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Income Tax Appellate Tribunal - Kolkata

Peerless General Finance & Investment ... vs Jt. Cit on 7 March, 2003

Equivalent citations: [2003]85ITD215(KOL)

ORDER

B.K. Mitra, J.M. The appeals filed by the assessee are directed against the common order dated 16-12-1998 passed by the Commissioner (Appeals) for the assessment years 1985-86 and 1986-87.

2. The main effective common ground in these cases is that the lower authorities refused to carry forward the business loss of the assessee for the assessment years 1985-86 and 1986-87 for setting off with his business income for subsequent assessment year on the ground that the returns for the said assessment years were filed late.

3. The learned counsel for the assessee stated that the lower authorities were not justified in refusing to carry forward the business loss claimed by the assessee. It was further contended that while refusing to carry forward the business loss the assessing officer failed to take note of several judicial decisions to the effect that return of income filed under section 139(4) should be deemed to have been filed under section 139 of the Income Tax Act and consequently the business loss determined on the basis of such belated return is required to be carried forward for set off with the business income of the assessee in the subsequent assessment year. The learned counsel placed reliance in the judgment of the Honble Calcutta High Court in the case of CIT v. Bangabasi Theatres (P) Ltd. (1993) 71 Taxman 408 (Cal) wherein it has categorically been stated by the Honble High Court that in respect of section 80 read with sections 139, 72 and 80 of the Income Tax Act, 1961 for the assessment year 1984-85 decision in the case of Presidency Medical Centre (P) Ltd. v. CIT (1977) 108 ITR 838 (Cal) will govern the assessment year 1984-85 and, therefore, even where the assessee filed his loss return for the assessment year 1984-85 beyond the period prescribed under section 139(3) the assessee was entitled to carry forward and set-off of business loss suffered by the assessee. The learned counsel further brought to our notice the decision rendered in Presidency Medical Centre (P) Ltd.s case (supra) wherein it was held that Circular No. 1807, dated 14-5-1985 will govern the assessment year 1984-85. It has been laid down in the said circular that the department accepted the decision rendered in Presidency Medical Centre (P) Ltd.s case (supra). It was brought to our notice that the principle laid down in Presidency Medical Centre (P) Ltd.s case (supra) was applied even after the said amendment made in 1970. It was further held that the changes made in 1986 will come into force on and from the assessment year-1987-88 which will not take but the assessment year 1984-85 from the ambit of the decision in Presidency Medical Centre (P) Ltd.s case (supra). In this case the learned counsel has brought to our notice the judgment of the Honble Madhya Pradesh High Court in the case of CIT v. Dogar Tools (P) Ltd. (1998) 232 ITR 616 (MP) which supports the claim of the assessee. The learned counsel further relied on the order of the Income Tax Appellate Tribunal, A-Bench, Calcutta in ITA No. 1953 (Delhi) of 1990 and ITA No. 2045 (Cal.) of 1988 which fully supports the claim of the assessee.

4. The learned Departmental Representative supported the order of the lower authorities.

5. We have heard the rival submissions and gone through the record. On a careful consideration of the facts of the case and the case laws cited by the learned counsel, we are of the opinion that the order of the Commissioner (Appeals) is not in accordance with the provisions of law and the same should have been quashed.

6. In view of the above foregoing discussions we are of the opinion that the assessee was entitled for the benefit of carry-forward of loss.

7. In the result, the appeals are allowed.

Pramod Kumar, A.M.

8. I find myself in respectful disagreement with the views expressed by learned Judicial Member and, therefore, with his leave and consent, I proceed to draft this separate order.

9. Briefly the facts. The assessee-company, for the relevant previous years, filed its income-tax returns beyond the time limit set out in section 139(1) of the Income Tax Act and admittedly no extension of time was also sought by the assessee. The income-tax return for the assessment year 1985-86 was filed on 14-10-1986 while the income-tax return for the assessment year 1986-87 could only be filed on 30-10-1987. It was in this backdrop of facts that the assessing officer declined carry forward of losses of Rs. 1,03,17,30,191 for the assessment year 1986-87 and of Rs. 76,46,98,933 for the assessment year 1985-86 by observing that these losses shall not be carried forward in view of late submission of income-tax returns. Aggrieved by assessing officers declining to carry forward the aforesaid losses aggregating to Rs. 179.64 crores, the assessee carried the matter in appeal before the Commissioner (Appeals) but without any success. Learned Commissioner (Appeals) observed that the law as it stood at the material point of time did not allow carry forward of losses in case of late filing of income-tax returns, unless any extension of time is sought by the assessee. Since even before the Commissioner (Appeals) the assessee did not file any evidence of having sought extension of time, and since the returns filed by the assessee-company were admittedly filed beyond time limit set out in section 139(1) of the Act, Commissioner (Appeals) upheld the stand of the assessing officer. Aggrieved by the orders of the Commissioner (Appeals), the assessee is in further appeal before us.

10. Rival contentions are conscientiously heard, orders of the authorities below carefully perused, and applicable legal provisions, as indeed the judicial precedents on the issue in appeal, duly deliberated upon.

11. I find that in the case of Krishna Chandra Dutta (Cookme) (P) Ltd. v. CIT (1993) 204 ITR 23 (Cal), one of the questions before their Lordships of Honble Calcutta High Court was :

"Whether the Tribunal was right in holding that the return for the assessment year 1983-84 having been filed on 2-7-1985, the amended provision of section 80 effective from 1-4-1985, was applicable and hence the loss determined was not to be carried forward ?"

