1. As these are cross-appeals by the assessee and the revenue, they are disposed of by a consolidated order.
2. The assessee is a private limited company who is an authorised dealer for Premier and Ambassador Cars, Matador Vans, Tempoes and Lamberetta scooters. Its relevant accounting year ended on 30-6-1976.
The assessee-company filed return showing loss of Rs. 5.58 lakhs which was received to Rs. 5.57 lakhs. The ITO completed the assessment computing the loss at Rs. 1.80 lakhs.
3 to 12. [These paras art not reproduced here as they involve minor issues.] 13. The last ground in the revenue's appeal is against the Commissioner (Appeals)'s direction to carry forward assessed loss. The ITO had laconically stated at page 24 of the assessment order that 'loss not to be carried forward as the return filed late'. In para 2 of the assessment order, date of filing of loss return of Rs. 5.58 lakhs is not given though it is mentioned that revised return was filed on 28-3-1980 showing loss of Rs. 5.57 lakhs.
14. The Commissioner (Appeals) directed the ITO to carry forward the loss relying on CIT v. Kulu Valley Transport Co. (P.) Ltd. [1970] 77 ITR 518 (SC), Presidency Medical Centre (P.) Ltd. v. CIT [1977] 108 ITR 838 (Cal.) and Telstar Advertising (P.) Ltd. v. CIT [1979] 116 ITR 610 (Bom.).
15. The learned departmental representative urges that the Supreme Court's decision in Kulu Valley Transport Co. (P.) Ltd.'s case (supra) was under the Indian Income-tax Act, 1922 ('the 1922 Act') and that the Mysore High Court in B.B. Danganavar v. ITO [1967] 65 ITR 370 had considered the provisions of Section 139 of the Income-tax Act, 1961 ('the Act') and had held that if a return showing loss was not filed within the statutory period, then the assessee was not entitled to carry forward the loss. Therefore, the assessee who wants the benefit of carry forward of loss must comply with strict provisions of Section 139(3). He pointed out that the assessee had not filed any application for extension of time and, therefore, he had not complied with the terms of Section 139(3). He drew support from the observations of the Supreme Court in Brij Mohan v. CIT [1979] 120 ITR 1 where dealing with penalty under Section 271(1)(c) of the Act, the Supreme Court observed that nowhere does Section 139 declare that where a return is filed within the extended period, it will be deemed to have been filed within the period originally prescribed by the statute. On the contrary, Section 139 contains a provision for payment of interest where the return is filed beyond the prescribed date even though within the extended period. That is evidence of the fact that the return filed during the extended period is not regarded by the statute as filed within the time originally prescribed. The learned departmental representative urged that if a return filed within the extended time is not treated as a return filed within the time originally prescribed, then a return not filed within the time prescribed under Section 139(3) but filed beyond that time, namely, within a two-year period prescribed under Section 139(4), cannot be treated to be a return under Section 139(3). He further urged relying on CIT v. Manmohan Das [1966] 59 ITR 699 (SC) that whether the loss in any year may be carried forward to the following year and set off against the profits and gains of the subsequent year under Section 24(2) of the 1922 Act has to be determined by the ITO who deals with the assessment of the subsequent year and that a decision recorded by the ITO who computes the loss in the previous year that the loss cannot be set off against the income of the subsequent year, is not binding on the assessee.
16. The learned counsel for the assessee pointed out that the original loss return showing loss of Rs. 5.58 lakhs was filed on 26-9-1977 while it was due on 30-6-1977 and the loss return though not filed within the time allowed under Section 139(3) was filed within the time allowed under Section 139(4). Relying on the order of the Commissioner (Appeals) and the decisions mentioned in his order, it is urged that the assessee is entitled to carry forward of loss.
