies : For PD | D2H Enquiries :
+91 9830741471 | +91 33 2555 1197 6290948313 | 8420129525 | 6290935202 | 033 2555 2254
www.meplclasses.com [email protected]

27  MTP Nov 21
Mr. Vikas holds shares carrying 33% voting power in Kaya Ltd. Mrs. Rinky is working as accountant in
Kaya Ltd. getting income from salary (computed) of ₹ 4,60,000 without any qualification in accountancy.
Mr. Vikas also receives ₹ 35,000 as interest on securities. Mrs. Rinky owns a house property which she
has let out. Rent received from tenants is ₹ 6,000 p.m. Compute the gross total income of Mr. Vikas and
Mrs. Rinky for the A.Y. 2022-23

Answer
Since Mrs. Rinky is not professionally qualified for the job, the clubbing provisions shall be applicable.
Computation of Gross total income of Mr. Vikas

Particulars ₹
Income from Salary of Mrs. Rinky (Computed) 4,60,000
Income from other sources
- Interest on securities 35,000
4,95,000

Computation of gross total income of Mrs. Rinky

Particulars ₹ ₹
Income from Salary Nil
[clubbed in the hands of Mr. Vikas]
Income from house property
Gross Annual Value [₹ 6,000 × 12] 72,000
Less: Municipal taxes paid -
Net Annual Value (NAV) 72,000
Less: Deductions under section 24
- 30% of NAV i.e., 30% of ₹ 72,000 21,600
- Interest on loan - 50,400
Gross total income 50,400

Income Tax
9.30 Saviour Pen Drive can be booked at
by Nikunj Goenka www.meplclasses.com
 For PD | D2H Enquiries : Fo r L i ve E n qu i r i e s :
6290948313 | 8420129525 | 6290935202 | 033 2555 2254 +91 9830741471 | +91 33 2555 1197
[email protected] www.meplclasses.com

Chapter 10
Set-Off & c/f of Losses

1 Study Mat
Mr. D has the following income for the PY 2021-22:

Particulars ₹
Income from the activity of owning and maintaining the race horses 75,000
Income from textile business 85,000
Brought forward textile business loss (relating to AY 2021-22) 50,000
Brought forward loss from the activity of owning and maintaining the race 96,000
horses (relating to AY 2019-20)

What is the total income in the hands of Mr. D for the AY 2022-23?

Answer
Total income of Mr. D for the AY 2022-23

Particulars ₹ ₹
Income from the activity of owning and maintaining race horses 75,000
Less: Brought forward loss from the activity of owning and maintaining 96,000
race horses
Loss from the activity of owning and maintaining race horses to be (21,000)
carried forward to AY 2023-24
Income from textile business 85,000
Less: Brought forward business loss from textile business. 50,000 35,000
Total income 35,000

Note : Loss from the activity of owning and maintaining race horses cannot be set-off against any
other source/head of income.

Income Tax
Pen Drive can be booked at Saviour 10.1
www.meplclasses.com by Nikunj Goenka
 Fo r Live En q u ir ies : For PD | D2H Enquiries :
+91 9830741471 | +91 33 2555 1197 6290948313 | 8420129525 | 6290935202 | 033 2555 2254
www.meplclasses.com [email protected]

2 Study Mat
Mr. E has furnished his details for the AY 2022-23 as under:

Particulars ₹
Income from salaries (computed) 1,50,000
Income from speculation business 60,000
Loss from non-speculation business (40,000)
Short term capital gain 80,000
Long term capital loss of AY 2020-21 (30,000)
Winning from lotteries (Gross) 20,000

What is the taxable income of Mr. E for the AY 2022-23?

Answer
Computation of taxable income of Mr. E for the AY 2022-23

Particulars ₹ ₹
Income from salaries 1,50,000
Income from speculation business 60,000
Less : Loss from non-speculation business (40,000) 20,000
Short-term capital gain 80,000
Winnings from lotteries 20,000
Taxable Income 2,70,000

Note : Long term capital loss can be set off only against long term capital gain. Therefore, long term
capital loss of ₹ 30,000 has to be carried forward to the next assessment year.

3 Study Mat
Mr. Soohan submits the following details of his income for the assessment year 2022-23:

Particulars ₹
Income from salary 3,00,000
Loss from let out house property (-) 40,000
Income from sugar business 50,000
Loss from iron ore business b/f (discontinued in PY 2016-17) (-) 1,20,000
Short term capital loss (-) 60,000
Long term capital gain 40,000
Dividend 5,000
Income received from lottery winning (Gross) 50,000
Winnings from card games (Gross) 6,000
Income Tax
10.2 Saviour Pen Drive can be booked at
by Nikunj Goenka www.meplclasses.com
 For PD | D2H Enquiries : Fo r L i ve E n qu i r i e s :
6290948313 | 8420129525 | 6290935202 | 033 2555 2254 +91 9830741471 | +91 33 2555 1197
[email protected] www.meplclasses.com

Agricultural income 20,000

Short-term capital loss under section 111A (-) 10,000
Bank interest on Fixed deposit 5,000

Calculate gross total income and losses to be carried forward.

Answer
Computation of Gross Total Income of Mr. Soohan for the AY 2022-23

Particulars ₹ ₹
Salaries
Income from salary 3,00,000
Less: Loss from house property set-off against salary income as (40,000) 2,60,000
per section 71
Profits and gains of business or profession
Income from sugar business 50,000
Less: Brought forward loss from iron-ore business set-off as per (50,000) Nil
section 72(1)
Balance business loss of ₹ 70,000 of PY 2016-17 to be carried
forward to AY 2023-24
Capital gains
Long term capital gain 40,000
Less: Short term capital loss set-off (40,000) Nil
Balance short-term capital loss of ₹ 20,000 to be carried forward
Short-term capital loss of ₹ 10,000 under section 111A also to be
carried forward
Income from other sources
Dividend 5000
Winnings from lottery 50,000
Winnings from card games 6,000
Bank interest 5,000 66,000
Gross Total Income 3,26,000
Losses to be carried forward to AY 2023-24
Loss of iron-ore business (₹ 1,20,000 – ₹ 50,000) 70,000
Short term capital loss (₹ 20,000 + ₹ 10,000) 30,000

Notes :
1. Agricultural income is exempt under section 10(1).
2. It is presumed that loss from iron-ore business relates to PY 2016-17, the year in which the
business was discontinued.

Income Tax
Pen Drive can be booked at Saviour 10.3
www.meplclasses.com by Nikunj Goenka
 Fo r Live En q u ir ies : For PD | D2H Enquiries :
+91 9830741471 | +91 33 2555 1197 6290948313 | 8420129525 | 6290935202 | 033 2555 2254
www.meplclasses.com [email protected]

4 Study Mat
Mr. Batra furnishes the following details for year ended 31.03.2022 :

Particulars ₹
Short term capital gain 1,40,000
Loss from speculative business 60,000
Long term capital gain on sale of land 30,000
Long term capital loss on sale of unlisted shares 1,00,000
Income from business of textile (after allowing current year depreciation) 50,000
Income from activity of owning and maintaining race horses 15,000
Income from salary (computed) 1,00,000
Loss from house property 40,000
Following are the brought forward losses :
(i) Losses from activity of owning and maintaining race horses-pertaining to AY 2019-20 ₹ 25,000.
(ii) Brought forward loss from business of textile ₹ 60,000 - Loss pertains to AY 2014-15.
Compute gross total income of Mr. Batra for the Assessment Year 2022-23. Also determine the losses
eligible for carry forward to the Assessment Year 2023-24.

Answer
Computation of Gross Total Income of Mr. Batra for the AY 2022-23

Particulars ₹ ₹
Salaries 1,00,000
Less: Current year loss from house property (40,000) 60,000
Profit and gains of business or profession
Income from textile business 50,000
Less: Loss from textile business brought forward from AY 2014-15 (60,000)
Balance business loss of AY 2014-15 [See Note 1] (10,000) NIL
Income from the activity of owning and maintaining race horses 15,000
Less: Loss from activity of owning and maintaining race horses (25,000)
brought forward from AY 2019-20
Loss to be carried forward to AY 2023-24 [See Note 2] (10,000) NIL
Capital Gain
Short term capital gain 1,40,000
Long term capital gain on sale of land 30,000
Less: Long term capital loss on sale of unlisted shares (1,00,000)
Loss to be carried forward to AY 2023-24 [See Note 3] (70,000) NIL
Gross Total Income 2,00,000

Income Tax
10.4 Saviour Pen Drive can be booked at
by Nikunj Goenka www.meplclasses.com
 For PD | D2H Enquiries : Fo r L i ve E n qu i r i e s :
6290948313 | 8420129525 | 6290935202 | 033 2555 2254 +91 9830741471 | +91 33 2555 1197
[email protected] www.meplclasses.com

Losses to be carried forward to AY 2023-24

Particulars ₹
Current year loss from speculative business [See Note-4] 60,000
Current year long term capital loss on sale of unlisted shares 70,000
Loss from activity of owning and maintaining of race horse pertaining to AY 2018-19 10,000

Notes :
(1) As per section 72(3), business loss can be carried forward for a maximum of eight assessment
years immediately succeeding the assessment year for which the loss was first computed. Since
the eight year period for carry forward of business loss of AY 2014-15 expired in the AY 2022-23,
the balance unabsorbed business loss of ₹ 10,000 cannot be carried forward to AY 2023-24.
(2) As per section 74A(3), the loss incurred on maintenance of race horses cannot be set-off against
income from any source other than the activity of owning and maintaining race horses. Such loss
can be carried forward for a maximum period of 4 assessment years.
(3) Long-term capital loss on sale of unlisted shares can be set-off against long-term capital gain
on sale of land. The balance loss of ₹ 70,000 cannot be set-off against short term capital gain or
against any other head of income. The same has to be carried forward for set-off against long-
term capital gain of the subsequent assessment year. Such long-term capital loss can be carried
forward for a maximum of eight assessment years.
(4) Loss from speculation business cannot be set-off against any income other than profit and gains
of another speculation business. Such loss can, however, be carried forward for a maximum of
four years as per section 73(4) to be set-off against income from speculation business.

5 Study Mat
Mr. A furnishes you the following information for the year ended 31.03.2022:

(₹ )
(i) Income from plying of vehicles (computed as per books) (He owned 5 light 3,20,000
goods vehicle throughout the year)
(ii) Income from retail trade of garments (Computed as per books) (Sales turnover
₹ 1,21,70,000)
Mr. A had declared income on presumptive basis under section 44AD for the 7,50,000
first time in AY 2021-22.
(iii) He has brought forward depreciation relating to AY 2020-21 1,00,000

Compute taxable income of Mr. A and his tax liability for the assessment year 2022-23 with reasons for
your computation.

Income Tax
Pen Drive can be booked at Saviour 10.5
www.meplclasses.com by Nikunj Goenka
 Fo r Live En q u ir ies : For PD | D2H Enquiries :
+91 9830741471 | +91 33 2555 1197 6290948313 | 8420129525 | 6290935202 | 033 2555 2254
www.meplclasses.com [email protected]

Answer
Computation of total income and tax liability of Mr. A for the AY 2022-23

Particulars ₹
Income from retail trade – as per books (See Note 1 below) 7,50,000
Income from plying of vehicles – as per books (See Note 2 below) 3,20,000
10,70,000
Less : Set off of brought forward depreciation relating to AY 2020-21 1,00,000
Total income 9,70,000
Tax liability 1,06,500
Add: Health and Education cess @4% 4,260
Total tax liability 1,10,760

Note :
1. Income from retail trade : Presumptive business income under section 44AD is ₹ 9,73,600 i.e., 8%
of turnover of ₹ 1,21,70,000 assuming the amount of sales turnover was received in cash. However,
the income computed as per books is ₹ 7,50,000 which is to be further reduced by the amount of
unabsorbed depreciation of ₹ 1,00,000. Since the income computed as per books is lower than the
income deemed under section 44AD, the assessee can adopt the income as per books.
However, if he does not opt for presumptive taxation under section 44AD, he has to get his books
of accounts audited under section 44AB, since his turnover exceeds ₹ 1 crore. Also, his case would
be falling under section 44AD(4) and hence tax audit is mandatory.
2. Income from plying of light goods vehicles : Income calculated under section 44AE(1) would
be ₹ 7,500 x 12 x 5 which is equal to ₹ 4,50,000. However, the income from plying of vehicles as
per books is ₹ 3,20,000, which is lower than the presumptive income of ₹ 4,50,000 calculated
as per section 44AE(1). Hence, the assessee can adopt the income as per books i.e. ₹ 3,20,000,
provided he maintains books of account as per section 44AA and gets his accounts audited and
furnishes an audit report as required under section 44AB.
It is to be further noted that in both the above cases, had presumptive income provisions been opted,
all deductions under sections 30 to 38, including depreciation would have been deemed to have been
given full effect to and no further deduction under those sections would be allowable.
If the assessee opted for income to be assessed on presumptive basis, his total income would
be as under:

Particulars ₹
Income from retail trade under section 44AD [₹ 1,21,70,000 @ 8%] 9,73,600
Income from plying of light goods vehicles under section 44AE [₹ 7,500 x 12 x 5] 4,50,000
14,23,600
Less: Set off of brought forward depreciation – not possible as it is deemed that it has Nil
been allowed and set off
Total income 14,23,600
Tax thereon 2,39,580

Income Tax
10.6 Saviour Pen Drive can be booked at
by Nikunj Goenka www.meplclasses.com
 For PD | D2H Enquiries : Fo r L i ve E n qu i r i e s :
6290948313 | 8420129525 | 6290935202 | 033 2555 2254 +91 9830741471 | +91 33 2555 1197
[email protected] www.meplclasses.com

Add : Health and Education cess @4% 9,583

Total tax liability 2,49,163
Total tax liability (rounded off) 2,49,160

6 Study Mat
Mr. Aditya furnishes the following details for the year ended 31-03-2022 :

Particulars Amount (₹)

Loss from speculative business A 25,000
Income from speculative business B 5,000
Loss from specified business covered under section 35AD 20,000
Income from salary (computed) 3,00,000
Loss from house property 2,50,000
Income from trading business 45,000
Long-term capital gain from sale of urban land 2,00,000
Long-term capital loss on sale of shares (STT not paid) 75,000
Long-term capital loss on sale of listed shares in recognized stock exchange (STT 1,02,000
paid at the time of acquisition and sale of shares)
Following are the brought forward losses :
(1) Losses from owning and maintaining of race horses pertaining to AY 2020-21 ₹ 2,000.
(2) Brought forward loss from trading business ₹ 5,000 relating to AY 2017-18.
Compute the total income of Mr. Aditya and show the items eligible for carry forward.

