Setting off of house property loss
Kamal
(Querist) 16 February 2013
This query is : Resolved
For a particular A.Y. an assessee incurred loss under the head House Property. The assessee has income under the head of PGBP and LTCG under Sec. 112 for that A.Y. On comparing, the assessee found that it was more beneficial for him to set off HP loss first against LTCG and he did the same while filing e-ROI (resulting in tax refund). Now, after the ROI being processed at CPC, he got the intimation u/s 143 in which he found that his tax refund has reduced. On analyzing, he found that HP loss has been set off against Business Income which resulted in reduction of his refund claim.
Based on above problem, I have following questions:
1) Is any order is prescribed for setting of HP loss against other heads?
2) If not, can assessee set off HP loss in a manner which is more beneficial to him?
3) What is the reason behind not setting off HP loss against LTCG?
4) If assessee's claim is correct, what can he do to get his full refund?
Please cite sections, case laws, circulars, etc. in support of your answer.
C. P. CHUGH
(Expert) 17 February 2013
Please refer to section 71 of the Income tax Act which provide for the manner in which current year loss under any head will be set off against current year income under other heads except salaries. The same is reproduced below for your ready reference.
[Set off of loss from one head against income from another.
71. (1) Where in respect of any assessment year the net result of the computation under any head
of income, other than "Capital gains", is a loss and the assessee has no income under the head
"Capital gains", he shall, subject to the provisions of this Chapter, be entitled to have the amount
of such loss set off against his income, if any, assessable for that assessment year under any other
head.
(2) Where in respect of any assessment year, the net result of the computation under any head of
income, other than "Capital gains", is a loss and the assessee has income assessable under the head
"Capital gains", such loss may, subject to the provisions of this Chapter, be set off against his
income, if any, assessable for that assessment year under any head of income including the head
"Capital gains" (whether relating to short-term capital assets or any other capital assets).
2A) Notwithstanding anything contained in sub-section (1) or sub-section (2), where in respect
of any assessment year, the net result of the computation under the head "Profits and gains of
business or profession" is a loss and the assessee has income assessable under the head "Salaries",
the assessee shall not be entitled to have such loss set off against such income.]
(3) Where in respect of any assessment year, the net result of the computation under the head
"Capital gains" is a loss and the assessee has income assessable under any other head of income,
the assessee shall not be entitled to have such loss set off against income under the other head.]
(4) Where the net result of the computation under the head "Income from house property" is a
loss, in respect of the assessment years commencing on the 1st day of April, 1995 and the 1st day
of April, 1996, such loss shall be first set off under sub-sections (1) and (2) and thereafter the loss
referred to in section 71A shall be set off in the relevant assessment year in accordance with the
provisions of that section.]
Thanks
H.M.Patnaik
(Expert) 18 February 2013
The provision of law cited by Mr. Chugh above clarifies your query in itself.HP loss can be set off against all other incomes derived during the same assessment year except Capital Gains.
Kamal
(Querist) 18 February 2013
First of all let me thank both the experts for expressing their opinion on this query. Sir I have read the section and use of 'may' in sec. 71(2) is most probably giving an option to assessee. Second point is that a contradiction is found between sec. 71 & 112. For this contradiction, I found a circular(Circular : No. 721, dated 13-9-1995) which I wish that you go through and give a fresh opinion. Also, it will be of much value if case laws are cited in favour of/against an argument.
