Section 73A of ITA, 1961 : Section 73A: Carry Forward And Set Off Of Losses By Specified Business

Explanation using Example

Imagine a company, GreenTech Innovations, which is involved in two different specified businesses under Section 35AD: manufacturing solar panels and developing wind farms. For the financial year 2022-2023, GreenTech faces a loss of INR 10 million from the solar panel manufacturing due to unexpected market downturns, while it makes a profit of INR 5 million from the wind farm business.

Under Section 73A(1) of the Income-tax Act, 1961, GreenTech can only set off the loss from the solar panel business against the profit from the wind farm business. This means that the company can reduce its taxable income from the wind farm business by INR 5 million, effectively bringing its taxable profit down to zero.

However, the remaining INR 5 million loss from the solar panel manufacturing business cannot be set off against any other income. As per Section 73A(2), GreenTech is allowed to carry forward this unadjusted loss of INR 5 million to the next financial year, 2023-2024. If in the following year, GreenTech has profits from either of the specified businesses, it can set off this carried forward loss against those profits. If not, it can continue to carry forward the loss to subsequent years.