12. It was in this context that their Lordships, vide order dated 31-3-1993, inter alia observed as follows :

"As regards the second question (i.e., the question reproduced above), it may be said that the amendment in section 80 is effective from 1-4-1985, requiring a return of loss to be filed under section 139(1) as a prerequisite for determination of loss for purpose of carry forward and set off. The amendment cannot apply retrospectively. It is admitted position that, in this case, the assessment year involved in 1983-84. Therefore the return filed under section 139(4) is not governed by the amended section 80. It is the unamended section 80 that should govern the assessees case for the instant assessment year being a year earlier than the assessment year 1985-86. It cannot be disputed that the decision of this court in Presidency Medical Centre (P) Ltd. v. CIT (1977) 108 ITR 838 (Kol), shall squarely apply to this case and, accordingly, the loss determined on the basis of a return under section 139 is entitled to the benefit of the carry forward and set off. The amendment has not affected the position of law as declared by the said decision in respect of loss arising from assessment year earlier than the assessment year 1985-86. Our attention was brought to an instruction of the Board (Instruction No. 1607 (F. No. 225/240/78-II/A-II) dated 14-3-1985) wherein the Board has directed that the disqualification for carry forward and set-off of loss determined in pursuance of a belated return shall be effective in respect of the assessment year subsequent to the assessment year 1984-85. Our attention has also been drawn to paragraphs 14.1, 14.2 and 14.3 of Circular No. 397C (1985) 152 ITR (St) 29) dated 16-10-1984. The extract of the relevant portion of the said Circular is set out below (See 152 ITR (St) 36) :

`14.1 Submission of return for losses-section 80Under the existing provisions of section 80 relating to submission of return for losses, no loss is allowed to be carried forward and set off under section 72(1), 73(2), 74(1) or 74A(3) unless such loss has been determined in pursuance of a return filed under section 139.

14.2 The Amending Act has amended section 80 of the Act to provide that such loss shall not be allowed to be carried forward and set off unless such loss is determined in pursuance of a return filed within the time allowed under section 139(1) for furnishing a voluntary return of income or within such further time as may be allowed by the Income Tax Officer.

14.3 The amendment takes effect from 1-4-1985, and will, accordingly, apply in relation to any loss for assessment year 1985-86 and subsequent years. (Section 18 of the Amending Act).

We find that the position as clarified by the Board is based on the correct construction of the provisions. We also share the view that the amendment shall apply to loss arising in assessment year 1985-86 and not in the earlier years.

In the premises, the second question is answered in the negative and in favour of the assessee."

13. Once Honble Jurisdictional High Court puts its seal of approval on the above extracted "position as clarified by the Board as being" based on the correct construction of the provisions" and observes that their Lordships "share the view that the amendment shall apply to loss arising in assessment year 1985-86 (onwards)", this Tribunal, in my considered view, is duty bound to respectfully follow that position.

14. Since this aspect of the matter has also been referred to in some decisions cited by the assessee, I may also mention that by way of Taxation Laws (Amendment) Act, 1986 and effective 1-4-1987, amendment has been made in section 139(3) to provide for the specific date by which loss return should be filed and, thereby, withdrawing powers of the assessing officer to extend, in his discretion, the time for furnishing return of loss. I consider it desirable to reproduce the relevant extracts from paragraph 9.1 of Central Board of Direct Taxes Circular No. 469 dated 23-9-1986 to mention the implication of this amendment :

"9.1 Providing the date by which a return showing loss is to be furnished and treatment of returns below taxable limitUnder the existing provisions of section 139(3) of the Income Tax Act, as amended by the Taxation Laws (Amendment) Act, 1970, the Income Tax Officer, on an application made to him for this purpose, is empowered to extend, in his discretion, the time for furnishing a return of loss. By the amending Act, this power of the Income Tax Officer has been withdrawn. Accordingly, as per the amended provision, if the assessee is to get a benefit of the determination of the loss or any part thereof and for its carry forward under section 72(1) or section 73(2) or section 74(1) or section 74A(3) of the Income Tax Act, he should file the return voluntarily within the period specified in section 139(1) or by the 31st day of July of the assessment year relevant to the previous year during which the loss was sustained ... (remaining portion of this paragraph is not relevant as it pertains to the amendment in section 139(10) 9.2 The above amendment shall come into force from 1-4-1987, and will, accordingly, apply to the assessment year 1987-88 and subsequent years."

15. In my considered view, the above amendment is not relevant to the controversy in appeal before us because in the present case, it is an undisputed position that the assessee did not seek any extension of time for filing of income-tax returns. In this view of the matter and bearing in mind Honble Jurisdictional High Courts observation to the effect that observes that their Lordships "share the view that the amendment shall apply to loss arising in assessment year 1985-86 (onwards) .", I am of the view that the Commissioner (Appeals) was justified in declining assessees contention that, despite the amendment in section 80 with effect from 1-4-1985, the loss on belated returns should be allowed to be carried forward for the assessment years 1985-86 and 1986-87 as well.

16. I now turn to the judicial precedents relied upon by the assessee.

17. As far as Honble Jurisdictional High Courts judgment in the case of Bangabasi Theatres (P) Ltd. (supra) is concerned, it may be mentioned that, in this case, their Lordships were in seisin of the assessment year 1984-85 and, in view of the discussions in paragraphs 11 to 13 above, it is an undisputed position that the amendment in law requiring the assessee to file the income-tax returns within the time limit laid down under section 139(1), in order to avail the benefit of carry forward of losses, came into force with effect from 1985-86. The issue before their Lordships was, therefore, not relevant to the controversy in appeals before us. No doubt the Honble High Court has mentioned that "the changes made in 1986 which will come into force on and from the assessment year 1987-88 will not take out the assessment year 1984-85 from the ambit of decision in Presidency Medical Centre (P) Ltd.s case (supra)" but then, as discussed in paragraphs 14 and 15 earlier in this order, this amendment is not relevant in the present context. In any event, judgment dated 31-3-1993 of the jurisdictional High Court, as against judgment dated 7-11-1990 in this case, has supported the stand of the revenue-as discussed in paragraphs 11 to 13 earlier in this order. Since number of Honble Judges in of both the High Court benches is equal, and in conformity with the settled law, later decision will prevail. The assessee thus derives no benefit from the case of Bangabasi Theatres (P) Ltd. (supra).