Answer
Computation of total income of Mr. Aditya for the AY 2022-23

Particulars ₹ ₹
Salaries
Income from Salary 3,00,000
Less: Loss from house property set-off against salary income as per 2,00,000 1,00,000
section 71(3A)
Profits and gains of business or profession
Income from trading business 45,000
Less : Brought forward loss from trading business of AY 2017-18 can 5,000 40,000
be set off against current year income from trading business as per
section 72(1), since the eight year time limit as specified under section
72(3), within which set-off is permitted, has not expired.
Income from speculative business B 5,000

Income Tax
Pen Drive can be booked at Saviour 10.7
www.meplclasses.com by Nikunj Goenka
 Fo r Live En q u ir ies : For PD | D2H Enquiries :
+91 9830741471 | +91 33 2555 1197 6290948313 | 8420129525 | 6290935202 | 033 2555 2254
www.meplclasses.com [email protected]

Less : Loss from speculative business A set-off as per section 73(1) 25,000
Loss from speculative business A to be carried forward to AY 2023-24 20,000
as per section 73(2)
Loss from specified business covered under section 35AD to be carried 20,000
forward for set-off against income from specified business as per
section 73A.
Capital Gains
Long term capital gain on sale of urban land 2,00,000
Less: Long term capital loss on sale of shares (STT not paid) set-off as 75,000
per section 74(1)]
Less: Long-term capital loss on sale of listed shares on which STT is 1,02,000 23,000
paid can also be set-off as per section 74(1), since long-term capital
arising on sale of such shares is taxable under section 112A
Total Income 1,63,000

Items eligible for carried forward to AY 2023-24

Particulars ₹
Loss from House property 50,000
As per section 71(3A), Loss from house property can be set-off against any other head
of income to the extent of ₹ 2,00,000 only.
As per section 71B, balance loss not set-off can be carried forward to the next year for
set-off against income from house property of that year. It can be carried forward for
a maximum of eight assessment years i.e., upto AY 2030-31, in this case.
Loss from speculative business A 20,000
Loss from speculative business can be set-off only against profits from any other
speculation business. As per section 73(2), balance loss not set-off can be carried
forward to the next year for set-off against speculative business income of that year.
Such loss can be carried forward for a maximum of four assessment years i.e., upto AY
2025-26, in this case, as specified under section 73(4).
Loss from specified business 20,000
Loss from specified business under section 35AD can be set-off only against profits
of any other specified business. If loss cannot be so set-off, the same has to be carried
forward to the subsequent year for set off against income from specified business, if
any, in that year. As per section 73A(2), such loss can be carried forward indefinitely
for set-off against profits of any specified business .
Loss from the activity of owning and maintaining race horses 2,000
Losses from the activity of owning and maintaining race horses (current year or
brought forward) can be set-off only against income from the activity of owning and
maintaining race horses. If it cannot be so set-off, it has to be carried forward to the
next year for set-off against income from the activity of owning and maintaining race
horses, if any, in that year. It can be carried forward for a maximum of four assessment
years, i.e., upto AY 2024-25, in this case, as specified under section 74A(3).

Income Tax
10.8 Saviour Pen Drive can be booked at
by Nikunj Goenka www.meplclasses.com
 For PD | D2H Enquiries : Fo r L i ve E n qu i r i e s :
6290948313 | 8420129525 | 6290935202 | 033 2555 2254 +91 9830741471 | +91 33 2555 1197
[email protected] www.meplclasses.com

7 Study Mat
The following are the details relating to Mr. Srivatsan, a resident Indian, aged 57, relating to the year
ended 31.3.2022:

Particulars ₹
Income from salaries (computed) 2,20,000
Loss from house property 1,90,000
Loss from cloth business 2,40,000
Income from speculation business 30,000
Loss from specified business covered by section 35AD 20,000
Long-term capital gains from sale of urban land 2,50,000
Loss from card games 32,000
Income from betting (Gross) 45,000
Life Insurance Premium paid (10% of the capital sum assured) 45,000

Compute the total income and show the items eligible for carry forward.

Answer
Computation of total income of Mr. Srivatsan for the AY 2022-23

Particulars ₹ ₹
Salaries
Income from salaries 2,20,000
Less: Loss from house property 1,90,000 30,000
Profits and gains of business or profession
Income from speculation business 30,000
Less: Loss from cloth business set off 30,000 Nil
Capital gains
Long-term capital gains from sale of urban land 2,50,000
Less: Loss from cloth business set off 2,10,000 40,000
Income from other sources
Income from betting 45,000
Gross Total Income 1,15,000
Less: Deduction under section 80C(life insurance premium paid) 30,000
Total Income 85,000

Losses to be carried forward

Particulars ₹
(1) Loss from cloth business (₹ 2,40,000 - ₹ 30,000 - ₹ 2,10,000) Nil
(2) Loss from specified business covered by section 35AD 20,000

Income Tax
Pen Drive can be booked at Saviour 10.9
www.meplclasses.com by Nikunj Goenka
 Fo r Live En q u ir ies : For PD | D2H Enquiries :
+91 9830741471 | +91 33 2555 1197 6290948313 | 8420129525 | 6290935202 | 033 2555 2254
www.meplclasses.com [email protected]

Notes :
(i) Loss from specified business covered by section 35AD can be set-off only against profits and
gains of any other specified business. Therefore, such loss cannot be set off against any other
income. The unabsorbed loss has to be carried forward for set-off against profits and gains of any
specified business in the following year.
(ii) Business loss cannot be set off against salary income. However, the balance business loss of
₹ 2,10,000 (₹ 2,40,000 – ₹ 30,000 set-off against income from speculation business) can be set-off
against long-term capital gains of₹ 2,50,000 from sale of urban land. Consequently, the taxable
long-term capital gains would be ₹ 40,000.
(iii) Loss from card games can neither be set off against any other income, nor can be carried forward.
(iv) For providing deduction under Chapter VI-A, gross total income has to be reduced by the amount
of long-term capital gains and casual income. Therefore, the deduction under section 80C in
respect of life insurance premium paid has to be restricted to ₹ 30,000 [i.e., Gross Total Income of
₹1,15,000 – ₹ 40,000 (LTCG) – ₹ 45,000 (Casual income)].
(v) Income from betting is chargeable at a flat rate of 30% under section 115BB and no expenditure
or allowance can be allowed as deduction from such income, nor can any loss be set-off against
such income.

8 Study Mat
Mr. Rajat submits the following information for the financial year ending 31st March, 2022. He desires
that you should:
(a) Compute the total income and
(b) Ascertain the amount of losses that can be carried forward.
Particulars ₹
(i) He has two houses :
(a) House No. I – Income after all statutory deductions 72,000
(b) House No. II – Current year loss (30,000)
(ii) He has three proprietary businesses :
(a) Textile Business :
(i) Discontinued from 31st October, 2021 – Current year loss 40,000
(ii) Brought forward business loss of AY 2017-18 95,000
(b) Chemical Business :
(i) Discontinued from 1st March, 2019 – hence no profit/loss Nil
(ii) Bad debts allowed in earlier years recovered during this year 35,000
(iii) Brought forward business loss of AY 2019-20 50,000
(c) Leather Business: Profit for the current year 1,00,000
(d) Share of profit in a firm in which he is partner since 2008 16,550
(iii) (a) Short-term capital gain 60,000
(b) Long-term capital loss 35,000
(iv) Contribution to LIC towards premium 10,000

Income Tax
10.10 Saviour Pen Drive can be booked at
by Nikunj Goenka www.meplclasses.com
 For PD | D2H Enquiries : Fo r L i ve E n qu i r i e s :
6290948313 | 8420129525 | 6290935202 | 033 2555 2254 +91 9830741471 | +91 33 2555 1197
[email protected] www.meplclasses.com

Answer
Computation of total income of Mr. Rajat for the AY 2022-23

Particulars ₹ ₹
1. Income from house property
House No.1 72,000
House No.2 (-) 30,000 42,000
2. Profits and gains of business or profession
Profit from leather business 1,00,000
Bad debts recovered taxable under section 41(4) 35,000
1,35,000
Less: Current year loss of textile business (-) 40,000
95,000
Less: Brought forward business loss of textile business for AY 2017-18 95,000 Nil
set off against the business income of current year
3. Capital Gains
Short-term capital gain 60,000
Gross Total Income 1,02,000
Less: Deduction under Chapter VIA
Under section 80C – LIC premium paid 10,000
Total Income 92,000

Statement of losses to be carried forward to AY 2023-24

Particulars ₹
Business loss of AY 2019-20 to be carried forward under section 72 50,000
Long term capital loss of AY 2022-23 to be carried forward under section 74 35,000

Notes :
(1) Share of profit from firm of ₹ 16,550 is exempt under section 10(2A).
(2) Long-term capital loss cannot be set-off against short-term capital gains. Therefore, it has to be
carried forward to the next year to be set-off against long-term capital gains of that year.

9 Study Mat
Ms. Geeta, a resident individual, provides the following details of her income / losses for the year
ended 31.3.2022:
(i) Salary received as a partner from a partnership firm ₹ 7,50,000. The same was allowed to the firm.
(ii) Loss on sale of shares listed in BSE ₹ 3,00,000. Shares were held for 15 months and STT paid on
sale and acquisition.
(iii) Long-term capital gain on sale of land ₹ 5,00,000.

Income Tax
Pen Drive can be booked at Saviour 10.11
www.meplclasses.com by Nikunj Goenka
 Fo r Live En q u ir ies : For PD | D2H Enquiries :
+91 9830741471 | +91 33 2555 1197 6290948313 | 8420129525 | 6290935202 | 033 2555 2254
www.meplclasses.com [email protected]

(iv) ₹ 51,000 received in cash from friends in party.

(v) ₹ 55,000, received towards dividend on listed equity shares of domestic companies.
(vi) Brought forward business loss of assessment year 2020-21 ₹ 12,50,000.
Compute gross total income of Ms. Geeta for the Assessment Year 2022-23 and as certain the amount
of loss that can be carried forward.

Answer
Computation of Gross Total Income of Ms. Geeta for the Assessment Year 2022-23

Particulars ₹
Profits and gains of business and profession
Salary received as a partner from a partnership firm is taxable under the head “Profits 7,50,000
and gains of business and profession”
Less: Brought forward business loss of Assessment Year 2020-21 to be set-off against 7,50,000
business income
Nil
Capital Gains
Long term capital gain on sale of land 5,00,000
Less: Long-term capital loss on shares on STT paid (See Note 2) 3,00,000 2,00,000
Income from other sources
Cash gift received from friends - since the value of cash gift exceeds ₹ 50,000, the entire 51,000
sum is taxable
Dividend received from a domestic company is fully taxable 55,000
Gross Total Income 3,06,000

Notes :
1. Balance brought forward business loss of assessment year 2020-21 of ₹ 5,00,000 has to be carried
forward to the next year.
2. Long-term capital loss on sale of shares on which STT is paid at the time of acquisition and sale
can be set-off against long-term capital gain on sale of land since long-term capital gain on sale
of shares (STT paid) is taxable under section 112A. Therefore, it can be set-off against long-term
capital gain on sale of land as per section 70(3).

10  May 17
Mr. Shyam, a resident of Chandigarh, provides the following information for the financial year 2021-22:

Particulars ₹
Income from textile business 4,60,000
Income from speculation business 25,000
Loss from gambling 12,000

Income Tax
10.12 Saviour Pen Drive can be booked at
by Nikunj Goenka www.meplclasses.com
 For PD | D2H Enquiries : Fo r L i ve E n qu i r i e s :
6290948313 | 8420129525 | 6290935202 | 033 2555 2254 +91 9830741471 | +91 33 2555 1197
[email protected] www.meplclasses.com

Loss on maintenance of race horse 15,000

Eligible current year depreciation of textile business not adjusted in the income 5,000
given above.
Unabsorbed depreciation of assessment year 2021-22 brought forward 10,000
Speculation business loss of assessment year 2021-22 30,000

Compute the Gross Total Income of Mr. Shyam for the Assessment year 2022-23 and any other item of
expense or loss eligible for carry forward.

Answer
Computation of Gross Total Income of Mr. Shyam for AY 2022-23

Particulars ₹ ₹
Profits and gains of business or profession
Income from Textile business 4,60,000
Less: Current year depreciation allowable under section 32(1) 5,000
4,55,000
Less: Unabsorbed depreciation brought forward from AY 2021-22 10,000 4,45,000
as per section 32(2)
Income from speculation business
Current year income from speculation business 25,000
Less: Speculation business loss for AY 2021-22 set-off as per the 30,000
provisions of section 73(2)
Speculation business loss to be carried forward (5,000) Nil
Gross Total Income 4,45,000

Losses eligible for carry forward to AY 2023-24

Particulars ₹
(1) Loss from speculation business to be carried forward as per section 73 5,000
[can be set off only against income from another speculation business. Therefore, the
remaining loss from speculation business has to be carried for ward to AY 2023-24].
(2) Loss on maintenance of race horses to be carried forward as per section 74A(3) 15,000
[can be set-off only against income from the activity of owning and maintaining
race horses. Therefore, it has to be carried forward to AY 2023-24]
(3) Loss from gambling can neither be set -off nor be carried forward

Income Tax
Pen Drive can be booked at Saviour 10.13
www.meplclasses.com by Nikunj Goenka
 Fo r Live En q u ir ies : For PD | D2H Enquiries :
+91 9830741471 | +91 33 2555 1197 6290948313 | 8420129525 | 6290935202 | 033 2555 2254
www.meplclasses.com [email protected]

11  Nov 17
Mr. Prakash furnishes you the following details in respect of the Financial year 2021-22.
(i) Loss from the business carried on by him as a proprietor: ₹ 11,20,000(*)
(ii) Deduction u/s 80-IB : ₹ 5,50.000 (*)
(iii) Unabsorbed Depreciation: ₹ 4,80.000 (*)
(iv) Loss from House property: ₹ 2,50,000 (*)
(*) Computed as per the Income-tax Act, 1961
The due date for filing the return for Mr. Prakash was 31st July, 2022 under section 139(1). However,
he filed the return on 29.9.2022. Discuss with reference to the relevant provisions of Income-tax Act,
1961 if the losses and deductions could be carried forward/claimed by Mr. Prakash.

