High Court Of Delhi
CIT vs. Greevees Enterprises (P) Ltd.
Sections 80, 139(3)
Asst. Year 1976-77
Arijit Pasayat, C.J. & D.K. Jain, J.
IT Ref. No. 29 of 1981
9th April, 2001
Counsel Appeared
R.C. Pandey, Ajay Jha & Ms. Premlata Bansal, for the Applicant : S.K. Aggarwal & Vinay Vaish, for the Respondent
JUDGMENT
Arijit Pasayat, C.J. :
Following question has been referred for opinion of this Court under s. 256(1) of the IT Act, 1961 (in short ‘Act’) by the Income-tax Tribunal, Delhi Bench-B, Delhi (in short “Tribunal”) :— “Whether, on the facts and in the circumstances of the case, the Tribunal is correct in law in allowing the carry forward of the loss of Rs. 1,08,364 ?”
The dispute relates to the asst. yr. 1976-77.
2. Factual position needs to be noted in brief, as factual controversy has very little role to play in the adjudication of the case. Assessee a private limited company filed its return of income on 27th Dec., 1976, showing a loss of Rs. 80,921. Revised return was filed on 5th Sept., 1977, showing loss of Rs. 1,38,258. Though the total loss was determined at Rs. 1,08,364, benefit of carry forward and set off against the assessments to follow was not granted on the ground that the return was not filed under s. 139(3) of the Act. Assessee preferred appeal before the AAC, who held that ITO was justified in not allowing the carry forward of loss, matter was carried in further appeal before the Tribunal by the assessee. It was held by the Tribunal that the ratio indicated by the apex Court in CIT vs. Kulu Valley Transport Co. (P) Ltd. (1970) 77 ITR 518 (SC) was applicable to the facts of the case and directed carry forward of loss and set off. On being moved for reference, the question as set out above, has been referred for opinion of this Court.
3. We have heard learned counsel for the parties. According to learned counsel for the Revenue the concept of carry forward and set off is different from determination of the loss in a case where return has not been filed in accordance with the provisions of s. 139(3). It is pointed out that s. 80 deals with submission of return for losses and the concept of carry forward and set off are dealt with in various sub-ss. viz. 72, 73, 74 and 74A. According to him carry forward and set off stand on a different footing from determination and even if there is determination of the loss, same is not to be carried forward unless the provisions of s. 139(3) are complied with. According to the learned counsel for the assessee, on the other hand, the position was different prior to 1st April, 1987, and a bare reading of s. 80 as it stood at the relevant point of time clearly indicates the position. According to him ratio in Kulu Valley Transport Co. (P) Ltd.’s case (supra) has been rightly applied.
4. It is to be noted that the decision in Kulu Valley Transport Co. (P) Ltd.’s case (supra) was rendered in the background of s. 22 of the Indian Income-tax Act, 1922 (hereinafter referred to as the “1922 Act”). Sub-s. (2A) of s. 22 read as follows : “(2A) If any person who has not been served with a notice under sub-s. (2) has sustained a loss of profits or gains in any year under the head ‘Profits and gains of business, profession or vocation’, and such loss or any part thereof would ordinarily have been carried forward under sub-s. (2) of s. 24, he shall, if he is to be entitled to the benefit of the carry forward of loss in any subsequent assessment, furnish within the time specified in the general notice given under sub-s. (1) or within such further time as the ITO in any case may allow, all the particulars required under the prescribed form of return of total income and total world income in the same manner as he would have furnished a return under sub-s. (1) had his income exceeded the maximum amount not liable to income-tax in his case, and all the provisions of this Act shall apply as if it were a return under sub-s. (1).” As was noted by the apex Court in Kulu Valley Transport Co. (P) Ltd.’s case (supra) there was no provision in s. 22 of the 1922 Act under which losses had to be determined for the purpose of s. 24 (2) of the said Act, though it conferred the benefit of losses being set off and carried forward. Sec. 22(2A) was introduced in the 1922
Act obviously with intent of clarifying the position regarding voluntary filing of a return showing loss.
5. Sec. 80 of the Act has undergone various changes. The said section as it stood at the relevant point of time read as follows : “80. Submission of return for losses—Notwithstanding any thing contained in this Chapter, no loss which has not been determined in pursuance of a return filed under s. 139, shall be carried forward and set off under sub-s. (1) of s. 72 or sub-s. (2) of s. 73 or sub-s. (1) of s. 74.” Subsequently the provision was amended w.e.f. 1st April, 1985. Expression “under s. 139” was substituted by the expression “within the time allowed under sub-s. (1) of s. 139 or within such further time as may be allowed by the ITO”. “80. Submission of return for losses—Notwithstanding anything contained in this Chapter, no loss which has not been determined in pursuance of a return filed within the time allowed under sub-s. (1) of s. 139 or within such further time as may be allowed by the ITO, shall be carried forward and set off under sub-s. (1) of s. 72 or sub-s. (2) of s. 73 or sub-s. (1) of s. 74 or sub-s. (3) of s. 74A.”. With effect from 1st April, 1989, by the amendment, in terms of Direct Tax Laws (Amendment) Act, 1987, the provision read as follows : “80. Submission of return for losses—Notwithstanding any thing contained in this Chapter, no loss which has not been determined in pursuance of a return filed in accordance with the provisions of sub-s. (3) of s. 139, shall be carried forward and set off under sub-s. (1) of s. 72 or sub-s. (2) of s. 73 or sub-s. (1) or sub-s. (3) of s. 74 or sub-s. (3) of s. 74A.”