18. In the case of Presidency Medical Centre (P) Ltd. (supra), the issue before the Honble Jurisdictional High Court were dealing with the assessment year 1964-65 and the issue before their Lordships related to assessing officers declining to carry forward the loss on the ground that "as notice under section 139(2) was not served and the return showing loss was not filed within the time allowed under section 139 of the Income Tax Act, 1961". Their Lordships of Honble Jurisdictional High Court, in this case, followed the decision of the Honble Supreme Court in the case of CIT v. Kulu Valley Transport Co. (P) Ltd. (1970) 77 ITR 518 (SC) which primarily dealt with the interpretation of section 22(2A) of the 1922 Act, which is materially identical to section 139(3) of 1961 Act, and which broadly proceeded on the reasoning that section 139(4) should be read as proviso to section 139(1) and that a compliance to the provisions of section 139(4) should be treated as compliance with section 139(1). In other words, a return filed under section 139(4) should also be treated as a return validly filed under section 139 and the carry forward of loss should accordingly be allowed. I may mention that the majority judgment by Honble Supreme Court rejected the objection of Shah, J. the dissenting Judge, that the aforesaid reasoning would render section 139(3) otiose. The majority judgment in this case inter alia read as follows :

Now, the question which was submitted for the opinion of the High Court in the present case, consisted of two parts, viz., (1) whether the loss returned by the assessee for the assessment years in question was required in law to be determined by the Income Tax Officer and (2) whether those losses could be carded forward after being set off under section 24(2) of the Act. The first part of the question stood concluded by the decision of this court in Ranchhoddas Karsondas case. The Income Tax Officer could have ignored the return and had to determine those losses. Section 24(2) confers the benefit of losses being set off and carried forward and there is no provision in section 22 under which losses have to be determined for the purpose of section 24(2). The question which immediately arises is, whether section 22(2A) places any limitation on that right. (Emphasis here italicised in print supplied) and to highlight its contrast with the applicable legal position under section 80 of 1961 Act whereby right to carry forward is restricted to the returns filed under sub-section (1) of section 139. This sub-section which has been reproduced before simply says that in order to get the benefit of section 24(2) the assessee must submit his loss return within the time specified by section 22(1). That provision must be read with section 22(3) for the purpose of determining the time within which return has to be submitted. It can well be said that section 22(3) is merely a proviso to section 22(1). Thus a return submitted at any time before the assessment is made is valid return. In considering whether a return made is within time sub-section (1) of section 22 must be read along with sub-section (3) of that section. A return whether it is a return of income, profits or gains or of loss must considered as having been made within the time prescribed of it is made within the time specified in section 22(3). In other words, if section 22(3) is complied with, section 22(1) also must be held to have been complied with. If compliance has been made with the latter provision the requirements of section 22(2A) would stand satisfied.

19. The proposition thus adopted was that a return of loss could be filed at any time within the time limit laid down under section 139(4) and yet, notwithstanding the provisions of section 139(3), the assessee will be entitled for the benefit of carry forward of losses in the income-tax returns so filed. The assessment years in Kulu Valley Transport Co. (P) Ltd.'s case (supra) and in Presidency Medical Centre (P) Ltd.'s case (supra), however, were 1954-55 and 1964-65 respectively. Those were the years in which section 80 was not in force in the form in which it was in force in the relevant assessment year.

20. I may also mention that section 80, as it stood at the relevant point of time, provided as follows :

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 Income Tax Officer 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.

21. The expression "time allowed under sub-section (1) of section 139 or within such further time as may be allowed by the Income Tax Officer" in the aforesaid provision was, by the virtue of Direct Tax Laws (Amendment) Act, 1987 and with effect from 1-4-1989, substituted by the expression" in accordance with the provisions of sub-section (3) of section 139". Prima facie a view therefore seems possible that it is only with effect from 1-4-1989 that returns filed under section 139(4) will not be, eligible for the benefit of carry forward of losses, since, the returns under section 139(4), up to that point of time, could be treated as returns validly filed under section 139 and, consequently, the same shall be eligible for carry forward in terms of the provisions of section 80 of the Act, as it stood at that point of time. It will, however, be fallacious inasmuch as the Honble Supreme Court, in Kulu Valley Transport Co. (P) Ltd.s case (supra) were dealing with only the provisions of section 22(2A) of 1922 Act, which are in pari materia with the provisions of section 139(3) of the 1961 Act, and there were no restrictions, as in section 80 now, on assessees right to carry forward of losses. It may further be noticed that even the expression "time allowed under sub-section (1) of section 139 or within such further time as may be allowed by the Income Tax Officer" was brought on the statute book with effect from 1-4-1985, vide Taxation Laws (Amendment) Act, 1984, and it substitute the expression return filed under section 139. The legal provisions applicable with effect from 1-4-1985 were, thus, neither in pari materia with the law under the 1922 Act, or the law under the 1961 Act till the point of time when this amendment in section 80 came in force. I am of the considered view that their Lordships of Honble Supreme Court, in the case of Kulu Valley Transport Co. (P) Ltd. (supra), and Their Lordships of Honble Calcutta High Court, in the case of Presidency Medical Centre (P) Ltd. (supra), were dealing with the legal provisions which are not in pari materia with the legal position, after amendment in section 80 of 1961 Act by Taxation Laws (Amendment) Act, 1984 with effect from 1-4-1985, and, accordingly, these judgments have no application on the issue in appeal before us.

22. While dealing with the pre-amendment law and referring to the Honble Supreme Courts judgment in the case of Kulu Valley Transport Co. (P) Ltd. (supra), Sampat Iyengars commentary on the Income Tax Law (7th Edition 1983 (1985 Reprint) at page 2557) observes that "the decision of minority (sic) will govern and be applicable even under the 1961 Act, as the provisions of section 139 are materially identical with those of section 22 of the 1922 Act and as, further, there is nothing in the language of section 80 to lead to a different conclusion" (Emphasis here italicised print supplied). However, once the amendment is brought about in section 80 and this amendment substitutes return filed under section 139 with "return filed, within the time allowed under sub-section (1) of section 139 or within such further time as may be allowed by the Income Tax Officer", the situation is not the same inasmuch as section 80 now specifically provides that in order to avail the benefit of carry forward of loss, the relevant return must be filed with time allowed under section 139(1) or within extended time allowed by the Income Tax Officer.