Answer
Mr. Prakash has furnished his return of income for AY 2022-23 on 29.9.2022, i.e., after the due date
specified under section 139(1), 31st July 2022. Hence, the return is a belated return under section
139(4).
As per section 80 read with section 139(3), specified losses, which have not been determined in
pursuance of a return of loss under section 139(3) filed within the time specified in section 139(1),
cannot be carried forward to the subsequent year for set -off against income of that year. The specified
losses include, inter alia, business loss to be carried forward under section 72 but does not include
loss from house property and unabsorbed depreciation to be carried forward under section 71B and
section 32(2), respectively.
Accordingly, business loss of ₹ 11,20,000 of Mr. Prakash for AY 2022-23, not determined in pursuance
of a return of loss for that year, filed within the time specified in section 139(1), cannot be carried
forward to AY 2023-24.
However, the loss of ₹ 2,50,000 from house property and unabsorbed depreciation of ₹ 4,80,000
pertaining to AY 2022-23, can be carried forward to AY 2023-24 for set-off, even though Mr. Prakash
has filed the return of loss for AY 2022-23 belatedly.
Further, as per section 80AC, furnishing of return of income on or before the due date specified under
section 139(1) is mandatory for claiming deduction under, inter alia, section 80-IB.
Hence, Mr. Prakash cannot claim deduction of ₹ 5,50,000 under section 80-IB for AY 2022-23, since he
has not furnished his return of income on or before the due date specified under section 139(1) for
that year.

Income Tax
10.14 Saviour Pen Drive can be booked at
by Nikunj Goenka www.meplclasses.com
 For PD | D2H Enquiries : Fo r L i ve E n qu i r i e s :
6290948313 | 8420129525 | 6290935202 | 033 2555 2254 +91 9830741471 | +91 33 2555 1197
[email protected] www.meplclasses.com

12  RTP May 18
The following are the details relating to Mr. Gupta, a resident Indian, relating to the year ended
31.3.2022:

Particulars ₹
Income from salaries 2,20,000
Long-term capital loss from sale of listed shares in recognized stock exchange 1,50,000
(STT paid at the time of sale and acquisition of shares)
Loss from cloth business 2,40,000
Income from speculation business 30,000
Loss from specified business covered by section 35AD 45,000
Long-term capital gains from sale of urban land 2,50,000
Loss from house property 2,50,000
Loss from card games 40,000
Income from betting (Gross) 35,000
Life Insurance Premium paid (Sum assured ₹ 5,00,000) 25,000

Compute his total income for AY 2022-23 and show the items eligible for carry forward.

Answer
Computation of total income of Mr. Gupta for the AY 2022-23

Particulars ₹ ₹
Salaries
Income from salaries 2,20,000
Less: Loss from house property [See Note (i)] 2,00,000 20,000
Profits and gains of business or profession
Income from speculation business 30,000
Less: Loss from cloth business set off [See Note (iv)] 30,000 Nil
Capital gains
Long-term capital gains from sale of urban land 2,50,000
Less: Long term capital loss on transfer of listed equity shares 1,50,000
[See Note (ii)]
Less: Loss from cloth business set off [See Note (iv)] 1,00,000 Nil
Income from other sources
Income from betting 35,000
Gross Total Income 55,000
Less: Deduction under section 80C (life insurance premium 20,000
paid) [See Note (vi)]
Total income 75,000

Income Tax
Pen Drive can be booked at Saviour 10.15
www.meplclasses.com by Nikunj Goenka
 Fo r Live En q u ir ies : For PD | D2H Enquiries :
+91 9830741471 | +91 33 2555 1197 6290948313 | 8420129525 | 6290935202 | 033 2555 2254
www.meplclasses.com [email protected]

Losses to be carried forward

Particulars ₹
(1) Loss from house property (₹ 2,50,000 - ₹ 2,00,000) 50,000
(2) Loss from cloth business (₹ 2,40,000 - ₹ 30,000 - ₹ 1,00,000) 1,10,000
(3) Loss from specified business covered by section 35AD 45,000
Notes :
(i) As per section 71(3A), loss from house property can be set-off against income under any other
head to the extent of ₹ 2,00,000 only. As per section 71B, balance loss not set-off can be carried
forward to the next year for set-off against income from house property of that year.
(ii) Long-term capital gains from sale of listed shares in a recognized stock exchange on which STT is
paid at the time of acquisition and sale is taxable u/s 112A. Loss from a taxable source can be set
off against profits from a taxable source. Therefore, long-term capital loss on sale of listed shares
on which STT is paid can be set-off against long-term capital gains from sale of urban land.
(iii) Loss from specified business covered by section 35AD can be set-off only against profits and
gains of any other specified business. Therefore, such loss cannot be set off against any other
income. The unabsorbed loss has to be carried forward for set- off against profits and gains of any
specified business in the following year(s).
(iv) Since inter-source set-off of losses is permissible as per section 70(1), loss from cloth business to
the extent of ₹ 30,000 can be set-off against income from speculation business. The remaining
business loss cannot be set off against salary income due to restriction contained in section
71(2A). However, the remaining business loss of ₹ 1,10,000 (₹ 2,40,000 – ₹ 30,000- ₹1,00,000) can
be set-off against long-term capital gains of ₹ 2,50,000 from sale of urban land. Consequently, the
taxable long-term capital gains would be ₹ Nil
(v) Loss from card games can neither be set off against any other income, nor can it be carried
forward.
(vi) For providing deduction under Chapter VI-A, gross total income has to be reduced by the amount
of long-term capital gains and casual income. Therefore, the deduction under section 80C in
respect of life insurance premium paid has to be restricted to ₹ 20,000 [i.e., Gross Total Income of
₹ 55,000 – ₹ 35,000 (Casual income)].
(vii) Income from betting is chargeable to tax at a flat rate of 30% under section 115BB and no
expenditure or allowance can be allowed as deduction from such income, nor can any loss be
set-off against such income.

13  May 18
Mr. Jaji is a chartered accountant and his income from profession for the year 2021-22 is ₹ 10,00,000.
He provides you with the following information for the year 2021-22.

Particulars ₹
Income of minor son Biju from company deposit 1,50,000
Income of minor daughter Chitra (professional dancer) 20,00,000
Interest from SBI received by Chitra on deposit made in 2019 out of her special talent 20,000

Income Tax
10.16 Saviour Pen Drive can be booked at
by Nikunj Goenka www.meplclasses.com
 For PD | D2H Enquiries : Fo r L i ve E n qu i r i e s :
6290948313 | 8420129525 | 6290935202 | 033 2555 2254 +91 9830741471 | +91 33 2555 1197
[email protected] www.meplclasses.com

Gift received by Chitra on 30-09-2021 from friends of Mr. Jaji on winning National 45,000
award
Short term capital loss of Mr. Jaji 6,00,000
Long term capital gain of Mr. Jaji 4,00,000
Long term capital gains from shares (STT paid) of Mr. Jaji 10,00,000
Short term capital loss under section 111A of Mr. Jaji 10,00,000

Compute the Total Income of Mr. Jaji for AY 2022-23 and the losses to be carried forward assuming
that he files his income tax returns every year before due date.

Answer
Computation of Total Income of Mr. Jaji for AY 2022-23

Particulars ₹ ₹ ₹
Profits and gains from business and profession
Income from chartered accountancy profession 10,00,000
Capital gains
Long term capital gains of ₹ 10,00,000 from shares is taxable 10,00,000
Less: Short term capital loss under section 111A (10,00,000)
Long term capital gain (other than above) 4,00,000
Less: Short term capital loss set off against long-term capital (4,00,000) Nil
gain as per section 74
Income from other sources
Income of minor son Biju
Income from company deposit includible in the hands of 1,50,000
Mr. Jaji as per section 64(1A)
Less: Exemption in respect of income of minor child u/s 1,500
10(32)
Income of minor daughter Chitra 1,48,500
- Income of ₹ 20,00,000 of minor daughter Chitra Nil
(professional dancer) not includible in the hands of parent,
since such income is earned on account of her special skills
- Interest received on deposit with SBI made out of amount 20,000
earned on account of her special talent is includible as per
section 64(1A), since interest income arises out of deposit
made and not on account of her special skills
Less: Exemption in respect of income of minor child u/s 1,500 18,500
10(32)
Other incomes:
- Gift of ₹ 45,000 received by her from friends of Mr. Jaji is not Nil 1,67,000
taxable under section 56(2)(x), since the aggregate amount
from non-relatives does not exceed ₹ 50,000
Total Income 11,67,000

Income Tax
Pen Drive can be booked at Saviour 10.17
www.meplclasses.com by Nikunj Goenka
 Fo r Live En q u ir ies : For PD | D2H Enquiries :
+91 9830741471 | +91 33 2555 1197 6290948313 | 8420129525 | 6290935202 | 033 2555 2254
www.meplclasses.com [email protected]

Losses to be carried forward to AY 2023-24

Particulars ₹
Short term capital loss (other than above) [₹ 6,00,000 – ₹ 4,00,000] 2,00,000

14  MTP Oct 18
Compute the total income of Mr. Prince (aged 48), a resident Indian, from the following
information relating to the financial year ended 31.3.2022. Also, show the items eligible for carry
forward to the AY 2023-24.

Particulars ₹
Income from salaries 2,20,000
Loss from house property 1,90,000
Loss from toy business 2,40,000
Income from speculation business 30,000
Loss from specified business covered under section 35AD 20,000
Long-term capital gains from sale of urban land 2,50,000
Long-term capital loss from sale of listed shares in recognized stock exchange 1,10,000
(STT paid both at the time of acquisition and sale )
Income from betting (Gross) 45,000

Answer
Computation of Total Income of Mr. Prince for the AY 2022-23

Particulars ₹ ₹
Salaries
Income from salaries 2,20,000
Less: Loss from house property 1,90,000 30,000
Profits and gains of business or profession
Income from speculation business 30,000
Less: Loss from toy business set off 30,000 Nil
Capital gains
Long-term capital gains from sale of urban land 2,50,000
Less: Long-term capital loss from sale of listed shares 1,10,000
Less: Loss from toy business set off 1,40,000 Nil
Income from other sources
Income from betting 45,000
Gross total income/ Total Income 75,000

Income Tax
10.18 Saviour Pen Drive can be booked at
by Nikunj Goenka www.meplclasses.com
 For PD | D2H Enquiries : Fo r L i ve E n qu i r i e s :
6290948313 | 8420129525 | 6290935202 | 033 2555 2254 +91 9830741471 | +91 33 2555 1197
[email protected] www.meplclasses.com

Losses to be carried forward :

Particulars ₹
(1) Loss from toy business (₹ 2,40,000 – ₹ 30,000 – ₹ 1,40,000) 70,000
(2) Loss from specified business covered by section 35AD 20,000

Notes :
(i) Long-term capital gains from sale of listed shares in a recognized stock exchange is not exempt
under section 10(38). Loss from a taxable source can be set off against profits from a taxable
source. Therefore, long-term capital loss on sale of listed shares can be set -off against long-term
capital gains from sale of urban land. Balance can be c/f.
(ii) Loss from specified business covered by section 35AD can be set -off only against profits and
gains of any other specified business. Therefore, such loss cannot be set off against any other
income. The unabsorbed loss has to be carried forward for set -off against profits and gains of any
specified business in the following year.
(iii) Business loss cannot be set off against salary income. However, business loss can be set-off
against income from speculative business and long term capital gains.
(iv) Income from betting is chargeable at a flat rate of 30% under section 115BB and no expenditure
or allowance can be allowed as deduction from such income, nor can any loss be set-off against
such income.

15  RTP Nov 18
From following information furnished for the year ended 31-03-2022, compute the total income of Mr.
Arihant for AY 2022-23 and show the items eligible for carry forward and upto which assessment year:

Particulars Amount (₹)

Long-term capital gain from sale of urban land 2,30,000
Long-term capital loss on sale of shares (STT not paid) 85,000
Long-term capital loss on sale of listed shares in recognized stock exchange (STT 1,02,000
paid both at the time of acquisition and sale)
Loss from speculative business X 25,000
Income from speculative business Y 15,000
Loss from specified business covered under section 35AD 40,000
Income from salary 3,50,000
Loss from house property 2,20,000
Income from trading business 75,000

Following are details of unabsorbed depreciation and the brought forward losses:
(1) Unabsorbed depreciation of ₹ 11,000 pertaining to AY 2021-22.
(2) Losses from owning and maintaining of race horses pertaining to AY 2021-22 ₹ 5,000.
(3) Brought forward loss from trading business ₹ 8,000 relating to AY 2018-19.

Income Tax
Pen Drive can be booked at Saviour 10.19
www.meplclasses.com by Nikunj Goenka
 Fo r Live En q u ir ies : For PD | D2H Enquiries :
+91 9830741471 | +91 33 2555 1197 6290948313 | 8420129525 | 6290935202 | 033 2555 2254
www.meplclasses.com [email protected]

Answer
Computation of total income of Mr. Arihant for the AY 2022-23
Particulars ₹ ₹
Salaries
Income from Salary 3,50,000
Less : Loss from house property set-off against salary income 2,00,000 1,50,000
as per section 71(3A), restricted to
Profits and gains of business or profession
Income from trading business 75,000
Less : Brought forward loss from trading business of AY 2016-17 8,000
can be set off against current year income from trading business,
as per section 72(1), since the eight-year time limit as specified
under section 72(3), within which set - off is permitted has not
expired.
67,000
Less: Unabsorbed depreciation 11,000 56,000
Income from speculative business Y 15,000
Less: Loss from speculative business X to be set-off as per section 15,000
73(1)
Loss from speculative business X to be carried forward to AY 2023- 10,000
24 as per section 73(2)
Capital Gains
Long term capital gain on sale of urban land 2,30,000
Less: Long term capital loss on sale of shares (STT not paid) set-off 85,000
as per section 70(3)]
Long-term capital loss of ₹ 1,02,000 on sale of listed shares on 1,02,000 43,000
which STT is paid both at the time of acquisition and sale can be
set-off against long-term capital gain on sale of urban land since
loss from a taxable source can be set- off against profit from a
taxable source.
Total Income 2,49,000
Items eligible for carried forward to AY 2023-24
Particulars ₹
Loss from House Property 20,000
As per section 71(3A), Loss from house property can be set -off against any
other head of income to the extent of ₹ 2,00,000 only.
As per section 71B, balance loss not set-off can be carried forward to the next year for
set-off against income from house property of that year. It can be carried forward for
a maximum of eight assessment years i.e., upto AY 2030-31, in this case.

