Section 78 - Carry forward and set off of losses in case of change in constitution of firm or on succession - Income-tax Act, 1961

Carry forward and set off of losses in case of change in constitution of firm or on succession 78. 3 [ (1) Where a change has occurred in the constitution of a firm, nothing in this Chapter shall entitle the firm to have carried forward and set off so much of the loss proportionate to the share of a retired or deceased partner as exceeds his share of profits, if any, in the firm in respect of the previous year. ] (2) Where any person carrying on any business or profession has been succeeded in such capacity by another person otherwise than by inheritance, nothing in this Chapter shall entitle any person other than the person incurring the loss to have it carried forward and set off against his income. **************** NOTES:- 1. Substituted vide Section 20 of the Direct Tax Laws (Amendment) Act, 1987 w.e.f. 01-04-1989 before it was read as, (1) Where a change has occurred in the constitution of a firm, nothing in this Chapter shall entitle the firm to have carried forward and set off so much of the loss proportionate to the share of a retired or deceased partner computed in accordance with section 67 as exceeds his share of profits, if any, of the previous year in the firm, or entitle any partner to the benefit of any portion of the said loss which is not apportionable to him under section 67. 2. Restored vide Section 95 of the Direct Tax Laws (Amendment) Act, 1989 w.e.f. 01-04-1989 before it was read as, 1 [ (1) Where a change has occurred in the constitution of a firm, nothing in this Chapter shall entitle the firm to have carried forward and set off so much of the loss proportionate to the share of a retired or deceased partner as exceeds his share of profits, if any, in the firm in respect of the previous year. ] 3. Substituted vide Section 40 of the Finance Act, 1992 w.e.f. 01-04-1993 before it was read as, 2 [ (1) Where a change has occurred in the constitution of a firm, nothing in this Chapter shall entitle the firm to have carried forward and set off so much of the loss proportionate to the share of a retired or deceased partner computed in accordance with section 67 as exceeds his share of profits, if any, of the previous year in the firm, or entitle any partner to the benefit of any portion of the said loss which is not apportionable to him under section 67. ]