Setoff of business loss with gain on depreciable assets

[SUDHAKAR SIVARAMAN]

Dear friends,

I have query related to Income tax. My client is having loss carry forward to the extent of Rs.1crore as business loss and Rs.5 lac as Unabsorbed depreciation loss. Next year he sold land and building for Rs.6.5 crore. Out of which building sale value Rs.4.5 crore.

Now my question is whether carryover unabsorbed deprecation loss can be setoff against gain on sale of building, since building is depreciable asset. Similarly whether business loss carryover can be setoff against this gain on depreciable asset and long term capital gain. Pls advice

AI Summary

Tax Strategy: Unabsorbed Depreciation Allows Offset Against Capital Gains, But Business Loss Remains Limited to Business Income A taxpayer with Rs. 1 crore business loss and Rs. 5 lakh unabsorbed depreciation sought guidance on setoff against capital gains from selling land and building. Unabsorbed depreciation can be set off against both short-term and long-term capital gains. However, business loss cannot be set off against capital gains, even for depreciable assets. Business loss remains restricted to business income and can be carried forward for up to 8 years.