Income Tax
10.20 Saviour Pen Drive can be booked at
by Nikunj Goenka www.meplclasses.com
 For PD | D2H Enquiries : Fo r L i ve E n qu i r i e s :
6290948313 | 8420129525 | 6290935202 | 033 2555 2254 +91 9830741471 | +91 33 2555 1197
[email protected] www.meplclasses.com

Loss from speculative business X 10,000

Loss from speculative business can be set -off only against profits from any other
speculation business. As per section 73(2), balance loss not set-off can be carried
forward to the next year for set -off against speculative business income of that
year. Su ch loss can be carried forward for a maximum of four assessment years
i.e., upto AY 2026-27, in this case, as specified under section 73(4).
Loss from specified business under section 35AD 40,000
Loss from specified business under section 35AD can be s et-off only against profits
of any other specified business. If loss cannot be so set-off, the same has to be
carried forward to the subsequent year for set off against income from specified
business, if any, in that year. As per section 73A(2), such loss can be carried forward
indefinitely for set-off against profits of any specified business .
Loss from the activity of owning and maintaining race horses 5,000
Losses from the activity of owning and maintaining race horses (current year or
brought forward) can be set -off only against income from the activity of owning
and maintaining race horses. If it cannot be so set-off, it has to be carried forward to
the next year for set-off against income from the activity of owning and maintaining
race horses, if any, in that year. It can be carried forward for a maximum of four
assessment years, i.e., upto AY 2025-26, in this case as specified under section
74A(3).

16  Nov 18
Mr. Rajeev submits the following information for the previous year 2021-22:

(Amount in ₹)
(i) Income from salary 6,50,000
(ii) Income from House-I 55,000
(iii) Loss from House-II (self-occupied property) 1,25,000
(iv) Loss from House-III 190,000
(v) Loss from leather business 68,000
(vi) Profit from cloth business 1,70,000
(vii) Business loss of chemical business acquired by inheritance 45,000
(viii) Brought forward loss of discontinued business of textile relating to 50,000
financial year 2016-17
(ix) Long term capital gain on transfer of listed equity shares on which 75,000
STT was paid
(x) Short term capital loss in equity oriented funds on which STT was paid 35,000
(xi) Income from crossword puzzles 12,000
(xii) Dividend from foreign company 8,500
(xiii) Loss on owning and maintenance of race horses 7,500
(xiv) Income from owning and maintenance of race bulls 9,000

Income Tax
Pen Drive can be booked at Saviour 10.21
www.meplclasses.com by Nikunj Goenka
 Fo r Live En q u ir ies : For PD | D2H Enquiries :
+91 9830741471 | +91 33 2555 1197 6290948313 | 8420129525 | 6290935202 | 033 2555 2254
www.meplclasses.com [email protected]

(xv) Mr. Rajeev had taken an education loan from XYZ Bank for his niece who
is dependent on him for pursuing full time MBA course on 2nd April,
2021. During the year, interest on loan was due for ₹ 55,000. However,
he paid towards principal and interest ₹ 55,000. However, he paid
towards principal and interest ₹ 90,000 and ₹ 30,000 respectively.

Compute the gross total income and losses to be carried forward of Mr. Rajeev for assessment
year 2022-23.

Answer
Gross Total Income of Mr. Rajeev for AY 2022-23

Particulars ₹ ₹
Salaries
Income from salary 6,50,000
Less: Loss from house property of ₹ 2,60,000, restricted to 2,00,000 4,50,000

Income from house property

Income from House I 55,000
Less: Loss from House II (self-occupied) 1,25,000
Loss from House III 1,90,000 3,15,000
(2,60,000)
Set-off of loss from house property against salary income, (2,00,000)
restricted to
Loss to be carried forward to AY 2023-24 (60,000)
Profits and gains of business or profession
Profit from cloth business 1,70,000
Less: Loss from leather business 68,000
1,02,000
Less: Business loss of chemical business acquired by inheritance 45,000

57,000
Less: B/f loss of discontinued textile business relating to FY 2016- 50,000 7,000
17 (allowed to be set-off since the 8 years time limit has not
expired)
Capital gains
Long term capital gains of ₹ 75,000 on transfer of listed equity 75,000
shares on which STT has been paid is taxable u/s 112A on gains
excceding ₹ 1 lakhs
Less: Short term capital loss in equity-oriented funds on which (35,000) 40,000
STT is paid ₹ 35,000 can be set-off only against capital gains and
not against income under any other head
Income from other sources

Income Tax
10.22 Saviour Pen Drive can be booked at
by Nikunj Goenka www.meplclasses.com
 For PD | D2H Enquiries : Fo r L i ve E n qu i r i e s :
6290948313 | 8420129525 | 6290935202 | 033 2555 2254 +91 9830741471 | +91 33 2555 1197
[email protected] www.meplclasses.com

Income from owning and maintenance of race bulls 9,000

Loss of ₹ 7,500 from the activity of owning and maintenance Nil
of race horses cannot be set-off against any source other than
income from the activity of owning and maint aining race horses.
Hence, such loss has to be carried forward to AY 2023-24.
Income from crossword puzzles 12,000
Dividend from foreign company 8,500 29,500
Gross Total Income 5,26,500

Losses to be carried forward to AY 2023-24

Particulars ₹
Loss from house property [to be carried forward for set -off against income from house 60,000
property]
Loss from owning and maintaining race horses [to be carried forward for set-off against 7,500
income from the activity of owning and maintaining race horses]

Note – It is assumed that Mr. Rajeev has filed his return on or before the due date under section 139(1).
Hence, he is eligible to carry forward short -term capital loss and loss on owning and maintaining
race horses.

17  MTP March 19
Compute the total income of Mr. Sahil for the assessment year 2022-23 from the following particulars:

Particulars Amount (₹)

Income from business before adjusting the following items: 2,50,000
(a) Business loss brought forward from assessment year 2018 -19 85,000
(b) Current year depreciation 30,000
(c) Unabsorbed depreciation of earlier year 2,00,000
Income from house property (Gross Annual Value) 5,10,000
Municipal taxes paid 50,000
Mr. Sahil sold a plot at Noida on 12th September, 2021 for a consideration of
₹7,90,000, which had been purchased by him on 20th December, 2019 at a cost of
₹ 6,10,000
Long-term capital loss on sale of shares sold through recognized stock exchange 90,000
(STT paid at acquisition and sale)
Long-term capital gain on sale of debentures 1,35,000
Dividend on shares held as stock in trade 25,000
Dividend from a company carrying on agricultural business 15,000

Income Tax
Pen Drive can be booked at Saviour 10.23
www.meplclasses.com by Nikunj Goenka
 Fo r Live En q u ir ies : For PD | D2H Enquiries :
+91 9830741471 | +91 33 2555 1197 6290948313 | 8420129525 | 6290935202 | 033 2555 2254
www.meplclasses.com [email protected]

Answer
Computation of total income of Mr. Sahil for the AY 2022-23
Particulars ₹ ₹
I. Income from house property
Gross Annual Value 5,10,000
Less: Municipal taxes paid 50,000
Net Annual Value (NAV) 4,60,000
Less: Deductions under section 24
30% of NAV 1,38,000
Interest on housing loan - 3,22,000
II. Income from business
Income from business 2,50,000
Less : Current year depreciation under section 32(1) 30,000
2,20,000
Less: Set-off of brought forward business loss of AY 2018-19 85,000
under section 72
1,35,000
Less: Unabsorbed depreciation set-off [See Note 3] 1,35,000 NIL
III. Capital Gains
Long-term capital gain on sale of debentures 1,35,000
Less: Long-term capital loss on sale of shares (STT is paid at 90,000
acquisition and sale) [See Note 1]
45,000 Nil
Less: Unabsorbed depreciation set-off [See Note 3] 45,000
Short term capital gain on sale of land [See Note 2] 1,80,000
Less: Unabsorbed depreciation set-off [See Note 3] 20,000 1,60,000
IV. Income from other sources
Dividend on shares (whether held as stock-in-trade or from - 40,000
a company carrying on agricultural operations)
5,12,000

Notes :
(1) Long-term capital loss on sale of listed equity shares through a recognized stock exchange on
which STT is paid at the time of acquisition and sale of such shares can be set -off against long-
term capital gains on sale of debentures applying the provisions of section 70(3).
(2) Since land is held for a period of less than 24 months, the gain of ₹1,80,000 arising from sale of
such land is a short-term capital gain.
(3) Brought forward unabsorbed depreciation can be adjusted against any head of income.
However, it is more beneficial to set-off unabsorbed depreciation first against long -term capital
gains, since it is taxable at a higher rate of 20% (the other income of the assessee falling in the
5% slab rate). Therefore, unabsorbed depreciation is first set -off against long- term capital gains

Income Tax
10.24 Saviour Pen Drive can be booked at
by Nikunj Goenka www.meplclasses.com
 For PD | D2H Enquiries : Fo r L i ve E n qu i r i e s :
6290948313 | 8420129525 | 6290935202 | 033 2555 2254 +91 9830741471 | +91 33 2555 1197
[email protected] www.meplclasses.com

to the extent of ₹45,000. The remaining unabsorbed depreciation is adjusted against business
income to the extent of ₹1,35,000 and the balance of ₹20,000 is adjusted against short-term
capital gains.
In the alternative, the balance of ₹20,000 may also be set-off against income from house property,
in which case, the net income from house property would be ₹3,02,000 and short-term capital
gains would be ₹1,80,000. The gross total income and total income would, however, remain
unchanged.

18  MTP Apr 19
Compute the total income of Mr. Pratap (aged 48), a resident Indian, from the following information
relating to the financial year ended 31.3.2022. Also, show the items eligible for carry forward.

Particulars ₹
Income from salaries 2,20,000
Loss from house property 2,50,000
Loss from toy business 1,30,000
Income from speculation business 40,000
Loss from specified business covered by section 35AD 20,000
Long-term capital gains from sale of urban land 2,50,000
Long-term capital loss from sale of listed shares in recognized stock exchange 1,10,000
(STT paid at the time of acquisition and sale of shares)
Loss from card games 32,000
Income from betting (Gross) 45,000
Life Insurance Premium paid (10% of the capital sum assured) 50,000

Answer
Computation of total income of Mr. Pratap for the AY 2022-23

Particulars ₹ ₹
Salaries
Income from salaries 2,20,000
Less: Loss from house property set-off against salary as per section 2,00,000 20,000
71(1) & 71(3A)
Profits and gains of business or profession
Income from speculation business 40,000
Less: Loss from toy business set off 40,000 Nil
Capital gains
Long-term capital gains from sale of urban land 2,50,000

Income Tax
Pen Drive can be booked at Saviour 10.25
www.meplclasses.com by Nikunj Goenka
 Fo r Live En q u ir ies : For PD | D2H Enquiries :
+91 9830741471 | +91 33 2555 1197 6290948313 | 8420129525 | 6290935202 | 033 2555 2254
www.meplclasses.com [email protected]

Less: Long term capital loss on sale of listed shares on which STT 1,10,000
is paid can be set off as per section 74(1), since long-term capital
gain arising on sale of such shares is taxable under section 112A
Less: Loss from toy business set off 90,000 50,000
Income from other sources
Income from betting 45,000
Gross total income 1,15,000
Less: Deduction under section 80C(life insurance premium paid) 20,000
Total Income 95,000
Losses to be carried forward:
Particulars ₹
(1) Loss from House property (₹ 2,50,000 – ₹ 2,00,000) 50,000
(2) Loss from toy business(₹ 1,30,000 - ₹ 40,000 - ₹ 90,000) Nil
(3) Loss from specified business covered by section 35AD 20,000

Notes :
(i) As per section 71(3A), loss from house property can be set-off against any other head of income
to the extent of ₹ 2,00,000 only. As per section 71B, balance loss not set-off can be carried forward
to the next year for set off against income from house property of that year. It can be carried
forward for a maximum of eight assessment years i.e., upto AY 2030-31, in this case.
(ii) Loss from specified business covered by section 35AD can be set-off only against profits and gains
of any other specified business. Therefore, such loss cannot be set off against any other income.
If loss cannot be so set-off, the same has to be carried forward to the subsequent year for set-off
against profits and gains of any specified business, if any, in that year. As per section 73A(2), such
loss can be carried forward indefinitely for set-off against profits of any specified business.
(iii) Business loss cannot be set off against salary income. However, business loss of ₹ 90,000
(₹ 1,30,000 – ₹ 40,000 set-off against income from speculation business) can be set-off against
long-term capital gains from sale of urban land. Consequently, the taxable long-term capital
gains would be ₹ 50,000.

19  May 19
Mr. Rahman furnishes the following information for the financial year 2021-22.

Particulars ₹
Loss from speculation business-A 70,000
Profit from speculation business-B 30,000
Loss from self-occupied house property 2,20,000
Income from let out house property 4,20,000
Income from trading and manufacturing business @ 8% 2,00,000
Salary income 3,70,000
Interest on PPF deposit 65,000

Income Tax
10.26 Saviour Pen Drive can be booked at
by Nikunj Goenka www.meplclasses.com
 For PD | D2H Enquiries : Fo r L i ve E n qu i r i e s :
6290948313 | 8420129525 | 6290935202 | 033 2555 2254 +91 9830741471 | +91 33 2555 1197
[email protected] www.meplclasses.com

Long term capital gain on sale of Vacant site 1,10,000

Short term capital loss on sale of Jewellery 50,000
Investment in tax saver deposit on 31-03-22 60,000
Brought forward loss of business of assessment year 2016-17 1,00,000
Donation to a charitable trust recognized under section 12AA and approved under 1,40,000
section 80G
Enhanced compensation received from government for compulsory acquisition of 3,00,000
land in the year 2009

Compute total income of Mr. Rahman for the assessment year 2022-23 and loss he is eligible to carry
forward .

