V.K. Singhal, J.
1. In these cases the assessment orders for the years 1988-89 and 1989-90 have been assailed on the ground that the benefit of carry forward of loss had not been given.
2. The assessee filed income-tax return declaring loss of Rs. 37,395.10 on September 30, 1988. An order under Section 143(1) was passed on February 27, 1989, that the return is late and hence the loss cannot be allowed to be carried forward. A revision was filed under Section 264 of the Income-tax Act pointing out that the loss declared in the return was only carry forward loss of the earlier years which has already been allowed and there is no loss declared in the relevant accounting year and the provisions of Section 139(3) and Section 139(10) are not applicable. The income for the assessment year 1988-89 was Rs. 4,11,340 and the total figure of loss to be carried forward up to 1987-88 was Rs. 41,50,850. The revision was rejected on the ground that the return was not filed within the time prescribed under Section 139(1). An application under Section 154 was also moved on April 9, 1991, to the Commissioner stating that the statutory benefit conferred cannot be withdrawn and the provisions of Section 139(1) would not apply to the benefit of carry forward of unabsorbed depreciation and unabsorbed investment allowance.
3. Learned counsel for the petitioner has submitted that it was the unabsorbed depreciation and unabsorbed investment allowances which have been carried forward and, therefore, it cannot be considered as a loss. It is also pointed out that even the return submitted by the petitioner for the assessment year 1988-89 has been accepted and tax has been levied on the income declared.
4. Arguments of learned counsel appearing for both the parties have been heard. Section 139(3) of the Income-tax Act provides that where 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-section (1) of Section 72 or Sub-section (2) of Section 73 or Sub-section (1) or Sub-section (3) of Section 74 or Sub-section (3) of Section 74A, he may furnish, within the time allowed under Sub-section (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-section (1). The words 'or by the thirty-first day of July of the assessment year relevant to theprevious year during which the loss was sustained' were omitted by the Direct Tax Laws (Amendment) Act, 1987, with effect from April 1, 1989. In CIT v. Harprasad and Co. Pvt Ltd., : [1975]99ITR118(SC) , it was observed by the apex court that from the charging provisions of the Act, it is discern-able that the words 'income' or 'profits or gains' should be understood as including loss also, so that, in any sense profit and gains represent plus income whereas loss represents minus income. In other words, loss was considered to be negative profit and both negative and positive profits being of a revenue character were considered to enter as component in the taxable income. Earlier the Income-tax Officer had discretion to extend time, but from April 1, 1987, return was required to be filed under Section 139(1) by 31st July of the assessment year relevant to the previous year during which loss was sustained. In CIT v. Kulu Valley Transport Co. Pvt. Ltd., : [1970]77ITR518(SC) , the return filed beyond the time allowed under Section 139(1) was considered to be a valid return because Section 139(4) was considered to be the proviso to Section 139(1) under which the return could have been filed before assessment is made and in the time limit prescribed thereunder.
5. In Sri Hari Mills Ltd. v. First ITO, : [1967]65ITR348(Mad) and in the case of Sathappa Textiles Pvt. Ltd. v. Second ITO, : [1969]71ITR260(Mad) it was observed that the section refers to the loss and not for unabsorbed depreciation and, therefore, in respect of carry forward loss and depreciation there is no obligation to file return within the time prescribed for the return under Section 139(1). Section 32(2) refers to depreciation allowance which if could be adjusted is deemed to be allowance of that previous year and this has to be carried forward. Earlier there was no limitation, but now limitation of eight years has been prescribed. Depreciation is diminition in value of capital and by reason of wear and tear.
6. From the provisions of Section 139(1) it is evident that the return was required to be filed within the time allowed. In respect of the assessment year 1987-88 the return was required to be filed within the time allowed under Section 139(1) or by 31st July of the assessment year, relevant to the previous year during which loss was sustained. For the year 1989-90, by amendment Act of 1987, return was required to be filed within the time allowed under Section 139(1) and the discretion for extension of time by the assessing authority would not be availed of. Section 80 is the specific provision for submission of return of loss which is as under :
'Section 80. Notwithstanding anything contained in this Chapter, no loss which has not been determined in pursuance of a return filed in accordance with the provisions of Sub-section (3) of Section 139, shall be carried forward and set off under Sub-section (1) of Section 72 or Sub-section (2) of Section 73 or Sub-section (1) or Sub-section (3) of Section 74 or Sub-section (3) of Section 74A.'
7. The above provision contemplates determination of loss in pursuance of the return filed under Section 139(3) of the Income-tax Act which are to be carried forward to be set off under Section 72, 73, 74 or 74(A). Section 139(3) also refers to the same provision contemplating for filing of the return within the time allowed under Section 139(1) and thus the determination of the loss is permissible when the return is filed within the stipulated time under Section 139(1). There is no reference to the provision for carry forward of depreciation or investment allowance in Section 80. Section 72A contains provision relating to carry forward and set off of cumulative loss and unabsorbed depreciation allowance in certain cases of amalgamation. Under Sub-section (1) unabsorbed depreciation is deemed to be a loss. But this provision is applicable only in cases of amalgamation. In respect of other assessees the unabsorbed depreciation or investment allowance, if claimed in a return filed after the time prescribed under Section 139(1) is not restricted. In CIT v. Nagpur Gas and Domestic Appliances, : [1984]147ITR440(Bom) , the Bombay High Court found that the principles of Section 78 which are in respect of carry forward and set off of losses in case of change in constitution of firm or on succession cannot be extended to unabsorbed depreciation. There was no time limit provided for carry forward of depreciation of earlier years which has now been restricted to eight years as that of loss, but the Legislature has considered the unabsorbed depreciation and investment allowances differently than that of business loss. In these circumstances, I am of the view that the period of limitation prescribed under Section 139(1) is not applicable for carry forward of unabsorbed depreciation and investment allowance. In CIT v. Jaipuria China Clay Mines (P.) Ltd., : [1966]59ITR555(SC) it was found that carry forward of depreciation is provided for in Section 10(2)(vi) and Section 24(2) only deals with losses other than the loss due to depreciation. In Sri Hari Mills Ltd. v. First ITO, : [1967]65ITR348(Mad) it was held that regarding carry forward of unabsorbed depreciation compliance with Section 22(2A) of the Indian Income-tax Act, 1922, is not necessary. The provisions of Section 24(2) cannot be invoked which are meant for loss only and ignoring the return and making assessment without carrying forward of loss is not proper.
8. It may also be observed that in this case the assessing authority has taken cognizance of the return and levied tax on the income which was declared in the return without giving the benefit of carry forward of the unabsorbed depreciation and investment allowance. Proceedings under Section 148 were not taken in the case considering it a case of escaped assessment or a case where no return is filed. Cognizance of the return was taken and accordingly the Income-tax Officer should have given due credit of the depreciation allowance and investment allowance.
9. The writ petitions are allowed and the Income-tax Officer is directed to amend the assessment order in the light of the observations made above.