Business loss set-off must precede Chapter VI-A deduction; no option exists to preserve carry forward and claim section 80M relief.

Business loss had to be adjusted against income under other heads when computing gross total income, and section 71 did not give the assessee an unrestricted choice to postpone set-off. Where available income existed, the loss could not be left unabsorbed merely to preserve a full carry forward while also claiming deduction on dividend income under section 80M. As Chapter VI-A deductions operate on gross total income after permissible set-off, no deduction under section 80M was available if that computation still produced a loss.

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Issues: Whether the assessee could avoid set-off of business loss against dividend income by claiming an option under section 71 and still obtain deduction under section 80M.

Analysis: The provisions governing set-off and carry forward of losses were read together with the limitation on deductions under Chapter VI-A. The expression that the assessee "shall be entitled" to set off loss was held not to confer a free choice to bypass set-off where income under another head was available. If the business loss was not set off despite available profits, the assessee could not still insist on carrying forward the full loss in later years and simultaneously claim deduction on dividend income. Gross total income had to be computed after giving effect to permissible set-off, and where that computation still resulted in a loss, no deduction under section 80M could be allowed.

Conclusion: The assessee had no such option, and the claim for deduction under section 80M failed.

Ratio Decidendi: For purposes of computing gross total income and Chapter VI-A deductions, business loss must be adjusted against available income under other heads; section 71 does not confer an unrestricted option to postpone set-off so as to preserve both full carry forward of loss and deduction under section 80M.

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