Answer
Computation of total income of Mr. Rahman for AY 2022-23

Particulars ₹ ₹
Salaries 3,70,000
Income from house property
Income from let out house property 4,20,000
Less: Loss from self-occupied house property cannot exceed 2,00,000 2,20,000
₹ 2 lakhs. Hence, the set-off is limited to ₹ 2 lakhs.
Profits and gains from business or profession
Profit from speculation business B 30,000
Less: Loss of ₹ 70,000 from speculation business A set- off against (30,000) Nil
profit from speculation business B to the extent of such profit
Income from trading and manufacturing business @ 8% 2,00,000
Less: Brought forward business loss of AY 2016-17 set-off since a (1,00,000) 1,00,000
period of eight assessment years has not expired
Capital Gains
Enhanced compensation received from government for 3,00,000
compulsory acquisition [Taxable in PY 2021-22 since enhanced
compensation is taxable on receipt basis]
Long term capital gain on sale of vacant site 1,10,000
Less: Short term capital loss on sale of jewellery 50,000 3,60,000

Income from Other Sources

Interest on PPF deposit 65,000
Less: Exempt 65,000 Nil
Gross Total Income 10,50,000
Less: Deduction under Chapter VI-A
Deduction under section 80C
Investment in tax saver deposit on 31.3.2022 60,000

Income Tax
Pen Drive can be booked at Saviour 10.27
www.meplclasses.com by Nikunj Goenka
 Fo r Live En q u ir ies : For PD | D2H Enquiries :
+91 9830741471 | +91 33 2555 1197 6290948313 | 8420129525 | 6290935202 | 033 2555 2254
www.meplclasses.com [email protected]

Deduction under section 80G

Donation to recognized and approved charitable trust [Donation 31,500 91,500
of ₹ 1,40,000 to be first restricted to ₹ 63,000, being 10% of
adjusted total income of ₹ 6,30,000 i.e., [₹ 10,50,000 – ₹ 3,60,000
– ₹ 60,000]. Thereafter, deduction would be computed at 50% of
₹ 63,000.
Total Income 9,58,500

Losses to be carried forward to AY 2023-24

Particulars ₹
Loss from speculation business A (₹ 70,000 - ₹ 30,000) 40,000
Loss from speculation business can be set-off only against profits of any other
speculation business. If loss cannot be so set-off, the same has to be carried forward
to the subsequent year for set off against income from speculation business, if any,
in that year.

20  Nov 19 (New)
Following are the details of incomes/losses of Mr. Rishi for the FY 2021-22 :

(Figures in brackets represents losses) ₹

Taxable salary income (computed) 3,60,000
Taxable income from house property (computed)
- from rented house property X 1,20,000
- from rented house property Y (3,40,000)
Taxable profit from business (computed)
- business P 2,30,000
- business Q (12,000)
- business R (speculative business) 15,000
- business T (speculative business) (25,000)
Taxable Income from other sources :
- from card games 16,000
- from owning & maintenance of race horses (7,000)
- interest on securities 5,000

You are required to determine the Gross total income of Mr. Rishi for AY 2022-23.

Income Tax
10.28 Saviour Pen Drive can be booked at
by Nikunj Goenka www.meplclasses.com
 For PD | D2H Enquiries : Fo r L i ve E n qu i r i e s :
6290948313 | 8420129525 | 6290935202 | 033 2555 2254 +91 9830741471 | +91 33 2555 1197
[email protected] www.meplclasses.com

Answer
Computation of gross total income of Mr. Rishi for the AY 2022-23

Particulars ₹ ₹
Salary Income (computed) 3,60,000
Less: Set-off of loss from house property , restricted to ₹ 2,20,000 2,00,000
1,60,000
Income from House Property
Income from Property X 1,20,000
Less: Loss from Property Y [inter-source set-off is permitted under 3,40,000
section 70(1)]
Loss from house property 2,20,000
Less: Loss eligible for set-off against salary income as per section 2,00,000
71(3A), restricted to
Loss to be carried forward to AY 2023-24 as per section 71B, for (20,000)
set-off against income from house property, if any, in that year.
Profits and gains of business or profession
Income from business P 2,30,000
Less: Loss from business Q (inter-source set-off is permitted) 12,000
2,18,000
Income from speculation business R 15,000
Less: Loss from speculation business T [can be set-off only against 25,000
income from speculation business as per section 73(1)]
Loss to be carried forward to AY 2023-24 for set-off against (10,000)
speculative business income of that year by virtue of section 73(2).
Income from Other Sources
Income from card games 16,000
Interest on securities 5,000 21,000
Loss from owning & maintaining race horses (7,000)
[Not allowed to be set-off against any other income under this head
or under any other head. Thus, such loss has to be carried forward
to AY 2023-24 for set-off against income, if any, from owning and
maintaining race horses in that year by virtue of section 74A(3)]
Gross Total Income 3,99,000

Note: Loss from house property of ₹ 2 lakh can also be set-off against business income instead of
salary income. In such a case, salary income would be ₹ 3,60,000 and business income would be
₹ 18,000. Gross total income would remain the same.
Any other permutation for set-off of house property (other than income from card games), including
partial set-off against one head and the remaining against another, is also possible.

Income Tax
Pen Drive can be booked at Saviour 10.29
www.meplclasses.com by Nikunj Goenka
 Fo r Live En q u ir ies : For PD | D2H Enquiries :
+91 9830741471 | +91 33 2555 1197 6290948313 | 8420129525 | 6290935202 | 033 2555 2254
www.meplclasses.com [email protected]

21  Nov 19 (Old)
Ms. Netra, a resident individual aged 32 years, furnishes you with the following information for the
year ended on 31-03-2022 :

Particulars Amount (₹)

Income from business of handloom trading 2,65,000
Long term capital gain on sale of jewellery 1,55,000
Long term capital loss on sale of shares listed in recognised stock exchange 1,25,000
(STT paid both at the time of sale and purchase of shares)

Ms. Netra also has a brought forward loss of ₹ 4,500 from handloom business related to AY 2013-14
and a brought forward loss from house property amounting to ₹ 2,20,000 related to the assessment
year 2021-22.
You are required to compute the total income of Ms. Netra for the assessment year 2022-23 and the
amount of loss, if any, to be carried forward.

Answer
Computation of total income of Ms. Netra for AY 2022-23

Particulars ₹
Profits and gains of business or profession
Income from business of handloom trading 2,65,000
[By virtue of section 72(3), brought forward loss of ₹ 4,500 from handloom business
for AY 2013-14 cannot be set-off against this income, since the eight year period
immediately succeeding the assessment year relevant to the previous year in which
the loss was incurred for carry forward and set-off of business loss has expired with
AY 2022-23]
Capital Gains
Long-term capital gains on sale of jewellery 1,55,000
Less: Long-term capital loss on sale of listed shares on which STT was paid both at 30,000
the time of purchase and sale 1,25,000
{Since long-term capital gains on sale of such shares is taxable under section 112A,
the long-term capital loss arising therefrom can be set-off against long-term capital
gains on sale of jewellery [Section 70(3)]}
Total Income 2,95,000
Loss to be carried forward to AY 2023-24
Loss from house property ₹ 2,20,000 related to AY 2021-22
As per section 71B, brought forward loss of ₹ 2,20,000 from house property related 2,20,000
to AY 2021-22 has to be carried forward to AY 2023-24, since there is no income
chargeable under this head in the AY 2022-23. Such loss can be carried forward
for a maximum of 8 assessment years for set-off only against income from house
property.

Income Tax
10.30 Saviour Pen Drive can be booked at
by Nikunj Goenka www.meplclasses.com
 For PD | D2H Enquiries : Fo r L i ve E n qu i r i e s :
6290948313 | 8420129525 | 6290935202 | 033 2555 2254 +91 9830741471 | +91 33 2555 1197
[email protected] www.meplclasses.com

22  MTP May 20
Mr. Mustafa submits the following information for the previous year 2021-22:
(Amount in ₹)
(i) Income from salary 6,50,000
(ii) Income from House-I 55,000
(iii) Loss from House-II (self-occupied property) 1,25,000
(iv) Loss from House-III 190,000
(v) Loss from leather business 68,000
(vi) Profit from cloth business 1,70,000
(vii) Short term capital loss in equity oriented funds on which STT was paid 35,000
(viii) Income from crossword puzzles 12,000
(ix) Dividend from foreign company 8,500
(x) Loss on owning and maintenance of race horses 7,500
(xi) Income from owning and maintenance of race bulls 9,000
Compute the gross total income and losses to be carried forward of Mr. Mustafa for assessment year
2022-23. Mr. Mustafa has filed his return of income on 25.07.2022.

Answer
Gross Total Income of Mr. Mustafa for AY 2022-23

Particulars ₹ ₹
Salaries
Income from salary 6,50,000
Less: Loss from house property of ₹2,60,000, restricted to 2,00,000
4,50,000
Income from house property
Income from House I 55,000
Less: Loss from House II (self-occupied) 1,25,000
Loss from House III 1,90,000 3,15,000
(2,60,000)
Set-off of loss from house property against salary income, restricted 2,00,000
to
Loss to be carried forward to AY 2023-24 (60,000)
Profits and gains of business or profession
Profit from cloth business 1,70,000
Less: Loss from leather business 68,000
1,02,000
Capital Gains

Income Tax
Pen Drive can be booked at Saviour 10.31
www.meplclasses.com by Nikunj Goenka
 Fo r Live En q u ir ies : For PD | D2H Enquiries :
+91 9830741471 | +91 33 2555 1197 6290948313 | 8420129525 | 6290935202 | 033 2555 2254
www.meplclasses.com [email protected]

Short term capital loss in equity-oriented funds on which STT is -

paid ₹35,000 to be carried forward to AY 2023-24 since such loss
can be set-off only against capital gains and not against income
under any other head
Income from other sources
Income from owning and maintenance of race bulls 9,000
Loss of ₹7,500 from the activity of owning and maintenance of race Nil
horses cannot be set-off against any source other than income from
the activity of owning and maintaining race horses. Hence, such
loss has to be carried forward to AY 2023-24.
Income from crossword puzzles 12,000
Dividend from foreign company 8,500
29,500
Gross Total Income 5,81,500

Losses to be carried forward to AY 2023-24:

Particulars ₹
Loss from house property [to be carried forward for set-off against income from 60,000
house property]
Short-term capital loss in equity oriented funds on which STT was paid [to be carried 35,000
forward for set-off against capital gains, long-term or short-term]
Loss from owning and maintaining race horses [to be carried forward for set-off 7,500
against income from the activity of owning and maintaining race horses]

Note: Loss from house property can also be set-off to the extent of ₹ 1,02,000 from profits and gains
from business or profession and balance i.e., ₹ 98,000 against Income under the head “Salaries”.

23  RTP May 20
Compute total income of Mr. Mathur for the assessment year 2022-23 from the following information
furnished by him for the financial year 2021-22.

Particulars ₹
Salary income (computed) 4,70,000
Loss from self-occupied house property 2,00,000
Loss from let out house property 60,000
Loss from speculation business-X 80,000
Profit from speculation business-Y 40,000
Income from trading and manufacturing business @ 8% 3,50,000
Interest on PPF deposit 95,000
Long term capital gain on sale of Vacant site (Computed) 2,10,000
Short term capital loss on sale of Jewellery 1,50,000

Income Tax
10.32 Saviour Pen Drive can be booked at
by Nikunj Goenka www.meplclasses.com
 For PD | D2H Enquiries : Fo r L i ve E n qu i r i e s :
6290948313 | 8420129525 | 6290935202 | 033 2555 2254 +91 9830741471 | +91 33 2555 1197
[email protected] www.meplclasses.com

Investment in tax saver deposit on 31-03-2022 60,000

Brought forward loss of business of assessment year 2016-17 5,50,000
Donation to a charitable trust recognized under section 12AA and approved under 1,10,000
section 80G paid by cheque
Enhanced compensation received from government for compulsory acquisition of 3,00,000
land (held for a period of 5 years) in the year 2008

Answer
Computation of total income of Mr. Mathur for AY 2022-23

Particulars ₹ ₹
Salaries 4,70,000
Profits and gains from business or profession
Profit from speculation business Y 40,000
Less: Loss of ₹ 80,000 from speculation business X set-off against profit (40,000) NIL
from speculation business Y to the extent of such profit
Loss of ₹ 40,000 from speculation business X to be carried forward to
AY 2022-23 for set-off against profits from speculation business.
Income from trading and manufacturing business @8% 3,50,000
Less: Brought forward business loss of AY 2016-17 set-off since a (3,50,000) Nil
period of eight assessment years has not expired. Balance loss of ₹
2,00,000 to be carried forward to AY 2023-24
Capital Gains
Enhanced compensation received from government for compulsory 3,00,000
acquisition [Taxable in PY 2021-22 since enhanced compensation is
taxable on receipt basis]
Long term capital gain on sale of vacant site 2,10,000
Less: Short term capital loss on sale of jewellery (1,50,000)
3,60,000
Less: Loss from house property can be set-off to the extent of (2,00,000) 1,60,000
₹ 2,00,000 as per section 71(3A) [since long-term capital gains would
be chargeable to tax @20%, it would be beneficial to set-off the loss
from house property against LTCG]. Balance loss of ₹ 60,000 to be
carried forward to AY 2023-24.
Income from Other Sources
Interest on PPF deposit 95,000
Less: Exempt under section 10(11) (95,000) Nil
Gross Total Income 6,30,000
Less: Deduction under Chapter VI-A
Deduction under section 80C
Investment in tax saver deposit on 31.3.2022 60,000
Deduction under section 80G

Income Tax
Pen Drive can be booked at Saviour 10.33
www.meplclasses.com by Nikunj Goenka
 Fo r Live En q u ir ies : For PD | D2H Enquiries :
+91 9830741471 | +91 33 2555 1197 6290948313 | 8420129525 | 6290935202 | 033 2555 2254
www.meplclasses.com [email protected]

Donation to recognized and approved charitable trust [Donation of ₹ 20,500 80,500

1,10,000 to be first restricted to ₹ 41,000, being 10% of adjusted total
income of ₹ 4,10,000 i.e., [₹ 6,30,000 – ₹ 1,60,000 – ₹ 60,000]. Thereafter,
deduction would be computed at 50% of ₹ 41,000.
Total Income 5,49,500

24  RTP Nov 20
Mr. Krishan, residing in Indore, provides the following information for the financial year 2020-21:

Particulars ₹
Income from textile business 4,60,000
Income from speculation business 25,000
Loss from gambling 12,000
Loss on maintenance of race horse 15,000
Current year depreciation of textile business not adjusted in the income given above. 5,000
Unabsorbed depreciation of assessment year 2019-20 10,000
Speculation business loss of assessment year 2020-21 30,000
Compute the Gross Total Income of Mr. Krishan for the Assessment year 2021-22 and also state the
losses eligible for carry forward and period upto which such losses can be carried forward.