17. We find that while the Mysore High Court in B.B. Danganavar's case (supra) supports the revenue's case that the assessee is not entitled to carry forward of loss if the return is not filed within the time allowed under Section 139(3), opposite view has been taken by the Calcutta High Court in Presidency Medical Centre (P.) Ltd.'s case (supra) where following Kulu Valley Transport Co. (P.) Ltd.'s case (supra), it was held that if a return is filed within the time specified by Sub-Section (4) of Section 139, it would be deemed to be in accordance with law and loss has to be determined and carried forward as a matter of course under Section 72(1), read with Section 80, of the Act, even though the return was not filed within the time provided by Section 139(1). The Bombay High Court in Telstar Advertising (P.) Ltd.'s case (supra) followed the Calcutta High Court and held that the ITO was not justified in refusing to carry forward the loss on the ground that the loss return had not been filed within the time prescribed under Section 139(3). The Bombay High Court did not follow the view taken by the Mysore High Court in B.B. Danganavar's case (supra). Similar view was taken by the Delhi High Court in CIT v.Bankipur Iron Works Ltd. [1980] 3 Taxman 484. The assessment year before the Delhi High Court was, however, the assessment year 1961-62, in which year the 1922 Act applied.
18. The Allahabad High Court in CIT v. Pratapgarh Cold Storage & Ice Factory [1980] 3 Taxman 61, while dealing with the assessment year 1971- 72, followed Kulu Valley Transport Co. (P.) Ltd.'s case (supra), Presidency Medical Centre (P.) Ltd.'s case (supra) and C.P. Sarthy Mudaliar [1978] 114 ITR 687 (AP) and held that a loss return though not filed within the time allowed under Section 139(3) and filed under Section 139(4), still entitled the assessee to carry forward of loss for set off against its future year's income.
19. The Andhra Pradesh High Court in C.P. Sarthy Mudaliar's case (supra) had taken the same view. In that case a loss return for the assessment year 1961-62 had been filed within 4 years of the end of the assessment year and the assessment was completed on 28-3-1966 under Section 143(3) of the Act and the High Court held that belated loss return should be deemed to be a return validly filed under Section 139(1).
20. The Madhya Pradesh High Court in Co-operative Marketing Society Ltd. v. CIT [1983] 143 ITR 99 was dealing a case, where loss returns were filed in response to notice under Section 148 of the Act for the assessment years 1972-73 and 1973-74 and the ITO had computed the loss for the relevant years but had declined to carry forward the loss on the ground that the returns were not filed within the time allowed under Section 139. The High Court held that the returns had been filed within the time allowed under Section 139(4) and, therefore, the assessee was entitled to the benefit of carry forward and set off of losses computed by the ITO in respect of the assessment years 1972-73 and 1973-74. The Madhya Pradesh High Court followed Kulu Valley Transport's case (supra).
21. The Tribunal, Special Bench, Jaipur, in ITO v. Bohra Film Finance [1983] 4 ITD 247, while holding that return filed under Section 139(4) could not be treated as filed under Section 139(1) or 139(2), did observe at page 257 that the scheme of the 1922 Act in regard to filing of the return was somewhat different from the scheme of the 1961 Act.
However, the Special Bench was not concerned with the problem before us. We also note that Kanga & Palkhivala in foot-note 12 at page 825 of Law and Practice of Income-tax, Vol. I, 7th edition, has observed that dissenting Judgment of Shah J. in Kulu Valley Transport Co. (P.) Ltd.'s case (supra) was the correct view that the assessee, not filing the loss return within the time allowed under Section 139(3)/22(2A), was not entitled to carry forward of loss.
22. Having carefully considered the submissions of both the parties and case laws discussed above and not finding any material difference in comparable provision of Section 22(2A) of the 1922 Act and Section 139(3) of the 1961 Act, we would follow the view held by the majority of the High Courts and hold that the assessee is entitled to carry forward of loss.
23. In view of the provisions of Section 72 and Section 80, we are not inclined to accept the revenue's submission [relying on the Supreme Court observations in Manmohan Das' case (supra) which were under the 1922 Act] that it was premature for the assessee to claim carry forward of loss in the year under consideration. In view of the ITO's holding that the loss is not to be carried forward, the assessee had to challenge the said directions in appeal and, therefore, the Commissioner (Appeals) was acting within his jurisdiction when he held that the assessee was entitled to carry forward of loss.
24. In the result, both the assessee's appeal and the revenue's appeal are partly allowed.