6. Sec. 139(3) has also undergone several changes. Originally the provision read as follows : “139. Return of income—……………. (3) If any person who has not been served with a notice under sub-s. (2), has sustained a loss in any previous year under the head ‘Profits and gains of business or profession’ or under the head ‘Capital gains’ and claims that the loss or any part thereof should be carried forward under sub-s. (1) or s. 72 or sub-s. (2) of s. 73, or sub-s. (1) of s. 74, he may furnish, within the time allowed under sub-s. (1) a return of loss in the prescribed form and verified in the prescribed manner and containing such other particulars as may be prescribed, and all the provisions of this Act shall apply as if it were a return under sub-s. (1)” By Taxation Laws (Amendment) Act, 1970, the expression “or within such further time which, on an application made in the prescribed manner, the ITO may, in his discretion, allow” was added after the expression within the time allowed under sub-s. (1). Subsequently by Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986, changes were made in the provision and after the change sub-s. (3) of s. 139 read as follows : “(3) If any person who has not been served with a notice under sub-s. (2), has sustained a loss in any previous year under the head ‘Profits and gains of business or profession’ or under the head ‘Capital gains’ and claims that the loss or any part thereof should be carried forward under sub-s. (1) of s. 72, or sub-s. (2) of s. 73, or sub-s. (1) or sub-s. (3) of s. 74, or sub-s. (3) of s. 74A, he may furnish, within the time allowed under sub-s. (1) or by the thirty-first day of July of the assessment year relevant to the previous year during which the loss was sustained, a return of loss in the prescribed form and verified in the prescribed manner and containing such other particulars as may be prescribed, and all the provisions of this Act shall apply as if it were a return under subs. (1).”
7. It is to be noted that in the said sub-section further changes were effected w.e.f. 1st April, 1988 by Finance Act,1987. A reference to “or sub-s. (3) of s. 74” was inserted by the Finance Act, 1987 w.e.f. 1st April, 1988. Before that expression “sub-s. (3) of s. 74A” was inserted by Finance Act 1974 w.e.f. 1st April, 1975. By the Amendment and Miscellaneous Provisions Act of 1986 referred to above, the amendments made by Finance Act, 1970 as referred to above was omitted and in its place the expression “by the thirty-first day of July of the assessment year relevant to the previous year during which the loss was sustained was substituted. By Direct Tax Laws (Amendment) Act, 1987 w.e.f. 1st April, 1989 two portions were omitted from sub-s. (3) of s. 139. After the omission the provision read as follows : “(3) If any person who has sustained a loss in any previous year under the head ‘Profits and gains of business or profession’ or under the head ‘Capital gains’ and claims that the loss or any part thereof should be carried forward under sub-s. (1) or s. 72, or sub-s. (2) of s. 73, or sub-s. (1) or sub-s. (3) of s. 74, or sub-s. (3) of s. 74A, he may furnish, within the time allowed under sub-s. (1), a return of loss in the prescribed form and verified in the prescribed manner and containing such other particulars as may be prescribed, and all the provisions of this Act shall apply as if it were a return under sub-s. (1).”
8. On a comparison of s. 22 of the 1922 Act and those contained in s. 139(3), it is to be noted that sub-s. (3) of s.139 empowered the ITO to extend time for furnishing a loss return between 1st April, 1971 and 31st March, 1987. A conjoint reading of s. 80 and s. 139 shows that till amendment of s. 80 by the Direct Tax Laws (Amendment) Act, 1987 a belated return filed under any of the provisions of s. 139 was sufficient for the purpose of determination and carry forward of loss. It is not permissible to read in isolation loss that has to be determined and carried forward under s. 80 of the Act. In fact sub-s. (3) of s. 139 deals with the claim of assessee that loss or any part thereof should be carried forward under various sub-sections of ss. 72, 73, 74 and 74A. Where such a claim is made, a return of loss has to be filed. Sec. 80 deals with submission of return for losses. As the legislative history of s. 80 would go to show, for the period to which the present dispute relates there was no reference to sub-s. (3) of s. 139. For the first time by Direct Tax Laws (Amendment) Act, 1987, the expression “in accordance with the provisions of sub-s. (3) of s. 139” was inserted under the Act, the necessity of public notice as was required under s. 22(1) of the 1922 Act has been taken away. A statutory obligation has been placed on every person whose total income exceeds the taxable limits to file a return within the period prescribed under sub-s. (1) of s. 139 or the period extended by the ITO. Sec. 139(3) as was originally enacted involved a departure from the provision of s.
22(2A) of the 1922 Act to the extent that return of loss under the old section could have been made either within the time prescribed by sub-s. (1), s. 22 or within the time as the ITO in any case might have allowed, benefit of extension of time by the ITO was not originally granted under s. 139(3). But such benefit was given by amending the provision w.e.f. 1st April, 1971. Again by way of an amendment by the Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986, power to extend time for furnishing a return disclosing loss has been taken away w.e.f. 1st April, 1987. With effect from that date a loss return is required to be furnished within the time allowed under s. 139(1) or by 31st July, of the assessment year relevant to the previous year during which the loss was claimed to have been sustained. Thereafter again by Direct Tax Laws (Amendment) Act, 1987 operative w.e.f. 1st April, 1989 return of loss is required to be furnished within the time allowed under s. 139(1). Since s. 80 which deals with submission of return for losses did not specifically refer to return under s. 139(3) and at the relevant point of time referred to return filed under s. 139, without specifying the sub-section thereof, the benefit of carry forward and set off of loss was available to the assessee.
In that view of the matter, our answer to the question referred is in the affirmative, in favour of the assessee and against the Revenue.
[Citation : 264 ITR 347]