Answer
Computation of Gross Total Income of Mr. Krishan for A.Y. 2021-22

Particulars ₹ ₹
Profits and gains of business or profession 4,60,000
Income from Textile business 5,000
Less: Current year depreciation allowable under section 32(1)
4,55,000
Less: Unabsorbed depreciation brought forward from A.Y.2019-20 as per 10,000
section 32(2)
4,45,000
Income from speculation business
Current year income from speculation business 25,000
Less: Speculation business loss for A.Y. 2020-21 set-off as per the 30,000
provisions of section 73(2)
Speculation business loss to be carried forward (5,000)
Nil
Gross Total Income 4,45,000

Income Tax
10.34 Saviour Pen Drive can be booked at
by Nikunj Goenka www.meplclasses.com
 For PD | D2H Enquiries : Fo r L i ve E n qu i r i e s :
6290948313 | 8420129525 | 6290935202 | 033 2555 2254 +91 9830741471 | +91 33 2555 1197
[email protected] www.meplclasses.com

Losses eligible for carry forward to A.Y.2022-23

Particulars ₹
(1) Loss from speculation business to be carried forward as per section 73 5,000
Loss from speculation business can be set off only against income from
another speculation business. The remaining loss from speculation business
can be carried forward for a maximum of four assessment years immediately
succeeding the assessment year for which the loss was first computed. Thus,
such loss can be carried forward upto A.Y.2025-26
(2) Loss on maintenance of race horses to be carried forward as per section 15,000
74A(3)
Loss on maintenance of race horses can be set-off only against income from
the activity of owning and maintaining race horses. Such loss can be carried
forward for a maximum of four assessment years immediately succeeding the
assessment year for which the loss was first computed. Thus, such loss can be
carried forward upto A.Y. 2026-27
(3) Loss from gambling can neither be set-off nor be carried forward.

25  Nov 20 (New)
Ms, Pooja a resident individual provides the following information of her income / losses for the year
ended on 31st March, 2022 :
S.
Particulars (₹)
No.
1 Income from salary (Computed) 2,20,000
2 Income from House Property (let out) (Net Annual Value) 1,50,000
3 Share of loss from firm in which she is partner 10,000
4 Loss from specified business covered under section 35 AD 20,000
5 Income from textile business before adjusting the following items : 3,00,000
(a) Current year depreciation 60,000
(b) Unabsorbed depreciation of earlier year 2,25,000
(c) Brought forward loss of textile business of the AY 2021-22 90,000
6 Long-term capital gain on sale of debentures 75,000
7 Long-term capital loss on sale of equity shares (STT not paid) 1,00,000
8 Long-term capital gain on sale of equity shares listed in recognized stock ex- 1,50,000
change (STT paid at the time of acquisition and sale)
9 Dividend from units of UTI 5,000
During the previous year 2021-22, Ms. Pooja has repaid ₹ 5,25,000 towards housing loan from a
scheduled bank. Out of this ₹ 3,16,000 was towards payment of interest and rest towards principal.
Compute the gross total income of Ms. Pooja and ascertain the amount of loss that can be carried
forward. Ms. Pooja has always filed her return within the due date specified under section 139(1) of
the Income-tax Act, 1961.
Income Tax
Pen Drive can be booked at Saviour 10.35
www.meplclasses.com by Nikunj Goenka
 Fo r Live En q u ir ies : For PD | D2H Enquiries :
+91 9830741471 | +91 33 2555 1197 6290948313 | 8420129525 | 6290935202 | 033 2555 2254
www.meplclasses.com [email protected]

Answer
Computation of gross total income of Ms. Pooja for the A.Y.2022-23

Particulars ₹ ₹
Salary Income (computed) 2,20,000
Less: As per section 71(3A), loss from house property of ₹ 2,00,000 20,000
2,11,000 can be set-off, to the extent of
Income from House Property
Net Annual Value of House Property 1,50,000
Less: Deduction u/s 24
(a) 30% of NAV 45,000
(b) Interest on housing loan 3,16,000 3,61,000
Loss from house property (2,11,000)
Less: Loss eligible for set-off against salary income restricted 2,00,000
to
Loss to be carried forward to A.Y. 2023-24 for set-off against (11,000)
income from house property, if any, in that year.
Profits and gains of business or profession
Share of loss from firm [loss from exempt source cannot be -
set-off against profit from taxable source. Hence such loss can
neither be set-off nor be carried forward]
Loss from specified business u/s 35AD ₹ 20,000 [Can be set-off -
only against income from any specified business. Hence, it has
to be carried forward to A.Y.2023-24]
Income from textile business 3,00,000
Less: Current year depreciation 60,000
2,40,000
Less: Brought forward loss of textile business 90,000
Less: Unabsorbed depreciation (₹ 2,25,000) set-off to the 1,50,000
extent of
1,50,000 Nil
Capital Gains
Long-term capital gains on sale of debentures 75,000
Less: Set-off of Long-term capital loss on sale of equity shares 75,000
(STT not paid)
Nil
Long-term capital gains on sale of listed equity shares (STT 1,50,000
paid)
Less: Set-off of balance long-term capital loss on sale of equity 25,000
shares (STT not paid) [₹ 1,00,000 – ₹ 75,000]
Less: Set-off of balance unabsorbed depreciation [₹ 2,25,000 – 1,25,000
₹ 1,50,000 s/o against business income]

Income Tax
10.36 Saviour Pen Drive can be booked at
by Nikunj Goenka www.meplclasses.com
 For PD | D2H Enquiries : Fo r L i ve E n qu i r i e s :
6290948313 | 8420129525 | 6290935202 | 033 2555 2254 +91 9830741471 | +91 33 2555 1197
[email protected] www.meplclasses.com

75,000
Long-term capital gains on sale of listed equity shares 1
50,000
Income from Other Sources
Dividend from units of UTI [Exempt] Nil
Gross Total Income 70,000

Losses to be carried forward to A.Y.2022-23 ₹

(i) Losses from specified business [can be carried forward indefinitely for set-off 20,000
against income from any specified business]
(ii) Loss from house property [can be carried forward upto 8 successive assessment 11,000
years for set-off against income from house property]

26  Jan 21 (Old)
Mr. Tarun, a resident individual, furnishes the following particulars of his income and other details for
the previous year 2021-22 :

₹
Income from Salary (Computed) 25,00,000
Business loss before providing current year depreciation (Business discontinued on 1,20,000
31.5.2021)
Current year depreciation 80,000
Interest from Fixed Deposit 12,14,000
Interest on Loan in respect of self-occupied property 2,15,000
Income from specified business (Not eligible for deduction under section 35 AD) 20,000
Brought forward losses (Pertaining to AY 2021-22)

Unabsorbed depreciation 58,000

Loss from specified business (eligible for deduction under section 35AD) 24,000
You are required to compute his total income for the AY 2022-23 in such a way that his tax liability is
minimised.

Answer
Computation of total income of Mr. Tarun for A.Y.2021-22

Particulars ` `
Income from Salary (Computed) 25,00,000
Less: Loss from self-occupied house property (on account of interest 2,00,000
deduction upto ` 2,00,000) [Loss from house property can be set-off
against salary income as per section 71(1)]
1 No tax is payable u/s 112A in respect of LTCG of ₹ 50,000, since the same is less than ₹ 1,00,000

Income Tax
Pen Drive can be booked at Saviour 10.37
www.meplclasses.com by Nikunj Goenka
 Fo r Live En q u ir ies : For PD | D2H Enquiries :
+91 9830741471 | +91 33 2555 1197 6290948313 | 8420129525 | 6290935202 | 033 2555 2254
www.meplclasses.com [email protected]

23,00,000
Profits and gains from business and profession
Income from specified business [not eligible for deduction u/s 35AD] 20,000 Nil
Less: Set-off of brought forward loss from specified business [eligible for (20,000)
deduction u/s 35AD] allowable as per section 73A [Brought forward loss
from specified business eligible for deduction u/s 35AD can be set-off
against income from any specified business, whether or not the same is
eligible for deduction u/s 35AD]
Income from Other Sources
Interest from fixed deposit 12,14,000
Less: Current year business loss set-off [Inter-head set-off is permissible 1,20,000
by virtue of section 71(1). Hence, current year business loss can be set-off
against interest income from fixed deposit]
10,94,000
Less: Current year depreciation 80,000
10,14,000
Less: Unabsorbed depreciation under section 32(2) [Can be set-off against 58,000 9,56,000
any head of income other than Salaries]
Gross Total Income/Total Income 32,56,000

27  MTP Apr 21
Compute the total income of Mr. Praveen (aged 48), a resident Indian, from the following information
relating to the financial year ended 31.3.2022. Also, show the items eligible for carry forward.

Particulars `
Income from salaries 2,20,000
Loss from house property 2,50,000
Loss from toy business 1,30,000
Income from speculation business 40,000
Loss from specified business covered by section 35AD 20,000
Long-term capital gains from sale of urban land 2,50,000
Long-term capital loss from sale of listed shares in recognized stock exchange 1,10,000
(STT paid at the time of acquisition and sale of shares)
Loss from card games 32,000
Income from betting (Gross) 45,000
Life Insurance Premium paid (10% of the capital sum assured) 50,000

Income Tax
10.38 Saviour Pen Drive can be booked at
by Nikunj Goenka www.meplclasses.com
 For PD | D2H Enquiries : Fo r L i ve E n qu i r i e s :
6290948313 | 8420129525 | 6290935202 | 033 2555 2254 +91 9830741471 | +91 33 2555 1197
[email protected] www.meplclasses.com

Answer
Computation of total income of Mr. Praveen for the A.Y.2022-23

Particulars ` `
Salaries
Income from salaries 2,20,000
Less: Loss from house property set-off against salary as per section 71(1) & 2,00,000 20,000
71(3A)
Profits and gains of business or profession
Income from speculation business 40,000
Less: Loss from toy business set off 40,000 Nil
Capital gains
Long-term capital gains from sale of urban land 2,50,000
Less: Long term capital loss on sale of listed shares on which STT is paid can 1,10,000
be set off as per section 74(1), since long-term capital gain arising on sale of
such shares is taxable under section 112A
1,40,000
Less: Loss from toy business set off 90,000 50,000
Income from other sources
Income from betting 45,000
Gross total income 1,15,000
Less: Deduction under section 80C(life insurance premium paid) 20,000
Total income 95,000

Losses to be carried forward:

Particulars `
(1) Loss from house property (`2,50,000 – `2,00,000) 50,000
(2) Loss from toy business (`1,30,000 - `40,000 - `90,000) Nil
(3) Loss from specified business covered by section 35AD 20,000

Notes:
(i) As per section 71(3A), loss from house property can be set-off against any other head of income
to the extent of ` 2,00,000 only.
As per section 71B, balance loss not set-off can be carried forward to the next year for set- off
against income from house property of that year. It can be carried forward for a maximum of
eight assessment years i.e., upto A.Y. 2030-31, in this case.
(ii) Loss from specified business covered by section 35AD can be set-off only against profits and
gains of any other specified business. Therefore, such loss cannot be set off against any other
income. If loss cannot be so set-off, the same has to be carried forward to the subsequent year
for set-off against profits and gains of any specified business, if any, in that year. As per section
73A(2), such loss can be carried forward indefinitely for set-off against profits of any specified
business.
Income Tax
Pen Drive can be booked at Saviour 10.39
www.meplclasses.com by Nikunj Goenka
 Fo r Live En q u ir ies : For PD | D2H Enquiries :
+91 9830741471 | +91 33 2555 1197 6290948313 | 8420129525 | 6290935202 | 033 2555 2254
www.meplclasses.com [email protected]

(iii) Business loss cannot be set off against salary income. However, business loss of `90,000 (`1,30,000
– `40,000 set-off against income from speculation business) can be set-off against long-term
capital gains from sale of urban land. Consequently, the taxable long-term capital gains would
be `50,000.
(iv) Loss from card games can neither be set off against any other income, nor can it be carried
forward.
(v) For providing deduction under Chapter VI-A, gross total income has to be reduced by the amount
of long-term capital gains and casual income. Therefore, the deduction under section 80C in
respect of life insurance premium paid has to be restricted to `20,000 [i.e., Gross Total Income of
`1,15,000 – `50,000 (LTCG) – `45,000 (Casual income)].
(vi) Income from betting is chargeable at a flat rate of 30% under section 115BB and no expenditure
or allowance can be allowed as deduction from such income, nor can any loss be set-off against
such income.

28  MTP Mar 21
Compute the gross total income of Mr. Farhan and show the items eligible for carry forward and
the assessment years upto which such losses can be carry forward from the following information
furnished by him for the year ended 31-03-2022:

Amount
Particulars
(₹)
Loss from speculative business MNO 12,000
Income from speculative business BPO 25,000
Loss from specified business covered under section 35AD 45,000
Income from salary (computed) 4,18,000
Loss from house property 2,20,000
Income from trading business 2,80,000
Long-term capital gain from sale of urban land 2,05,000
Long-term capital loss on sale of equity shares (STT not paid) 85,000
Long-term capital loss on sale of listed equity shares in recognized stock exchange (STT 1,10,000
paid at the time of acquisition and sale of shares)
Short-term capital loss under section 111A 85,000

Following are the brought forward losses:

(1) Brought forward loss from speculative business MNO ₹ 18,000 relating to A.Y. 2018-19.
(2) Brought forward loss from trading business of ₹ 12,000 relating to A.Y. 2016-17. 6
(3) Unabsorbed depreciation ₹ 1,00,000 relating to A.Y. 2021-22
Assume Mr. Farhan has furnished his return of income on or before the due date specified under
section 139(1) in all the above previous years.

