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- Business Losses which are Deductible from Business Income
- Business Losses which are Not Deductible from Business Income
1. Following Losses are Deductible from Business Income
- Loss of stock-in-trade as a result of enemy action, or arising under similar circumstances.
- Loss of stock-in-trade due to destruction by an act of God.
- Loss arising on account of failure on the part of the assessee to accept delivery of goods.
- Depreciation in funds kept in foreign country for purchase of stock-in-trade.
- Loss due to exchange rate fluctuations of foreign currency held on revenue account.
- Loss arising from sale of securities held in the regular course of business.
- Loss of cash and securities in a banking company on account of dacoity (maybe after banking hours.) 8. Loss incurred on realisation of amount advanced in connection with business.
- Loss of security deposited for the purposes of acquisition of stock-in-trade.
- Loss due to forfeiture of a deposit made by the assessee for properly carrying out of contract for supply of commodities.
- Loss on account of embezzlement by an employee.
- Loss incurred due to theft or burglary in factory premises during or after working hours.
- Loss of precious stones or watches of a dealer while bringing them from business premises to his house.
- Loss arising from negligence or dishonesty of employees.
- Loss incurred on account of insolvency of banker with which current account is maintained by the assessee.
- Loss incurred due to freezing of the stock-in-trade by enemy action.
- Loss incurred by a sugar manufacturing company by foregoing advance made to sugarcane growers who used to sell sugarcane crop exclusively to the company.
- Loss on account of non-recovery of advances given by the assessee-company (engaged in the business of financing its subsidiaries) to its 100 per cent subsidiary company.
- Loss incurred by a holding company which has guaranteed a loan taken by its subsidiary company.
- Loss arising as a result of seizure and confiscation of illegal stock-in-trade is allowable as a business loss against income from illegal business—
- Loss arising as a result of rejection of goods by the importer (as goods are unfit for human consumption).
2. Following Losses are Not Deductible from Business Income
- Loss which is not incidental to trade or profession, carried on by the assessee.
- Loss incurred due to damage, destruction, etc., of capital assets.
- Loss incurred due to sale of shares held as investment.
- Loss of advances made for setting up of a new business which ultimately could not be started.
- Depreciation of funds kept in foreign currency for capital purposes.
- Loss arising from non-recovery of tax paid by an agent on behalf of the non-resident.
- Anticipated future losses.
- Provision made by assessee in respect of non-performing assets.
- Loss relating to any business or profession discontinued before the commencement of previous year.
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