High Court Of Madras
CIT vs. L.G. Balakrishnan
Sections 1979FA SCH I, Part IV, RULE 9(5)
Asst. Year 1979-80
R. Jayasimha Babu & Mrs. A. Subbulakshmy, JJ.
Tax Case No. 113 of 1987
5th September, 2001
Counsel Appeared
Mrs. Chitra Venkataraman, for the Revenue : P.P.S. Janardhana Raja, for the Assessee
JUDGMENT
R. JAYASIMHA BABU, J. :
The assessment year is 1979-80.
2. Despite the absence of provisions similar to ss. 80 and 139(3) with regard to the need for having the loss determined in the relevant assessment year before claiming the right of carry forward of the loss to subsequent assessment years, the Revenue contended before the Tribunal that loss in relation to the agricultural activity of the assessee in earlier years, prior to the assessment year in which agricultural as well as non-agricultural income was returned by the assessee should not be considered. That contention having been rejected by the Tribunal, which upheld the view that was taken by the CIT, the Revenue has brought this reference before us for considering the following questions : “1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee was entitled to have the losses of earlier years under the head ‘Agricultural income’ set off against the income under similar head of the current year, even though the losses have not been computed by the ITO in the respective assessments in the absence of particulars furnished by the assessee? Whether, on the facts and in the circumstances of the case and having regard to the provisions of r. 9(5) of Part IV of the First Schedule to the Finance Act, 1979, the Tribunal was right in holding that there was neither an obligation on the assessee to return the net agricultural loss for the earlier years in the assessment of those years nor a duty was enjoined on the ITO to determine the losses and hence the set off of earlier years’ losses claimed by the assessee against the income of the current year can be entertained?”
The manner in which agricultural income is to be determined had been set out in the Finance Act in Part IV. The Finance Act for the year 1979 in Part IV in r. 9 therein provides that where an assessee has agricultural income in the assessment year commencing on the 1st day of April, 1979, and the net result of the computation of the agricultural income of the assessee for any one or more of the previous years relevant to the assessment years commencing on the 1st day of April, 1974, or the 1st day of April, 1975, or the 1st day of April, 1976, or the 1st day of April, 1977, or the 1st day of April, 1978, is a loss, then, the loss so computed for the earlier year relevant to the assessment year commencing on the 1st day of April, 1979, shall be set off against the agricultural income of the assessee for the previous year relevant to the assessment year commencing on the 1st day of April, 1979. Sub-r. (5) of the same r. 9 provides that notwithstanding anything contained in that rule no loss, which has been determined by the ITO, under the provisions of these rules, or the rules contained in Part IV of the First Schedule to the Finance Act, 1974 (20 of 1974), or of the First Schedule to the Finance Act, 1975 (25 of 1975), or of the First Schedule to the Finance Act, 1976 (66 of 1976), or of the First Schedule to the Finance (No. 2) Act, 1977 (29 of 1977), or of the First Schedule to the Finance Act, 1978 (19 of 1978), shall be set off under sub-r. (1), or, as the case may be, sub-r. (2). Rule 10 of the Rules in Part IV of the Finance Act, 1974, provides that where the net result of the computation made in accordance with those rules is a loss, the loss so computed shall be ignored and the net agricultural income shall be deemed to be nil. The Finance Act, 1974, in Part IV in r. 9 therein, provided that for the assessment year commencing on the 1st day of April, 1975, any loss in the computation of agricultural income for the previous year relevant to the assessment year commencing on the 1st day of April, 1974, shall be set off against the agricultural income in the previous year relevant to the assessment year commencing on the 1st day of April, 1974. Sub-r. (4) of that rule provides that notwithstanding anything contained in that rule no loss which has not been determined by the ITO under the provisions of those rules shall be set off under sub-r. (1). Rule 10 provides that the net-result of the computation made in accordance with those rules can be a loss, the loss so computed shall be ignored and the net agricultural income shall be deemed to be nil. Provisions similar to those found in the Finance Act, 1974, are to be found in the Finance Acts of the years 1975, 1976, 1977 and 1978 as well.
The assessee in this case had not filed a return in the assessment years prior to the one commencing on the 1st day of April, 1979, and, therefore, there was no determination of the extent of loss, if any, in the earlier assessment years. The Finance Act of 1979 in r. 9(5) of Part IV of the First Schedule thereto imposed a bar on loss not determined by the ITO, under the provisions of those rules and the rules contained in the Finance Acts of earlier years being set off against the income of the assessee for the previous year relevant to the assessment year commencing on the 1st day of April, 1979. That sub-rule does not specify the time at which the loss should have been determined under the rules of the Finance Acts of the earlier years. It does not deal with a situation where an assessee has no non-agricultural income, which is required to be taxed under the Central Act and has incurred a loss in his activities in relation to agriculture. Such a person was not required to file a return during the assessment years commencing on the 1st day of April, 1974, till the assessment year commencing on the 1st day of April, 1979, solely for the purpose of having the loss from the agricultural activities computed. The annual Finance Acts preceding the year 1979, as also the Finance Act of the year 1979 do not provide for the carry over of the loss from agricultural activities. The Finance Act is applicable to the concerned year. Those Finance Acts, on the other hand provided that where the net result of the computation made in accordance with the rules contained therein is a loss the same shall be ignored. Those Acts do not provide for carry forward of loss to later years. An assessee who had non-agricultural income in the assessment year commencing on the 1st day of April, 1979, and who was not required to file returns in earlier years in the absence of non-agricultural income but had incurred loss in those years in agricultural activities is, therefore, not to be deprived of the benefit of the carry forward provision in the Finance Act, 1979. If the assessee is able to show that the result of the computation by applying the rules set out in the Finance Acts of 1974 and subsequent years prior to 1979, is a loss, the assessee is not to be denied the benefit of having that loss set off against the agricultural income of the previous year relevant to the assessment year commencing on the 1st day of April, 1979, only on the ground that he had not filed a return in the earlier years, even when the law had not imposed any obligation on him to file a return solely for the purpose of having the agricultural loss from his agricultural activities computed, the assessee not having had income from non- agricultural sources in those years.
The CIT and the Tribunal have held rightly that in the absence of any express prohibition, an assessee is not to be denied the benefit of set off provided for in r. 9 of Part IV of the First Schedule to the Finance Act, 1979, as long as the assessee is able to show that he had incurred loss from his agricultural activities in the earlier assessment years after a computation made in accordance with the requirements of the rules provided in the relevant Finance Acts and that such loss had not been set off against the agricultural income of earlier years. The fact that the time at which this exercise is to be carried out is subsequent to the enactment of the Finance Act, 1979, should not, in the absence of any express prohibition, make a difference to the benefit that can be granted to the assessee which is no less or no more than the benefit which the assessee could have obtained, had he non-agricultural income in the earlier years and only loss from his agricultural activities.
6. In cases where two possible views can be taken with reference to the provisions of a taxing statute, a view which would result in the benefit being given to the assessee without resulting in any injustice to the Revenue is to be preferred and neither technicalities nor rules of interpretation which permit reading implied prohibitions should be allowed to come in the way of the benefit being granted to the assessee. Allowing the assessee to claim set off of the losses determined after applying the rules of the earlier Finance Acts for those years against the agricultural income of the previous year relevant to the assessment year commencing on the 1st day of April, 1979, does not result in any denial of revenue due to the State but, would only ensure that a benefit intended by Parliament to be given to the assessee is in fact enjoyed by the assessee. We, therefore, answer the question referred to us in favour of the assessee and against the Revenue.
[Citation : 255 ITR 339]