Income Tax
10.40 Saviour Pen Drive can be booked at
by Nikunj Goenka www.meplclasses.com
 For PD | D2H Enquiries : Fo r L i ve E n qu i r i e s :
6290948313 | 8420129525 | 6290935202 | 033 2555 2254 +91 9830741471 | +91 33 2555 1197
[email protected] www.meplclasses.com

Answer
Computation of Gross total income of Mr. Farhan for the A.Y.2022-23

Particulars ₹ ₹
Salaries
Income from Salary 4,18,000
Less: Loss from house property set-off against salary (2,00,000) 2,18,000
[As per section 71(3A), loss from house property to the extent of ₹ 2,00,000
can be set-off against any other head of income.]
Profits and gains of business or profession
Income from trading business 2,80,000
Less: Brought forward loss from trading business of A.Y. 2016-17 can be set (12,000)
off against current year income from trading business as per section 72(1),
since the eight-year time limit as specified under section 72(3), within
which set-off is permitted, has not expired.
Less: Unabsorbed depreciation (1,00,000) 1,68,000
Income from speculative business BPO 25,000
Less: Loss from speculative business MNO set-off as per section 73(1) (12,000)
Loss from speculative business MNO brought forward from A.Y. 2018-19 as (13,000) -
per section 73(2), can be set off to the extent of ₹ 13,000. Balance loss will
be lapsed, since four years his expired
Capital Gains
Long term capital gain on sale of urban land 2,05,000
Less: Long term capital loss on sale of shares (STT not paid) set- off as per (85,000)
section 71(3)
Less: Long-term capital loss on sale of listed equity shares on which STT is (1,10,000)
paid can also be set-off as per section 71(3), since long-term capital arising
on sale of such shares is taxable under section 112A
Less: Short-term capital loss under section 111A as per section 71(2) (10,000) -
Gross Total Income 3,86,000

Items eligible for carried forward to A.Y.2023-24

Particulars ₹
Loss from house property 20,000
As per section 71B, balance loss not set-off can be carried forward to the next year for
set-off against income from house property of that year. It can be carried forward for a
maximum of eight assessment years i.e., upto A.Y. 2030-31, in this case.

Income Tax
Pen Drive can be booked at Saviour 10.41
www.meplclasses.com by Nikunj Goenka
 Fo r Live En q u ir ies : For PD | D2H Enquiries :
+91 9830741471 | +91 33 2555 1197 6290948313 | 8420129525 | 6290935202 | 033 2555 2254
www.meplclasses.com [email protected]

Loss from specified business under section 35AD 45,000

Loss from specified business under section 35AD can be set-off only against profits of
any other specified business. If loss cannot be so set-off, the same has to be carried
forward to the subsequent year for set off against income from specified business, if
any, in that year. As per section 73A(2), such loss can be carried forward indefinitely for
set-off against profits of any specified business .
Short-term capital loss under section 111A 75,000
Short-term capital loss under section 111A can be set-off against long term or short
term capital gains. If it cannot be so set-off, it has to be carried forward to the next
year for set-off against capital gains, if any, in that year. It can be carried forward for
a maximum of eight assessment years, i.e., upto A.Y.2030-31, in this case, as specified
under section 74(1).

29  RTP May 21
Mr. Prakash furnishes the following information for the financial year 2021-22.

Particulars ₹
Loss from speculation business-X 85,000
Profit from speculation business-Y 45,000
Interest on borrowings in respect of self-occupied house property 3,18,000
Income from let out house property 1,20,000
Presumptive Income from trading and manufacturing business under section 44AD 1,00,000
Salary from XYZ (P) Ltd. 5,25,000
Interest on PPF deposit 65,000
Long term capital gain on sale of Vacant site 1,25,000
Short term capital loss on sale of Jewellery 65,000
Investment in tax saver deposit on 31-03-22 60,000
Brought forward loss of business of assessment year 2016-17 1,00,000
Donation to a charitable trust recognized under section 12AA and approved under 60,000
section 80G (payment made via credit card)

Compute total income of Mr. Prakash for the assessment year 2022-23 also show the loss, eligible to
be carried forward. Assume that he does not opt for section 115BAC.

Answer
Computation of total income of Mr. Prakash for A.Y.2022-23

Particulars ₹ ₹
Salary from XYZ (P) Ltd. 5,25,000
Less: Standard Deduction u/s 16(ia) 50,000

Income Tax
10.42 Saviour Pen Drive can be booked at
by Nikunj Goenka www.meplclasses.com
 For PD | D2H Enquiries : Fo r L i ve E n qu i r i e s :
6290948313 | 8420129525 | 6290935202 | 033 2555 2254 +91 9830741471 | +91 33 2555 1197
[email protected] www.meplclasses.com

4,75,000
Less: Loss from house property of ₹ 20,000 [₹ 80,000 - ₹ 60,000, being the 20,000 4,55,000
loss set-off against long-term capital gains]
Income from house property
Income from let out house property 1,20,000
Less: Loss from self-occupied house property to the extent of ₹ 2 lakhs, 2,00,000
allowable as deduction u/s 24(b) in respect of interest on borrowings
(80,000)
Less: Amount set-off against other heads of income (80,000)
Profits and gains from business or profession
Profit from speculation business Y 45,000
Less: Loss of ₹ 85,000 from speculation business X set-off against profit (45,000)
from speculation business Y to the extent of such profit
Nil
Presumptive Income from trading and manufacturing business 1,00,000
Less: Brought forward business loss of A.Y. 2016-17 set- off since the period (1,00,000) Nil
of eight assessment years has not expired
Capital Gains
Long term capital gain on sale of vacant site 1,25,000
Less: Short term capital loss on sale of jewellery 65,000
60,000
Less: Loss from house property to be set-off to the extent of LTCG 60,000 Nil
(It is more beneficial for Mr. Prakash to first set-off the loss from house
property against the long-term capital gains, since it is taxable @20%)
Income from Other Sources
Interest on PPF deposit 65,000
Less: Exempt 65,000 Nil
Gross Total Income 4,55,000
Less: Deduction under Chapter VI-A
Deduction under section 80C
Investment in tax saver deposit on 31.3.2022 60,000
Deduction under section 80G
Donation to recognized and approved charitable trust [Donation of ₹ 19,750
60,000 to be first restricted to ₹ 39,500, being 10% of adjusted total income
of ₹ 3,95,000 (₹ 4,55,000 – ₹ 60,000). Thereafter, deduction would be
computed at 50% of ₹ 39,500.
79,750
Total Income 3,75,250

Income Tax
Pen Drive can be booked at Saviour 10.43
www.meplclasses.com by Nikunj Goenka
 Fo r Live En q u ir ies : For PD | D2H Enquiries :
+91 9830741471 | +91 33 2555 1197 6290948313 | 8420129525 | 6290935202 | 033 2555 2254
www.meplclasses.com [email protected]

Losses to be carried forward to A.Y.2023-24

Particulars ₹
Loss from speculation business X (₹ 85,000 - ₹ 45,000) 40,000
Loss from speculation business can be set-off only against profits of any other
speculation business. If loss cannot be so set-off, the same has to be carried forward to
the subsequent year for set off against income from speculation business, if any, in that
year.

30  May 21 (New)
Mr. X a resident individual submits the following information, relevant to the previous year ending
March 31, 2022:

S.
Particulars Amount (₹)
No.
(i) Income from Salary (Computed) 2,22,000
(ii) Income from House Property
- House in Delhi 22,000
- House in Chennai (-) 2,60,000
- House in Mumbai (self-occupied) (-) 20,000
(iii) Profit and gains from business or profession
- Textile business 18,000
- Cosmetics business (-) 22,000
- Speculative business- 1 (-) 74,000
- Speculative business-2 46,000
(iv) Capital gains
Short term capital loss from sale of property Long term capital gains from sale (-) 16,000
of property 15,400
(v) Income from other sources (Computed)
- Income from betting 34,000
- Income from card games 46,000
- Loss on maintenance of race horses (-)14,600

Determine the gross total income of Mr. X for the assessment year 2022-23 and the losses to be carried
forward assuming that he does not opt to be taxed under section 115BAC.

Answer
Computation of Gross Total Income of Mr. X for A.Y. 2022-23

Income Tax
10.44 Saviour Pen Drive can be booked at
by Nikunj Goenka www.meplclasses.com
 For PD | D2H Enquiries : Fo r L i ve E n qu i r i e s :
6290948313 | 8420129525 | 6290935202 | 033 2555 2254 +91 9830741471 | +91 33 2555 1197
[email protected] www.meplclasses.com

Particulars Amount Amount

Salaries
Income from salary (computed) 2,22,000
Less: Set-off of loss from house property of ₹ 2,58,000 to the extent of ₹ 2 2,00,000 22,000
lakhs by virtue of section 71(3A)
Income from house property
- House in Delhi 22,000
- House in Chennai (2,60,000)
- House in Mumbai (self-occupied) (20,000)
(2,58,000)
Loss upto ₹ 2 lakhs can be set off against income from salary.
Balance loss of ₹ 58,000 from house property has to be carried forward to
A.Y.2023-24.
Profits and gains from business or profession
Profits from Speculative business – 2 46,000
Less: Loss of ₹ 74,000 from speculation business - 1 set off to the extent of (46,000) -
profits of ₹ 46,000 as per section 73(1) from another speculation business.
Loss from speculation business cannot be set-off against any income other
than profit and gains of another speculation business.
Hence, the balance loss of ₹ 28,000 from speculative business has to be
carried forward to A.Y.2023-24.
Profits from textile business 18,000
Less: Loss from cosmetic business of ₹ 22,000 set off against profits from (18,000) -
textile business to the extent of ₹ 18,000 as per section 70(1).
Balance loss of ₹ 4,000 from cosmetic business has to be carried forward to 15,400
A.Y.2023-24, since the same cannot be set-off against salary income.
Capital Gains
Long term capital gain from sale of property
Less: Short-term capital loss can be set-off against both short-term capital (15,400) -
gains and long-term capital gains. Short term capital loss of ₹ 16,000 set
off against long- term capital gains to the extent of ₹ 15,400 as per section
74(1).
Balance short term capital loss of ₹ 600 has to be carry forward to A.Y.2023-
24
Income from Other Sources
Income from betting [No loss is allowed to be set off against such income] 34,000
Income from card games [No loss is allowed to be set off against such 46,000
income]

Income Tax
Pen Drive can be booked at Saviour 10.45
www.meplclasses.com by Nikunj Goenka
 Fo r Live En q u ir ies : For PD | D2H Enquiries :
+91 9830741471 | +91 33 2555 1197 6290948313 | 8420129525 | 6290935202 | 033 2555 2254
www.meplclasses.com [email protected]

Loss on activity of owning and maintenance of race horses [Loss incurred Nil
on activity of owning and maintenance of race horses cannot be set-off
against income from any source other than the activity of owning and
maintaining race horses. Hence, such loss of ₹ 14,600 has to be carried
forward to A.Y.2023-24]
80,000
Gross Total Income 1,02000

31  May 21 (Old)
Mr. Brajesh is a partner in a partnership firm named XYZ Associates. He provides the details regarding
his income and losses for the F.Y. 2021-22 and brought forward losses as follows:
(i) Salary from XYZ & Associates ₹ 3,75,000 which was claimed by the firm in its return and allowed
as deduction.
(ii) Long term capital gain on sale of his house ₹ 2,50,000.
(iii) Long term capital loss on sale of shares listed in National Stock Exchange. STT has been paid on
the transactions of purchase and sales ₹ 1,50,000.
(iv) Business loss brought forward from A.Y. 2021-22 ₹ 6,25,000.
(v) Dividend received from listed equity shares of domestic companies ₹ 27,500.
(vi) Gift received from father’s friend ₹ 51,000 in cash.
(vii) Loss from speculative business brought forward from Assessment Year 2019-20 ₹ 2,50,000.
(viii) Life Insurance Premium paid (10% of the capital sum assured) ₹ 1,00,000.
Compute the total income of Mr. Brajesh for the Assessment Year 2022-23 and show the items eligible
for carry forward. (Ignore the provisions of section 115BAC)

Answer
Computation of total income of Mr. Brajesh for A.Y.2022-23

Particulars ₹ ₹
Profits and gains from business and profession
Salary from XYZ & Associates [Taxable as business income, since firm has 3,75,000
claimed and been allowed deduction in respect of the remuneration in its
return of income]
Less: Set-off of brought forward business loss of ₹ 6,25,000 of A.Y.2021-22 3,75,000 Nil
to the extent of ₹ 3,75,000 by virtue of section 72(1)
[Balance brought forward business loss of ₹ 2,50,000 (i.e., ₹ 6,25,000 – ₹
3,75,000) to be carry forward to A.Y.2023-24 for set-off against business
income of that year]

Income Tax
10.46 Saviour Pen Drive can be booked at
by Nikunj Goenka www.meplclasses.com
 For PD | D2H Enquiries : Fo r L i ve E n qu i r i e s :
6290948313 | 8420129525 | 6290935202 | 033 2555 2254 +91 9830741471 | +91 33 2555 1197
[email protected] www.meplclasses.com

Capital Gains
Long term capital gain on sale of house 2,50,000
Less: Long-term capital loss on sale of listed shares on which STT is paid can 1,50,000 1,00,000
also be set-off against long-term capital gain on sale of house as per section
74(1), since long-term capital arising on sale of such shares is taxable under
section 112A.
Income from Other Sources
Dividend from domestic companies 27,500
Gifts from father’s friend [Taxable under section 56(2)(x), since received 51,000 78,500
from a non-relative and it exceeds the aggregate limit of ₹ 50,000]
Gross Total Income 1,78,500
Less: Deduction under section 80C
LIC premium paid of ₹ 1,00,000 restricted to ₹ 78,500, being gross total 78,500
income excluding long term capital gains as Chapter VIA deductions are
not allowable against long-term capital gains
Total Income 1,00,000