23. Section 22(2A) of the 1922 Act, scope of which was subject-matter of consideration before the Honble Supreme Court in Kulu Valley Transport Co. (P) Ltd.s case (supra), provided as follows :

"If any person, who has not been served with a notice under subsection (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 subsection (1) or within such further time as the Income Tax Officer in any case may allow, all the particulars required under the prescribed form of return of total 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 subsection (1)."

24. The aforesaid provisions of 1922 Act are in pari materia with the provisions of section 139(3) as it stood at the relevant point of time and which, for the sake of ready reference, is reproduced below :

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) of section 74, or sub-section (3) of section 74A, he may furnish, within the time allowed under sub-section (1) within such further time which, on an application made in the prescribed manner, the Income Tax Officer may, in his discretion allow, 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).

25. The implications of section 22(2A) of the 1922 Act and of section 139(3) of the 1961 Act being identical, and the restriction on carry forward of losses under section 80 restricted to rather broad category of returns filed under section 139, the observations of Their Lordships in the context of section 22(2A) continued to be valid, with respect to returns filed under section 139(4), till the amendment in section 80 was brought about with effect from 1-4-1985. The case before the Honble Calcutta High Court in Presidency Medical Centre (P) Ltd.s case (supra), being for the assessment year 1964-65, was also of pre-amended section 80 (assessment years earlier than 1985-86) and, therefore, the restriction brought in force in section 80, to allow carry forward of losses only for returns filed under section 139(1) as against the return filed in any of the sub-sections of section 139 till that point of time, had not come to be effective. As far as Kulu Valley Transport Co. (P) Ltd.s case (supra) is concerned, the provisions regarding restrictions on assessees right to carry forward the losses, as envisaged in section 80 of 1961 Act, were not in force anyway.

In this view of the matter, and for the elaborate reasons set out above, I am of the considered view that the assessee derives no benefit from these judgments. .

26. The assessees reliance on the judgment of Honble M.P. High Court, in the case of Dogar Tools (P) Ltd. (supra) is also not legally sustainable, in view of the fact that Honble Jurisdictional High Court, in the case of Krishna Chandra Dutta (Cookme) (P) Ltd. (supra), has held that the amendment in section 80, restricting the right of carry forward of losses to the cases wherein returns are filed within time limit allowed under section 139(1) or such extended time as may be allowed by the Income Tax Officer, shall apply to loss arising in assessment year 1985-86 onwards. Once Honble Jurisdictional High Court takes a view, even in conflict with the esteemed views of any non-jurisdictional High Court, it is no longer open to the Tribunal to take any other view of the matter than the one taken by the Honble Jurisdictional High Court. We are, therefore, unable to subscribe to the proposition thus advanced by the Honble M.P. High Court that the decision of Honble Supreme Court in the case of Kulu Valley Transport Co. (P) Ltd. (supra) was good law till the assessment year 1988-89". In any event, since with effect from 1-4-1985, amended section 80 of the 1961 Act restricted the right of carry forward of losses to the cases where income-tax return was filed within time allowed under section 139(1) or within such extended time, as Income Tax Officer may have allowed, and since the Honble Supreme Court had allowed the carry forward of losses in case of belated returns since no statutory provision then existing "places any limitation on that right" of carry forward of losses in case of belated returns. The issue in that judgment was confined to the interpretation of section 22(2A) of the 1922 Act which is broadly in pari materia with section 139(3) of the 1961 Act. It would thus appear, in harmony with the views expressed by Honble Jurisdictional High Court, that, strictly speaking, Honble Supreme Courts judgment in the case of Kulu Valley Transport Co. (P) Ltd. (supra) may not be applicable after the amendment in section 80, by the virtue of Taxation Laws (Amendment) Act, 1984, with effect from 1-4-1985.

27. As for the decisions by the co-ordinate and SMC bench of the Tribunal, I may only add that since I have arrived at my conclusions in the light of the judgment of the Honble Jurisdictional High Court, and for the detailed reasons as aforesaid, I do not see any reasons to be dissuaded from my views expressed above. In any event, none of the decisions specifically deals with the reasons set out above. These decisions only rely upon the judgments in the case of Presidency Medical Centre (P) Ltd. (supra) and CBDT Circular No. 469 (supra) which, for the elaborate reasons set out above, are not applicable on the facts of this case.

28. Accordingly, in my view, Commissioner (Appeals) was justified in holding that assessing officer rightly declined carry forward of losses of Rs. 103,17,30,191 for the assessment year 1986-87 and of Rs. 76,46,98,933 for the assessment year 1985-86.

29. In the result, appeals are dismissed.

Order under section 255(4) of the Income Tax Act, 1961 As there is a difference of opinion between the Judicial Member and the Accountant Member, the matter is being referred to the Honble President of Income Tax Appellate Tribunal with a request that the following question may be referred to a Third Member or pass such orders as the Honble President may kindly decide :

"Whether on the facts and in the circumstances of the case, the Tribunal should have allowed carry forward of the loss aggregating to Rs. 179.64 crores, for assessment years 1985-86 and 1986-87 or the Tribunal should have declined the carry forward of the aforesaid losses of Rs. 179.64 crores in view of amendment in section 80 with effect from 1-4-1985 and in view of the fact that income-tax returns were filed beyond the time limit allowed under section 139(1) ORDER (Third Member) M.A. Bakhshi, V.P. The appeals of the assessee for the assessment years 1985-86 and 1986-87 were heard by "C" Bench of the Tribunal and as a result of difference of opinion amongst the learned Members of the Bench, the Honble President has nominated me as Third Member under section 255(4) of the Income Tax Act, 1961 for decision in regard to the following point of dispute :

"Whether, on the facts and in the circumstances of the case, the Tribunal should have allowed carry forward of the loss aggregating to Rs. 179.64 crores, for assessment years 1985-86 and 1986-87 or the Tribunal should have declined the carry forward of the aforesaid losses of Rs. 179.64 crores in view of the amendment in section 80 with effect from 1-4-1985 and in view of the fact that income-tax returns were filed beyond the time limit allowed under section 139(1) ?"

