Set off and carryforward of losses:

Set off means adjustment. Set off is discussed in section 37. Any loss from any
head can be adjusted against other heads income, but there are some
restrictions.
Restriction No 1: Income from cigarette manufacturing cannot be adjusted with
any head of loss. Income from cigarette manufacturing is called restricted
income.
Restriction No 2 : Loss from capital gain can not be adjusted against any head of
income. Loss from capital gain is called restricted head of loss.
Example: Sale of machinery at TK 10,00,000, original cost 900,000 CG 100,000
Sale of private company’s shares 900,000, cost of acquisition 11,00,000 CG
( 200,000)
Income from capital gain ( 100,000)
Restriction No 3: Loss from speculative business cannot be adjusted against any
head of income. Loss from speculative business is called restricted item of loss.
Restriction No 4 : Loss from Busines and Profession cannot be set off against
house property income and capital gain
Restriction No 5 : Loss from agriculture can not be set off against Income from
capital gain.
Restriction no 6 : loss from exempted income cannot be set off against any heads
of income.

Mr. X purchased 10,000 listed company’s shares at TK 100,000 which was sold at
TK 110,000.
Gain from sale of shares 10,000
Exempted: As per SRO 196 (30.06.2015) 10,000
If shares are sold is TK 90,000, loss will be Tk 10,000, the loss can not be set off
against any head of income
Restriction no 7: Loss from Tax holiday unit cannot be set off against any head of
income.
Restriction No 8: If cash subsidy is received any head of income, the loss will be
reduced

Example: The following income is given below in I/Y 2019-2020

Income from capital gain ( 100,000)
Income from Salary 10,00,000
Income from Business and profession (1200,000)
Income from house property 700,000
Calculate taxable income
Solution:
Particular TK TK TK
Income from salary 10,00,000
Income from house property 700,000
Income from business (12,00,000)
Set off of losses with salary income (10,00,000)
And carry forward of losses (200,000)
Income from capital gain (100,000)
Carryforward of losses 95,000 and Tk 100,000
5000 will not be carried forward
Total Income 700,000

Example: Income from business and profession ( 200,000) in income year 2014-
2015
Income from business and profession (200,000)
Carried forward of business loss 200,000
2015-2016
Income from business and profession (300,000)
Loss from income year 2014-2015 ( 200,000)

(500,000)
Carried forward of business loss from I/Y 2014-2015 200,000
Carried forward of business loss during current income year 300,000
Income from business and profession Nil
2016-2017
Income from Business and Profession 400,000
set off of losses from I/Y 2014-2015 (200,000)
set off of losses from I/Y 2015-2016 (200,000)
and carried forward of losses of Tk 100,000
--------------------------------------------------------------
Income from Business and Profession Nil

Carryforward means set off of losses in next period or periods

Carryforward of losses of partnership firm and its partner: Section 42

1. If income arises from partnership firm, partner will show income in his
return as per profit sharing ratio
2. If loss arises from partnership firm, partner will not show loss in his return
as per profit sharing ratio
3. Example loss from ABC partnership firm (300,000) in 2016-2017
MR C retired in 1st October 2017, I/Y 2017-2018 profit in 500,000, loss set
off 200,000
4. ABC Firm, c retired/ dead, if newcomer will come (inheritance), previous
period loss will be set off and carryforward
5. ABC Firm, c retired/ dead, if newcomer will come (no inheritance),
previous period loss will not be set off and carryforward, TK 100,000

Speculative business

DO --- Delivery order --- a piece of legal paper

City group-- gives an offer to a supplier, you can 100, 000 liters at TK
90/per liter. You will get product after 30 days and you have to pay now.
1st September Mr. A 90,00,000, After few days, he was thinking, he needs
money
MR A offered to MR B --- offer price 95,00,000
Sale 95,00,000
Purchase 90,00,000
Income from speculative business 500,000
MR B offered to MR C --- offer price 100,00,000

Sale 110,00,000
Purchase 100,00,000
Income from Business and Profession 10,00,000