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Section 113

Set off and carry forward of losses from speculation business

(1)
Any loss computed from a speculation business carried on by the assessee, during any tax year, shall be set off only against profits and gains, if any, of another speculation business for the said tax year.
(2)
The unabsorbed speculation business loss for any tax year shall be carried forward to the subsequent tax year and shall be set off only against the profits and gains of speculation business, if any, computed for such subsequent tax year, and so on.
(3)
The unabsorbed speculation business loss referred to in sub-section (2) shall not be carried forward for more than four tax years immediately succeeding the tax year in which such loss was first computed.
(4)
The unabsorbed speculation business loss referred to in sub-section (2) shall first be allowed to be set off before allowing set off of any carried forward allowance under section 33(11) or 45(7).
(5)
In this section,––

(a) where any part of the business of the assessee (being a company) consist of purchase and sale of shares of other companies, then the assessee shall be deemed to be carrying on a speculation business, to the extent to which its business consists of purchase and sale of such shares;

(b)
“unabsorbed speculation business loss” means any loss computed in respect of a speculation business carried on by the assessee during the tax year, which has not been, or is not wholly, set off against profits and gains, if any, of another speculation business under sub-section (1) for the said tax year.
(6)
The provisions of sub-section (5)(a) shall not apply to an assessee, being a company, if—

(a) its gross total income consists mainly of income which is chargeable under the heads “Income from house property”, “Capital gains” or “Income from other sources”; or

(b) its principal business is of trading in shares or banking or the granting of loans and advances.