2. Parties have been heard and records perused. The relevant facts relating to the issue involved in these appeals may be stated even at the cost of repetition for the sake of coherence and convenience. For assessment year 1985-86, the return of income was filed by the assessee on 14-10-1985 declaring income of Rs. 5,14,82,950. The assessee had sought extension of time up to 30-9-1985. Thus the return of income filed by the assessee was beyond time allowed under section 139(1) either originally or on extension by the assessing officer. Similarly the return of income for assessment year 1986-87 was filed on 30-10-1987 declaring income of Rs. 3,93,67,310. The assessee had filed Form No. 6 seeking extension of time up to 31-12-1986 and subsequently up to 31-3-1987. The assessing officer had allowed the extension of time for filing of the return up to 31-12-1986 and the decision on extension application had been communicated to the assessee vide letter dated 30-12-1986 served on 12-1-1987. Thus the return filed by the assessee for assessment year 1986-87 was beyond the prescribed time under section 139(1) either originally or on extension by the assessing officer. Thus the admitted fact is that the income-tax returns for assessment years 1985-86 and 1986-87 were filed beyond the time allowed under section 139(1) originally or on extension by the assessing officer. So, however, it is also not disputed that both the returns filed by the assessee for the aforementioned assessment years were within the time allowed under section 139(4) of the Income Tax Act, 1961.

3. The assessing officer completed the assessment of the assessee-company on 22-9-1992 for assessment year 1985-86 at an income of Rs. 52,80,30,490 against which the assessee had filed an appeal before the Commissioner (Appeals) and subsequently to the Tribunal. Before the Tribunal, assessee claimed certain receipts, offered for taxation in its returns, as nontaxable. The Tribunal in its consolidated order dated 31-1-1995 in I.T.A. Nos. 1275 and 1276 (Cal)/1993 for assessment years 1985-86 and 1986-87 allowed the claim of the assessee. Accordingly, the assessing officer gave effect to the order of the Tribunal as a result of which a net loss of Rs. 103,17,30,191 was determined for assessment year 1985-86.

4. Similarly for assessment year 1986-87, the assessing officer had made an assessment under section 143 (3) vide order dated 24-9-1992 determining income of Rs. 41,57,26,060. Subsequently as a result of appellate orders of the Commissioner (Appeals) and the Tribunal (supra), the loss of Rs. 76,46,98,933 was determined by the assessing officer while giving effect to the order of the Tribunal.

5. While giving effect to the appellate orders, the assessing officer denied the benefit of carry forward of loss on the ground of late submission of the income-tax returns. Section 80 of the Income Tax Act, 1961 has been invoked.

6. It may not be out of place to mention that the orders of the Tribunal have not become final as the reference has been directed by the Honble Supreme Court to be made to the Honble Calcutta High Court on the questions of law arising out of order of the Tribunal.

7. The assessee had appealed to the Commissioner (Appeals) against the appeal effect order of the assessing officer. However, the Commissioner (Appeals) vide his order dated 16-12-1998 held that since the returns filed by the assessee-company were belated and there was no evidence brought on record to show that the assessee-company sought extension of time for filing of the returns for assessment years 1985-86 and 1986-87, it was not entitled to the benefit of carry forward the business loss for any of the two years. Whereas the observation of the Commissioner (Appeals) that extension of time had not been sought by the assessee is contrary to the observations of the assessing officer in the assessment order, yet undisputed fact remains that the returns filed by the assessee for assessment years 1985-86 and 1986-87 were beyond the time allowed under section 139(1) either originally or on extension. The assessee appealed to the Tribunal and the appeals were initially heard by a Division Bench, i.e., "C" Bench of the Income Tax Appellate Tribunal, Kolkata. The learned Judicial Member decided the issue in favour of the assessee relying upon the decision of the Calcutta High Court in the case of Bangabasi Theatres (P) Ltd. (supra), in Presidency Medical Centre (P) Ltd.s case (supra) and Madhya Pradesh High Court in the case of Dogar Tools (P) Ltd. (supra). Reliance has also been placed on the decisions of the Tribunal in the case of United Dairies (P) Ltd. v. ITO (IT Appeal No. 195 (Delhi) of 1990, order dated 31-3-1998) and in the case of Regent Estates Ltd. v. ITO (IT Appeal No. 2045 (Cal) of 1988, order dated 29-6-1989).

8. However, the learned Accountant Member has expressed a divergent view. He has relied upon the decision of the Calcutta High Court in the case of Krishna Chandra Dutta (Cookme) (P) Ltd. (supra) as also on the circular of the Central Board of Direct Taxes No. 397 dated 16-10-1984 and Instruction No. 1607 dated 14-3-1985 as well as to the amendment made in section 80 of the Income Tax Act, 1961 by the Taxation Laws (Amendment) Act, 1984 with effect from 1-4-1985. The learned Accountant Member has expressed the view that the subsequent judgment of the jurisdictional High Court dated 31-3-1993 in Krishna Chandra Dutta (Cookme) (P) Ltd.s case (supra) was to be followed in preference to the earlier judgment in Bangabasi Theatres (P) Ltd.s case (supra) relied upon by the learned Judicial Member. It has also been observed by the learned Accountant Member that the relevant provisions applicable from 1-4-1985 are not in pari materia with the provisions of law under 1922 Act. It has further been held that the decision of the Supreme Court in the case of Kulu Valley Transport Co. (P) Ltd. (supra) is not applicable in this case in view of the amendment in section 80 of the Income Tax Act, 1961 by the Taxation Laws (Amendment) Act, 1984 with effect from 1-4-1985. In regard to the decision of the Madhya Pradesh High Court in the case of Dogar Tools (P) Ltd. (supra), it has been pointed out that the said decision is inapplicable in view of the decision of the jurisdicational High Court in Krishna Chandra Dutta (Cookme) (P) Ltd.s case (supra). It has further been observed that Circular No. 469 dated 23-9-1986 of the Central Board of Direct Taxes (hereinafter referred to as the CBDT) was irrelevant.

