Q1. If income from a particular source is exempt from tax, then loss from such source
cannot be set off against any other income which is chargeable to tax.
(a) True (b) False
Correct answer : (a)
Justification of correct answer :
If income from a particular source is exempt from tax, then loss from such source cannot
be set off against any other income which is chargeable to tax.
Thus, the statement given in the question is true and hence, option (a) is the correct
option.
Q2. The process of adjustment of loss from a source under a particular head of income
against income from other source under the same head of income is called __________.
(a) Inter-head adjustment (b) Intra-head adjustment
(c) Carry forward of loss (d) Clubbing of income
Correct answer : (b)
Justification of correct answer:
The process of adjustment of loss from a source under a particular head of income against
income from other source under the same head of income is called intra-head adjustment.
Thus, option (b) is the correct option.
Q3. While making intra-head adjustment of loss, short-term capital loss cannot be set off
against long-term capital gain.
(a) True (b) False
Correct answer : (b)
Justification of correct answer :
While making intra-head adjustment of loss, short-term capital loss can be set off against
short-term capital gain as well as against long-term capital gain.
Thus, the statement given in the question is false and hence, option (b) is the correct
option.
Q4. While making intra-head adjustment,loss from the business of owning and
maintaining race horses can be set off against ____________ only.
(a) Income from winnings from lotteries
(b) Income from crossword puzzles
(c) Income from business of owning and maintaining race horses
(d) Income from card game
Correct answer : (c)
Justification of correct answer :
Loss from the business of owning and maintaining race horses cannot be set off against
any income other than income from the business of owning and maintaining race horses.
Thus, option (c) is the correct option.
Q5. While making inter-head adjustment of loss, loss from business and profession
cannot be set off against income chargeable to tax under the head “Salaries”.
(a) True (b) False
Correct answer : (a)
Justification of correct answer :
While making inter-head adjustment of loss, loss from business and profession (including
unabsorbed depreciation) cannot be set off against income chargeable to tax under the
head “Salaries”.
Thus, the statement given in the question is true and hence, option (a) is the correct
option.
Q6. Loss under the head “Profits and gains of business or profession” can be carried
forward even if the return of income/loss of the year in which loss is incurred is not
furnished on or before the due date of furnishing the return, as prescribed under section
139(1).
(a) True (b) False
Correct answer : (b)
Justification of correct answer :
Loss under the head “Profits and gains of business or profession” can be carried forward
only if the return of income/loss of the year in which loss is incurred is furnished on or
before the due date of furnishing the return, as prescribed under section 139(1).
Thus, the statement given in the question is false and hence, option (b) is the correct
option.
Q7. However, if loss under the head “Income from house property” cannot be fully
adjusted in the year in which such loss is incurred, then unadjusted loss can be carried
forward for ___________ years immediately succeeding the year in which the loss is
incurred.
(a) 2 (b) 5
(c) 8 (d) 10
Correct answer : (c)
Justification of correct answer :
With effect from the assessment year 2018-19, loss under the head “house property” shall
be allowed to be set-off against any other head of income only to the extent of Rs.
2,00,000 for any assessment year.
If loss under the head “Income from house property” cannot be fully adjusted in the year
in which such loss is incurred, then unadjusted loss can be carried forward for 8 years
immediately succeeding the year in which the loss is incurred.
Thus, option (c) is the correct option.
Comment on incorrect answer :Option (c) is the correct option since it gives the correct
number of years, all the other options, viz., option (a), (b) and (d) giving incorrect
number of years are not correct.
Q8.Restriction of section 78 is applicable only in case of loss and is not applicable in
case of adjustment of unabsorbed depreciation, unabsorbed capital expenditure on
scientific research or family planning expenditure.
(a) True (b) False
Correct answer : (a)
Justification of correct answer :
Section 78 contains provisions relating to carry forward and set off of loss in case of
change in constitution of a partnership firm due to death or retirement of a partner (i.e.
when a partner goes out of firm by retirement or death). In such a case, the share of loss
attributable to the outgoing partner cannot be carried forward by the firm. Restriction of
section 78 is applicable only in case of loss and is not applicable in case of adjustment of
unabsorbed depreciation, unabsorbed capital expenditure on scientific research or family
planning expenditure.
Thus, the statement given in the question is true and hence, option (a) is the correct
option.
Q9. In case of a Company, being a company in which public are not substantially
interested but not being an eligible start-up as referred to in section 80-IAC, if the person
beneficially holding ________ of the voting power as on the last day (i.e. 31st March) of
the year in which the loss was incurred and on the last day (i.e. 31st March) of the year in
which the company wants to set off the brought forward loss are different, then the
company cannot set off such brought forward loss.
(a) 20% (b) 25%
(c) 50% (d) 51%
Correct answer : (d)
Justification of correct answer :
In case of a company in which public are not substantially interested (i.e., closely held
company), if the person beneficially holding 51% of the voting power as on the last day
(i.e. 31st March) of the year in which the loss was incurred and on the last day (i.e. 31st
March) of the year in which the company wants to set off the brought forward loss are
different, then the company cannot set off such brought forward loss.
Thus, option (d) is the correct option.