Losses eligible for carried forward to A.Y. 2023-24

Amount
Particulars
(₹)
Business loss of A.Y. 2021-22 [₹ 6,25,000 – ₹ 3,75,000] 2,50,000
Loss from Speculative business of A.Y. 2019-20 (since the same can be set off only against 2,50,000
profits of any other speculation business. As there is no such profit in the current year,
the loss has to be carried forward to A.Y. 2023-24, since the four year time limit for carry
forward expires only in A.Y.2023-24)

32  Nov 21 (Old)
Gopal, a resident aged 50 years furnishes the following information for the year ended on 31-03-2022 :
Income by way of salary (computed) 2,75,000
Income from house property (1,85,000)
Business income - Retail business 1,20,000
Business income — whole sale business (1,00,000)
Brought forward business loss (AY 2020-21) (1,35,000)
Long term capital gain from sale of listed equity shares (STT paid on sale and purchase 2,00,000
of shares)
Lottery winning (gross) 45,000
Contribution to provident fund and NSC 1,50,000
Income of minor daughter Manisha from special talent 2,00,000
Interest from Bank received by Manisha on deposit made out of her special talent 15,000
Compute his income tax liability assuming that he does not opt for Section 115 BAC and his wife does
not earn any income.
Income Tax
Pen Drive can be booked at Saviour 10.47
www.meplclasses.com by Nikunj Goenka
 Fo r Live En q u ir ies : For PD | D2H Enquiries :
+91 9830741471 | +91 33 2555 1197 6290948313 | 8420129525 | 6290935202 | 033 2555 2254
www.meplclasses.com [email protected]

Answer
Computation of tax liability of Mr. Gopal for A.Y.2021-22
Particulars ₹ ₹
Salary
Income by way of salary (computed) 2,75,000
Less: Set-off of loss from house property against salary income 1,85,000 90,000
Profits and gains from business and profession
Business Income- Retail business 1,20,000
Less: Set-off of business loss of ₹ 1,00,000 from wholesale business 1,00,000
20,000
Less: Set-off of brought forward business loss of ₹ 1,35,000 of A.Y.2019-20 20,000 Nil
allowable to the extent of ₹ 20,000 by virtue of section 72(1)
[Balance brought forward business loss of ₹1,15,000 (i.e., ₹ 1,35,000 –
₹ 20,000) to be carry forward to A.Y. 2022-23 for set- off against business
income of that year]
Capital Gains
Long-term capital gain on sale of listed equity shares on which STT is paid 2,00,000
Income from Other Sources
Lottery winnings 45,000
Income of minor daughter from special talent [Not included in Gopal’s -
income since it is earned from special talent]
Interest from bank received by minor daughter on deposit made out of her 15,000
income from special talent [Includible in the income of Mr. Gopal, since
Mrs. Gopal does not earn any income]
Less: Exemption under section 10(32) 1,500 13,500
Gross Total Income 3,48,500
Less: Deduction under section 80C
Contribution to provident fund and NSC ₹ 1,50,000, deduction to be 1,03,500
restricted to gross total income excluding LTCG and winnings from lottery
(i.e., ₹ 3,48,500 – ₹ 2,00,000 – ₹ 45,000)
Total Income 2,45,000
Tax on ₹ 2,45,000
Tax on lottery income of ₹ 45,000 @30% [unexhausted basic exemption 13,500
limit can not be reduced from lottery income]
Tax u/s 112A on LTCG exceeding ₹ 1 lakh [No tax, since unexhausted basic -
exemption limit of ₹ 2,50,000 can be exhausted against such long-term
capital gains]
13,500
Less: Rebate under section 87A [See Note for Alternative view] -
13,500
Add: Health and education cess @4% 540
Tax liability 14,040

Income Tax
10.48 Saviour Pen Drive can be booked at
by Nikunj Goenka www.meplclasses.com
 For PD | D2H Enquiries : Fo r L i ve E n qu i r i e s :
6290948313 | 8420129525 | 6290935202 | 033 2555 2254 +91 9830741471 | +91 33 2555 1197
[email protected] www.meplclasses.com

Alternate Solution – The solution can also be worked out by setting-off loss from house property
partially against long-term capital gains as given below -
Computation of tax liability of Mr. Gopal for A.Y.2021-22

Particulars ₹ ₹
Salary
Income by way of salary (computed) 2,75,000
Less: Set-off of balance loss from house property against salary income (i.e., 85,000 1,90,000
₹1,85,000 – ₹ 1,00,000)
Profits and gains from business and profession
Business Income- Retail business 1,20,000
Less: Set-off of business loss of ₹ 1,00,000 from wholesale business 1,00,000
20,000
Less: Set-off of brought forward business loss of ₹ 1,35,000 of A.Y.2019-20 20,000 Nil
allowable to the extent of ₹ 20,000 by virtue of section 72(1)
[Balance brought forward business loss of ₹ 1,15,000 (i.e., ₹ 1,35,000 –
₹ 20,000) to be carry forward to A.Y.2022-23 for set- off against business
income of that year]
Capital Gains
Long-term capital gain on sale of listed equity shares on which STT is paid 2,00,000
Less: Set-off of loss from house property against long term capital gains to 1,00,000 1,00,000
the extent of ₹ 1 lakh only, since LTCG exceeding ₹ 1 lakh alone is taxable
under section 112A
Income from Other Sources
Lottery winnings 45,000
Income of minor daughter from special talent [Not included in Gopal’s -
income since it is earned from special talent]
Interest from bank received by minor daughter on deposit made out of her 15,000
income from special talent [Includible in the income of Mr. Gopal, since
Mrs. Gopal does not earn any income]
Less: Exempt under section 10(32) 1,500 13,500
Gross Total Income 3,48,500
Less: Deduction under section 80C
Contribution to provident fund and NSC 1,50,000
Total Income 1,98,500
Tax on ₹ 1,98,500
Tax on lottery income of ₹ 45,000 @30% [unexhausted basic exemption 13,500
limit can not be reduced from lottery income]
Tax u/s 112A on LTCG exceeding ₹ 1 lakh -
Tax on other income of ₹ 53,500 (since it does not exceed basic exemption -
limit)

Income Tax
Pen Drive can be booked at Saviour 10.49
www.meplclasses.com by Nikunj Goenka
 Fo r Live En q u ir ies : For PD | D2H Enquiries :
+91 9830741471 | +91 33 2555 1197 6290948313 | 8420129525 | 6290935202 | 033 2555 2254
www.meplclasses.com [email protected]

13,500
Less: Rebate under section 87A [See Note below] -
13,500
Add: Health and education cess @4% 540
Tax liability 14,040

Note - Section 58 of the Income-tax Act, 1961 provides that no deduction in respect of any expenditure
or allowance shall be allowed under any provision of this Act in computing the income by way of, inter
alia, any winnings from lotteries. Accordingly, in line with the intent of this provision, rebate under
section 87A is not provided to Mr. Gopal in respect of such income both in the main solution and
alternate solution given above.
However, the tax calculator in the income-tax website www.incometaxindia.gov.in allows rebate
under section 87A in respect of lottery income, provided the conditions stipulated under section 87A
are satisfied. Also, there is no express prohibition in section 115BB in respect of availing rebate under
section 87A (whereas section 112A contains an express prohibition in this regard). In such case, the tax
liability of Mr. Gopal would be ₹ 1,040.

33  MTP Oct 21
Compute total income of Mr. Mayank for the A.Y.2022-23 from the following information furnished by
him for the financial year 2021-22.

Particulars ₹
Salary income (computed) 4,70,000
Loss from self-occupied house property 2,00,000
Loss from let out house property 60,000
Loss from speculation business-X 80,000
Profit from speculation business-Y 40,000
Income from trading and manufacturing business @ 8% 3,50,000
Interest on PPF deposit 95,000
Long term capital gain on sale of Vacant site (Computed) 2,10,000
Short term capital loss on sale of Jewellery 1,50,000
Brought forward loss of business of assessment year 2016-17 5,50,000
Donation to a charitable trust recognized under section 12AA and approved under 1,10,000
section 80G paid by cheque
Enhanced compensation received from government for compulsory acquisition of land 3,00,000
(held for a period of 5 years) in the year 2006

Income Tax
10.50 Saviour Pen Drive can be booked at
by Nikunj Goenka www.meplclasses.com
 For PD | D2H Enquiries : Fo r L i ve E n qu i r i e s :
6290948313 | 8420129525 | 6290935202 | 033 2555 2254 +91 9830741471 | +91 33 2555 1197
[email protected] www.meplclasses.com

Answer
Computation of total income of Mr. Mayank for A.Y.2022-23

Particulars ₹ ₹
Salaries 4,70,000
Income from house property
Loss from self-occupied house property (2,00,000)
Loss from let out house property (60,000)
(2,60,000)
Less: Loss of ₹ 2,00,000 set off against capital gain. Balance loss of ₹ 60,000
to be carried forward to A.Y. 2023-24 for set-off against income from house
property
Profits and gains from business or profession
Profit from speculation business Y 40,000
Less: Loss of ₹ 80,000 from speculation business X set-off against profit (40,000)
from speculation business Y to the extent of such profit
Loss of ₹ 40,000 from speculation business X to be carried forward to A.Y.
2023-24 for set-off against profits from speculation business
Income from trading and manufacturing business @8% 3,50,000
Less: Brought forward business loss of A.Y. 2016-17 set-off since a period of (3,50,000) Nil
eight assessment years has not expired.
Balance loss of ₹ 2,00,000 to be carried forward to A.Y. 2023-24
Capital Gains
Enhanced compensation received from government for compulsory 3,00,000
acquisition [Taxable in P.Y. 2021-22 since enhanced compensation is
taxable on receipt basis]
Long term capital gain on sale of vacant site 2,10,000
Less: Short term capital loss on sale of jewellery (1,50,000)
3,60,000
Less: Loss from house property can be set-off to the extent of ₹ 2,00,000 (2,00,000) 1,60,000
as per section 71(3A) [since long-term capital gains would be chargeable
to tax @20%, it would be beneficial to set-off the loss from house property
against LTCG].
Income from Other Sources
Interest on PPF deposit 95,000
Less: Exempt under section 10(11) (95,000) Ni
Gross Total Income 6,30,000
Less: Deduction under Chapter VI-A
Deduction under section 80G

Income Tax
Pen Drive can be booked at Saviour 10.51
www.meplclasses.com by Nikunj Goenka
 Fo r Live En q u ir ies : For PD | D2H Enquiries :
+91 9830741471 | +91 33 2555 1197 6290948313 | 8420129525 | 6290935202 | 033 2555 2254
www.meplclasses.com [email protected]

Donation to recognized and approved charitable trust [Donation of 23,500 23,500

₹ 1,10,000 to be first restricted to ₹ 47,000, being 10% of adjusted total
income of ₹ 4,70,000 i.e., [₹ 6,30,000 – ₹ 1,60,000]. Thereafter, deduction
would be computed at 50% of ₹ 47,000.
Total Income 6,06,500

34  MTP Nov 21
Compute the total income of Mr. Veer for the assessment year 2022-23 under proper heads from the
following information furnished by him for the financial year 2021-22:

Particulars ₹
Income from let out house property (computed) 3,50,000
Interest paid on housing loan for self-occupied property 2,00,000
Income from Textile business 5,75,000
Brought forward business loss of Assessment Year 2018-19 1,05,000
Short-term capital loss 70,000
Brought forward long-term loss from Assessment Year 2020-21 90,000
Long-term capital gain on sale of house 75,000
Interest on enhanced compensation from Government for acquisition of land in 2017 5,00,000
Dividend from ABC Ltd., Andhra Pradesh 15,000
Deposit made on 15.02.2022 in his Public Provident fund account 75,000
Loss from owning and maintaining race horse of Assessment Year 2021-22 20,000
Loss from Gambling 8,000

Also state the loss that can be carried forward to A.Y. 2023-24. Mr. Veer filed the return of income for
assessment year 2018-19 after the expiry of due date for filing the return.

Answer
Computation of total income of Mr. Veer for A.Y.2022-23

Particulars ₹ ₹
Income from house property
Income from let out house property 3,50,000
Less: Set-off of loss from self-occupied house property by virtue of section (2,00,000) 1,50,000
70(1) [Whole of interest i.e., ₹ 2,00,000 allowable as deduction, since it is
within the permissible limit applicable to self- occupied property; The said
amount represents loss from self- occupied property]
Profits and gains of business or profession
Income from textile business 5,75,000

Income Tax
10.52 Saviour Pen Drive can be booked at
by Nikunj Goenka www.meplclasses.com
 For PD | D2H Enquiries : Fo r L i ve E n qu i r i e s :
6290948313 | 8420129525 | 6290935202 | 033 2555 2254 +91 9830741471 | +91 33 2555 1197
[email protected] www.meplclasses.com

[As per section 80, brought forward business loss of ₹ 1,05,000 of assessment Nil 5,75,000
year 2018-19 cannot be set-off, since return of income for that year was
filed after the expiry of due date specified under section 139(1)]
Capital Gains
Long-term capital gains on sale of house 75,000
Less: Short-term capital loss can be set-off against long-term capital gains 70,000
[section 70(2)]
5,000
Less: Brought forward long- term capital loss of ₹ 90,000 from A.Y. 2020-21, 5,000 Nil
set-off to the extent of ₹ 5,000
Income from Other Sources
Interest on enhanced compensation from Government 5,00,000
Less: Deduction @50% 2,50,000
2,50,000
Dividend from ABC Ltd. 15,000 2,65,000
Gross Total Income 9,90,000
Less: Deduction under section 80C – Deposit in PPF 75,000
Total Income 9,15,000
Losses to be carried forward to A.Y.2023-24
Long-term capital loss of A.Y. 2020-21 (₹ 90,000 – ₹ 5,000) to be set-off 85,000
against long-term capital gains, if any, in that year
Loss from owning and maintaining racehorse of the A.Y. 2021-22 to be 20,000
set-off against income, if any, from owning and maintaining race horses in
that year.
Loss from gambling (it can neither be set-off against any income during the
previous year nor can it be carried forward for set-off against any income in
the subsequent assessment years).

Income Tax
Pen Drive can be booked at Saviour 10.53
www.meplclasses.com by Nikunj Goenka