9. The learned counsel for the assessee contended that section 22 of the Income Tax Act, 1922 substantially corresponds to section 139 of the Income Tax Act, 1961 as it stood at all material time. Sub-section (2A) of section 22 of the 1922 Act corresponds to section 139(3) of 1961 Act. Subsection (3) of section 22 of the 1922 Act corresponds to sub-sections (4) and (5) of section 139 of 1961 Act. According to the learned counsel, section 80 of 1961 Act contains the very same provision which was earlier contained in sub-section (2A) of 1922 Act. Sub-section (2) of 1922 Act corresponds to section 139(3) of 1961 Act. The learned counsel for the assessee contended that the provisions of section 139(3) being in pari materia with sub-section (2A) of section 22 of 1922 Act, the decision of the Supreme Court in the case of Kulu Valley Transport Co. (P) Ltd. (supra) is clearly applicable to the facts of this case. It was contended that subsection (2A) of section 22 of 1922 Act came up for judicial interpretation before the Honble Supreme Court in the aforementioned case and the question before the Apex Court was whether an assessee who files belated returns of loss beyond the time, specified in the general notice under subsection (1) of section 139 of 1961 Act or within such further time as extended by the Income Tax Officer for filing the return, could lawfully claim as loss suffered by him to be determined and carried forward notwithstanding the fact that the assessee has not complied with the requirement of subsection (2A) of section 22 of 1922 Act. The learned counsel further contended that sub-section (3) of section 22 of 1922 Act is also in pari materia with the provisions of sub-section (4) of section 139 read with section 80 of the Income Tax Act, 1961. According to the learned counsel, section 80 of 1961 Act only reiterates what is already set out as a condition in section 139(3) of the 1961 Act. According to the learned counsel, section 139(4) being a section latter in the statute book both to section 80 and section 139(3) of 1961 Act, the same would prevail.

10. Relying upon the decision of the Supreme Court in the case of Banarsi Debi v. ITO (1964) 53 ITR 100 (SC) at page 106, it was contended that where a word-or phrase has received a clear judicial interpretation, the subsequent statute which incorporates the same word or phrase in a similar context, must be construed in a manner that the word or phrase in interpreted according to the meaning that has previously been assigned to it. It is the claim of the learned counsel that section 80 after its amendment with effect from 1-4-1985 and provisions of section 139(3) and section 139(4) echoes the similar provisions considered by the Honble Supreme Court under the 1922 Act in the case of Kulu Valley Transport Co. (P) Ltd. (supra). According to the learned counsel, the CBDT Circular No. 397 dated 16-10-1987, Instruction No. 1528 dated 20-9-1983 and Instruction No. 1607 dated 14-3-1985, the Board having expressed the minority view taken by Mr. Justice Shah in Kulu Valley Transport Co. (P) Ltd.s case (supra) is, therefore, not acceptable. According to the learned counsel, the CBDT circulars/instructions are binding upon the tax authorities and may be given effect by the Tribunal and the courts only if these are benevolent in nature. Reliance was placed on the decision of the Supreme Court in the case of Keshavji Ravji & Co. v. CIT (1990) 183 ITR 1(SC) in support of the contention that the circulars of the Board are binding upon the income-tax authorities, but the same cannot bind the Tribunal or the High Courts. It was contended that the circulars or instructions of CBDT contrary to the interpretation given by the Apex Court are not binding.

Relying upon the decisions of the Supreme Court in the cases of N.N. Bhagwati v. CIT (2001) 247 ITR 206 (SC) and Hindustan Aeronautics Ltd. v. CIT (2000) 243 ITR 808, it was contended that the Tribunal is not empowered to direct that a circular should be given effect to in preference to the decision of the Honble Supreme Court. It was further contended that the Hon'ble Calcutta High Court in Presidency Medical Centre (P) Ltd.s case (supra) held that the principles laid down by the Apex Court in the case of Kulu Valley Transport Co. (P) Ltd. (supra) delivered that reference to provisions of 1922 Act was equally applicable under the 1961 Act, more particularly because even under section 139(4) of 1961 Act a return could be filed by an assessee at any time before the assessment is made. The learned counsel further pointed out that admittedly in the case of Presidency Medical Centre (P) Ltd. (supra), the assessment year involved is 1964-65. So, however, the amendment in section 80 of 1961 Act with effect from 1-4-1985 merely echoes and reiterates what was earlier contained in subsection (2A) of section 22 of 1922 Act as well as what is contained in subsection (3) of section 139 of 1961 Act. According to the learned counsel, no additional condition was sought to be imposed in the 1961 Act over and above what was already contained in section 22(2A) of the 1922 Act. It was, accordingly, contended that the law relating to assessment years 1985-86 and 1986-87 in regard to set off and carry forward of losses was no different than for assessment years 1962-63 to 1984-85 under the 1961 Act and/or any assessment year under the 1922 Act. Referring to the decision of the Honble Calcutta High Court in the case of Bangabasi Theatres (P) Ltd. (supra), it was contended that the view canvassed by the appellant has been accepted by the Honble High Court in the aforementioned case. It was pointed out that in that decision the Honble High Court held that changes made in 1986 will come into force from 1987-88. Reliance was also placed on the decision of the Tribunal in the case of United Dairies (P) Ltd. (supra) where a view on similar issue has been taken in favour of the assessee. Reliance has also been placed on the decision of the Madhya Pradesh High Court in the case of Dogar Tools (P) Ltd. (supra). Further, the decision of the Honble Calcutta High Court in the case of Krishna Chandra Dutta (Cookme) (P) Ltd. (supra) is sought to be distinguished on the ground that the Honble High Court had decided the issue relating to assessment year 1983-84 and, therefore, the view expressed by their Lordships in regard to an issue which was not before the Hon'ble High Court is in the nature of sub silentio and not binding. In this regard reliance has been placed on the decisions of the Supreme Court in the case of MCD v. Gurnam Kaur (1989) 1 SCC 101 and Director of Settlements v. MR. Apparao (2002) 4 SCC 638. The learned counsel further contended that the decision in the case of Presidency Medical Centre (P) Ltd. (supra) was the solitary decision cited before the D-Bench and the said decision is based on the decision of the Supreme Court in the case of Kulu Valley Transport Co. (P) Ltd. (supra). It was, accordingly, pleaded that the issue may be decided in favour of the assessee.

