Commissioner of Income Tax Vs. Greevees Enterprises (P) Ltd. - Court Judgment

Excerpt:
direct taxation - set off and carry forward - sections 80 and 139 of direct tax laws (amendment) act, 1987 and sections 72, 73, 74, 80 and 139 (3) of income tax act, 1961 - benefit of carry forward and set off claimed by assessed on account of loss incurred by him - authority refused to carry forward and set off loss on ground that as required by section 80 return filed by assessed not in accordance with section 139 (3) - section 80 did not specifically refer to return under section 139 (3) - section 80 only refer to return filed under section 139 without specifying sub-section - return filed by assessed in accordance with section 139 (1) - held, benefit of carry forward and set off of loss available to assessed. - - according to the learned counsel for the assessed, on the other hand, the position was different prior to 1st april, 1987, and a bare reading of section 80 as it stood at the relevant point of time clearly indicates the position.arijit pasayat, c.j.1. following question has been referred for opinion of this court under section 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.assessed 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 section 139(3) of the act. assessed 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 assessed. it was held by the tribunal that the ratio indicated by the apex court in cit v. kulu valley transport co. (p) ltd. : [1970]77itr518(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 section 139(3), it is pointed out that section 80 deals with submission of return for losses and the concept of carry forward and set off are dealt with in various sub-sections 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 section 139(3) are complied with. according to the learned counsel for the assessed, on the other hand, the position was different prior to 1st april, 1987, and a bare reading of section 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 section 22 of the indian income-tax act, 1922 (hereinafter referred to as'the '1922 act'). sub-section (2a) of section 22 read as follows :'(2a) if any person who has not been served with a notice under sub-section (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-section (2) of section 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-section (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-section (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-section (1).'as was noted by the apex court in kulu valley transport co. (p) ltd. 's case (supra) there was no provision in section 22 of the 1922 act under which losses had to be determined for the purpose of section 24(2) of the said act, though it conferred the benefit of losses being set off and carried forward. section 22(2a) was introduced in the 1922 act obviously with intent of clarifying the position regarding voluntary filing of a return showing loss.5. section 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 josses--notwithstanding any thing contained in this chapter, no loss which has not been determined in pursuance of a return filed under 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) of section 74.'subsequently the provision was amended w.e.f. 1st april, 1985. expression 'under section 139' was substituted by the expression 'within the time allowed under sub-section (1) of section 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-section (1) of section 139 or within such further time as may be allowed by the ito, 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) of section 74 or sub-section (3) of section 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 josses--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-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.'6. section 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-section (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-section (1) or section 72 or sub-section (2) of section 73, or sub-section (1) of section 74, 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)'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-section (1).subsequently by taxation laws (amendment and miscellaneous provisions) act, 1986, changes were made in the provision and after the change sub-section (3) of section 139 read as follows :'(3) if any person who has not been served with a notice under sub-section (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-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) 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 sub-section (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-section (3) of section 74' was inserted by the finance act, 1987 w.e.f. 1st april, 1988. before that expression 'sub-section (3) of section 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-section (3) of section 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-section (1) or 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).'8. on a comparison of section 22 of the 1922 act and those contained in section 139(3), it is to be noted that sub-section (3) of section 139 empowered the ito to extend time for furnishing a loss return between 1st april, 1971 and 31st march, 1987. a conjoint reading of section 80 and section 139 shows that till amendment of section 80 by the direct tax laws (amendment) act, 1987 a belated return filed under any of the provisions of section 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 section 80 of the act. in fact sub-section (3) of section 139 deals with the claim of assessed that loss or any part thereof should be carried forward under various sub-sections of sections 72, 73, 74 and 74a. where such a claim is made, a return of loss has to be filed. section 80 deals with submission of return for losses. as the legislative history of section 80 would go to show, for the period to which the present dispute relates there was no reference to sub-section (3) of section 139. for the first time by direct tax laws (amendment) act, 1987, the expression 'in accordance with the provisions of sub-section (3) of section 139' was inserted under the act, the necessity of public notice as was required under section 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-section (1) of section 139 or the period extended by the ito. section 139(3) as was originally enacted involved a departure from the provision of section 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-section (1), section 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 section 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 section 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 section 139(1). since section 80 which deals with submission of return for losses did not specifically refer to return under section 139(3) and at the relevant point of time referred to return filed under section 139, without specifying the sub-section thereof, the benefit of carry forward and set off of loss was available to the assessed.in that view of the matter, our answer to the question referred is in the affirmative, in favor of the assessed and against the revenue.