Taxable income; Assessable profit; Losses treatment; Multiple income
This case is about a taxpayer who was a schoolteacher by profession, owned property and traded in textiles. He was assessed in respect of his profession, his rental income and his income in the textile trade. There was also an assessment in respect of his wife's income from textile trade and from her property. The schoolteacher sustained losses on his textile trade and sought to offset the losses from the profit of his other sources of income in the following year of assessment. He contended that a loss sustained under a particular source of income in one year could be deducted from the profit of other sources in the following year. The tax authority contended that no deduction was allowable in law. The case highlights that the essence of income tax on profits is the balancing of incomings and outgoings; deductions, therefore, become an inherent trait in the conception or taxable income of any trading concern. Loss regime is one such deduction provided for by the taxing statutes. Losses incurred by a company in any trade or business during a preceding year of assessment, are deductible in computing the total income of the company for income tax purposes. However, under the Company Income Tax Act (2004), losses sustained from one source of income could only be deducted from profit earned at a future date from that particular source of income.