11. The learned Departmental Representative, on the other hand, contended that the decision of the Honble Supreme Court in the case of Kulu Valley Transport Co. (P) Ltd. (supra) is based on the provisions of the 1922 Act and since the law had been amended with effect from 1-4-1985, the Tribunal is bound to take into account the law as it existed on the 1st day of the assessment year. Reliance has been placed on the decision of the Supreme Court in the case of Reliance Jute & Industries Ltd. v. CIT (1979) 120 ITR 921 and the decision of the Bombay High Court in the case of CIT v. Orkay Silk Mills (P) Ltd. (1998) 230 ITR 108 (Bom) in support of the proposition of law canvassed on behalf of the assessee. The learned Departmental Representative further contended that section 139 and section 80 of 1961 Act have got to be read together and not in a disjointed manner. It was contended that this is a basic tenant of harmonious construction. Reliance has been placed on the decisions of the Supreme Court in the case of CIT v. Sardar Arjun Singh Ahluwalia (1999) 240 ITR 693 (SC) and Calcutta High Court in the case of CIT v. Smt. Anita Ghosh (1993) 202 ITR 991(Cal) and that of Kerala High Court in the case of CIT v. Parekh Bros. (2002) 253 ITR 434 (Ker). It was further contended that section 80 of Income Tax Act, 1961, as amended with effect from 1-4-1985, cannot be ignored. Relying upon the decision of the Supreme Court in the case of CIT v. Distributors (Baroda) (P) Ltd. (1972) 83 ITR 377 (SC), it was contended- "No part of a provision of a statute can be just ignored by saying that the legislature enacted it not knowing what it was saying." Relying upon the decision of the Supreme Court in the case of CWT v. Kripashankar Dayashanker Worah (1971) 81 ITR 763 (SC), it was contended that if the intention of the legislature is clear and beyond doubt, then the fact that the provision could have been more artistically drafted cannot be a ground for treating any part of a provision as otiose. In regard to the decisions cited on behalf of the assessee, the learned Departmental Representative contended that in the aforementioned decisions the relevant provisions applicable for assessment years 1985-86 and 1986-87 were not under consideration of the Honble High Court. It was pointed out that the Honble Calcutta High Court has specifically mentioned in the case of Krishna Chandra Dutta (Cookme) (P) Ltd. (supra) that "the amendment to section 80 was effective from 1-4-1985, requiring a return of loss to be filed under section 139(1) as a prerequisite for determination of loss for the purpose of carry forward and set off." It was pointed out that even the obiter dicta in the case of Krishna Chandra Dutta (Cookme) (P) Ltd. (supra) is relevant in this case as there is no ratio decidendi of the jurisdictional High Court available in any other case. The decisions of the Tribunal cited on behalf of the assessee are claimed to be inapplicable to the facts of the case insofar as the relevant provisions of the Act and the relevant decisions have not been taken into consideration. Placing reliance on the CBDT circulars explaining the purpose of amending the provisions of section 80 of the Income Tax Act, 1961, it was contended that the explanatory notes to the amending Acts are of contemporaneous value and not just executive instructions extending or withdrawing a benefit. In this connection reliance was placed on the decision of the Supreme Court in the case of K.P. Varghese v. ITO (1981) 131 ITR 597 (SC). It was further contended that the decision of the Madhya Pradesh High Court in the case of Dogar Tools (P) Ltd. (supra) is not to be followed as held by Their Lordships of the Mysore High Court in the case of Dr. T.P. Kapadia v. CIT (1973) 87 ITR 511 (Mys), wherein it has been held that the Tribunal should not follow a decision of a different High Court where there is a specific circular of the Board to the contrary. The learned Departmental Representative also relied upon the decision of the Tribunal in favour of the revenue in the case of Asstt. CIT v. MK. Chatterjee (IT Appeal No. 213 (Cal) of 1998, order dated 27-9-2002). Reliance was also placed on the Kerala High Court decision in the case of CIT v. Smt. Gunavathy Dharamsy (2000) 241 ITR 168 (Ker). It was further pointed out that the decision of the Kerala High Court in the case of Smt. Gunavathy Dharamsy (supra) has been followed by the same High Court in the case of CIT v. Rajesh Kumar (2002) 125 Taxman 834 (Ker). The learned Departmental Representative has also placed reliance on the decision of the Calcutta High Court in the case of Koppind (P) Ltd. v. CIT (1994) 207 ITR 228 (Cal) where their Lordships of the High Court have dealt with the carry forward of loss in the return filed under section 148. But on analysing the relevant provisions of the Act, their Lordships held particularly in the context of amended provisions that section 80 which, with effect from 1-4-1985, completely prohibits determination of loss and its carry forward and set off except where the return is filed either under section 139(2) or section 139(1) of the 1961 Act. According to the learned Departmental Representative, the decision of the Supreme Court in the case of Kulu Valley Transport Co. (P) Ltd. (supra) has been considered in the aforementioned decision of Koppind (P) Ltd. (supra). It was, accordingly, pleaded that the appeal of the assessee may be dismissed.

12. I have perused the records, given my careful consideration to the rival contentions advanced on behalf of the parties and have also taken into consideration the views expressed by the learned Accountant Member and the learned Judicial Member.

13. I first propose to consider the main contentions advanced on behalf of the parties as to whether the principle laid down by the Supreme Court in the case of Kulu Valley Transport Co. (P) Ltd. (supra) is applicable in this case even after the amendment of section 80 of the Income Tax Act, 1961 with effect from 1-4-1985.

