High Court Of Madras
CIT vs. Sumathi Process Industries (P)Ltd.
Sections 72, 139(3)
Asst. Year 1984-85
Markandey Katju, C.J. & F.M. Ibrahim Kalifulla, J.
Tax Case No. 409 of 2001
2nd August, 2005
Counsel Appeared
Mrs. Pushya Sitaraman, for the Revenue : None, for the Assessee
JUDGMENT
MarkandEy Katju, C.J. :
This is an income-tax reference on behalf of the Department under s. 256(1) of the IT Act, 1961 (hereinafter referred to as “the Act”), relating to the asst. yr. 1984-85, in which the following questions have been referred to us for our opinion :
“1. Whether, on the facts and circumstances of the case, the Tribunal is right in law in holding that the assessee is entitled to carry forward of business loss relying on the Supreme Court’s decision in the case of CIT vs. Kulu Valley Transport Co. (P) Ltd. (1970) 77 ITR 518 (SC) (which was rendered under the old Act) ?
2. Whether the Tribunal is justified in law in allowing carry forward of loss when as per the amended provision of s. 139(3) by the Taxation Laws (Amendment) Act, 1970, the loss return filed beyond the time prescribed by s. 139(3) cannot be considered as having been filed within the time allowed under s. 139(4) ?”
Heard learned counsel for the Department. None has appeared for the assessee, although notice has been served. The facts of the case are that the assessee is a private limited company. For the asst. yr. 198485, the accounting period ended on 30th June, 1983. The assessee filed a return of loss of Rs. 9,64,601 on 24th July, 1985. This return was not filed within the time allowed under s. 139(1) of the Act. The AO assessed at “nil” loss without allowing the benefit of carry forward of the same to be set off against the future income on the ground that the return was not filed within time. On appeal, the CIT(A) held that though the assessee had not filed the return in terms of the provision of s. 139(1) of the Act, the return was filed within the time allowed under s. 139(4) of the Act, and hence the assessee was entitled to the benefit of carry forward and set off of the business loss in the subsequent assessment year in view of the decision of the Supreme Court in CIT vs. Kulu Valley Transport Co. (P) Ltd. (1970) 77 ITR 518 (SC). The Department’s appeal before the Tribunal failed, and hence this reference. It may be mentioned that prior to 1971, sub-s. (3) of s. 139 did not empower the AO to extend the time for furnishing a return of loss. However between 1971 and 1989, the amended sub-s. (3) empowered the AO to extend the time since in the Taxation Laws (Amendment) Act, 1970 it was provided that carry forward of losses may be permitted to an assessee if he has furnished a return of loss “within the time allowed under sub-s. (1) or within such further time which, on an application made in a prescribed manner, the ITO, may in his discretion allow”.
With effect from 1st April, 1989, the Direct Tax Laws (Amendment) Act, 1987 came into force, which again restored the old position prior to 1971, namely, that the AO has no power to extend the time for filing return of income under s. 139(1) and to extend the time for filing under s. 139 (3), a return of loss intended to be carried forward. However, since we are in this case concerned with the asst. yr. 1984-85, the law as between 1971 and 1989 will apply, and hence the AO has in his discretion the power to extend the time for filing a return of loss. In CIT vs. Kulu Valley Transport Co. (P) Ltd. (supra), the Supreme Court held that sub-ss. (1) and (4) of s. 139 are to be read together, and hence the assessee would be entitled to carry forward of loss, if he has filed the return after the period prescribed by sub-s. (1), but within the time allowed under sub-s. (4). This view has been followed by the Gauhati High Court in CIT vs. Naginimara Veneer & Saw Mills (P) Ltd. (1996) 130 CTR (Gau) 354 : (1995) 216 ITR 237 (Gau); the Calcutta High Court in Basant Kumar Bajoria vs. CIT (1993) 202 ITR 957 (Cal) and the Orissa High Court in CIT vs. Orissa Metal Industries (P) Ltd. (1992) 101 CTR (Ori) 477 : (1992) 196 ITR 803 (Ori), etc. In view of the above, the reference is decided in the affirmative, i.e., in favour of the assessee and against the Department.
[Citation : 284 ITR 109]
