Losses from the activity of owning and maintaining race horses [Section 74A(3)] :
(i) According to provisions of section 74A(3), the losses incurred by an assessee from the activity of owning and maintaining race horses cannot be set -off against the income from any other source other than the activity of owning and maintaining race horses.
(ii) Such loss can be carried forward for a maximum period of 4 assessment years for being set-off against the income from the activity of owning and maintaining race horses in the subsequent years.
(iii) For this purpose, the “amount of loss incurred by the assessee in the activity of owning and maintaining race horses” means the amount by which such income by way of stake money falls short of the amount of revenue expenditure incurred by the assessee for the purpose of maintaining race horses. i.e. Loss = Stake money – revenue expenditure for the purpose of maintaining race horses.
(iv) Further, the expression “horse race‟ means a horse race upon which wagering or betting may be lawfully made.
(v) “Income by way of stake money” means the gross amount of prize money received on a race horse or race horses by the owner thereof on account of the horse or horses or any one or more of the horses winning or being placed second or in any lower position in horse races.
Illustration
Mr. D has the following income for the P.Y.2015-16 –
| Particulars | Rs |
| Income from the activity of owning and maintaining the race horses | 75,000 |
| Income from textile business | 85,000 |
| Brought forward textile business loss | 50,000 |
| Brought forward loss from the activity of owning and maintaining the race horses (relating to A.Y.2013-14) | 96,000 |
What is the taxable income in the hands of Mr. D for the A.Y. 2016-17?
Solution
The taxable income is calculated as under:
| Particulars | Rs | Rs |
| Income from the activity of owning and maintaining race horses | 75,000 | |
| Less: Brought forward loss from the activity of owning and maintaining race horses | 96,000 | |
| Loss from the activity of owning and maintaining race horses to be carried forward to A.Y.2017-18 | (21,000) | |
| Income from textile business | 85,000 | |
| Less: Brought forward business loss from textile business. | 50,000 | 35,000 |
| Taxable business income | 35,000 |
Note: Loss from the activity of owning and maintaining race horses cannot be set -off against any other source/head of income.