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1) Loss of firm can be carry forward by firm only
(2) It cannot be carry forward by partners
(3) In case of change in constitution of firm then that much portion cannot be carry forward, which exceeds retired/deceased partner’s profits share.
However,it does not apply to Unaborbed Depreciation
QUESTION 1
M/s. Vivitha & Co., a partnership firm, with four partners A, B, C and D having equal shares, furnishes the following details, summarized from the valid returns of income filed by it:
| Assessment year | Item eligible for carry forward and set off |
| 2014-15 | Unabsorbed business loss Rs. 1,20,000 |
| 2015-16 | Unabsorbed business loss Rs. 1,90,000 |
| 2015-16 | Unabsorbed depreciation Rs. 1,20,000 |
| 2015-16 | Unabsorbed long-term capital losses: 300000 |
| (from shares Rs 1,10,000; -from building Rs 1,90,000 |
C who was a partner during the last three years, retired from the firm with effect from 1.4.2015.
What is amount of loss to be carry forward?
View AnswerSince all partners had equal share
Share of C=1/4
Hence Partnership firm cannot carry forward 1/4 of business loss and LTCL
However, unabsorbed depreciation can be fully carry forward
| Assessment year |
Item eligible for carry forward and set off |
Amount not eligible |
Amount which can be carry forwarded |
| 2014-15 |
Unabsorbed business loss Rs. 1,20,000 |
120000*1/4=30000 | 120000-30000=90000 |
| 2015-16 |
Unabsorbed business loss Rs. 1,90,000 |
190000*1/4=47500 | 190000-47500=142500 |
| 2015-16 |
Unabsorbed depreciation Rs. 1,20,000 |
0 | 120000-30000=90000 |
| 2015-16 | Unabsorbed long-term capital losses: 300000 | 300000*1/4=75000 | 300000-75000=225000 |
| (from shares Rs 1,10,000; -from building Rs 1,90,000 |