14. In the case of Kulu Valley Transport Co. (P) Ltd. (supra), the assessee had filed the returns disclosing loss for assessment years 1953-54 and 1954-55 in January 1956 and the question that arose for consideration of the Honble Supreme Court was "whether the loss had to be determined and carried forward under section 24(2) of the Income Tax Act, 1922, though the returns were not filed within the time specified in the general notice under section 22(1) and the time for filing the return had not been extended by the Income Tax Officer. Notice under section 22(2). Had also not been served upon the assessee." Their Lordships of the Supreme Court, by a majority judgment, decided the issue in favour of the assessee. Honble Justice Hegde and Justice Grover (Justice Shah dissenting) held that since section 22(3) of 1922 Act allowed the assessee to file a return before the assessment was made, the condition for set off and carry forward under section 22(2A) of the 1922 Act was ineffective insofar as sub-section (3) of section 22 of the said Act permitted an assessee to file a return at any time within the specified period. In my view if the above decision of the Honble Supreme Court in the case of Kulu Valley Transport Co. (P) Ltd. (supra) is applied blindly without going into the context in which the decision of the Supreme Court is founded, one may tend to believe that the said decision of the Honble Supreme Court may be attracted in this case. However, it is well-settled principle of law that the decision of the court must be read in the context in which it has been rendered. In this connection, it would be relevant to refer to the observation of their Lordships of the Supreme Court in the case of CIT v. Sun Engg. Works (P) Ltd. (1992) 198 ITR 297 (SC) as under :

"It is neither desirable nor permissible to pick out a word or a sentence from the judgment of the Supreme Court divorced from the context of the question under consideration and treat it to be the complete law declared by the court. The judgment must be read as a whole and the observations from the judgment have to be considered in the light of the questions which were before the court. A decision of the Supreme Court takes its colour from the questions involved in the case in which it is rendered and, while applying the decision to a later case, courts must carefully try to ascertain the true principle laid down by the decision."

15. Similarly, in the case of Director of Settlements (supra), their Lordships of the Supreme Court held as under :

"Article 141 of the Constitution unequivocally indicates that the law declared by the Supreme Court shall be binding on all courts within the territory of India. The aforesaid article empowers the Supreme Court to declare the law. It is, therefore, an essential function of the court to interpret a legislation. The statements of the court on matters other than law like facts may have no binding force as the facts of two cases may not be similar. But what is binding is the ratio of the decision and not any finding of facts. It is the principle found out upon a reading of a judgment as a whole, in the light of the questions before the court that forms the ratio and not any particular word or sentence. To determine whether a decision has "declared law" it cannot be said to be a law when a point is disposed of on concession and what is binding is the principle underlying a decision. A judgment of the court has to be read in the context of questions which arose for consideration in the case in which the judgment was delivered. An "obiter dictum" as distinguished from a ratio decidendi is an observation by the court on a legal question suggested in a case before it but not arising in such manner as to require a decision. Such an obiter may not have a binding precedent as the observation was unnecessary for the decision pronounced but even though an obiter may not have a binding effect as a precedent, but it cannot be denied that it is of considerable weight. The law which will be binding under article 141 would, therefore, extend to all observations of points raised and decided by the court in a given case. So far as constitutional matters are concerned, it is a practice of the court not to make any pronouncement on points not directly raised for its decision. The decision in a judgment of the Supreme Court cannot be assailed on the ground that certain aspects were not considered or the relevant provisions were not brought to the notice of the court Ballabhadas Mathurdas Lakhani v. Municipal Committee, Malkapur (1970) 2 SCC 267. When the Supreme Court decides a principle it would be the duty of the High Court or a subordinate court to follow the decision of the Supreme Court. A judgment of the High Court which refused to follow the decision and directions of the Supreme Court or seeks to revive a decision of the High Court which had been set aside by the Supreme Court or seeks to revive a decision of the High Court which had been set aside by the Supreme Court is a nullity (Narinder Singh v. Surjit Singh (1984) 2 SCC 402 and Kausalya Devo Bogra v. Land Acquisition Officer (1984) 2 SCC 324)."

16. In the light of the above principles of law it is important to find out the context in which decision of the Supreme Court in the case of Kulu Valley Transport Co. (P) Ltd. (supra) has been rendered. In order to appreciate the context and the reasoning given by the Honble Supreme Court in arriving at the decision in the case of Kulu Valley Transport Co. (P) Ltd. (supra), the relevant portions of the judgment may be quoted hereunder :

"The assessee, Kulu Valley Transport Co. (P) Ltd., is a private company incorporated under the Indian Companies Act, 1913, having its registered office at Pathankot. In January 1956, the company voluntarily filed returns under section 22(3) of the Income Tax Act, 1922, hereinafter called the "Act", showing losses of Rs. 1,51,520 and Rs. 48,977 for the assessment years 1953-54 and 1954-55 respectively. No notice had been served on the company under section 22(2) of the Act. The Income Tax Officer held that since the returns had been filed after the statutory period the company was not entitled to carry forward the losses for both the years in the subsequent assessments. Before the Appellate Assistant Commissioner two main points were urged. The first was that the delay in the submission of the returns should have been condoned and, secondly, the returns should have been treated as having been made under section 22(3) in which case also they would be valid returns under section 22(2A) by reading sub-sections (3) and (1) of section 22 together. The Appellate Assistant Commissioner did not find any sufficient or reasonable cause for condoning the delay. On the second point he decided against the company. The Tribunal agreed with the view of the Appellate Assistant Commissioner and on the main point held that the company was not entitled to the benefit of carrying forward the losses as it had not filed the returns in accordance with section 22(2A) of the Act.

Section 24(2) contains substantive provisions relating to carrying forward of the loss. It provides that where any assessee sustains a loss or profits or gains in any year being a previous year in any business, profession or vocation and the loss cannot be wholly set off under subsection (1) (of section 24) so much of the loss as is not so set off or the whole loss where the assessee had no other head of income shall be carried forward to the following year. Sub-section (2A) of section 22 was inserted by the Income Tax (Amendment) Act, 1953, with effect from 1-4-1952 (Emphasis here italicised in print supplied).

..... Thus, the scheme of section 22 is that a public or general notice is to be given every year by the Income Tax Officer or he could even give an individual or special notice. But if a person has not furnished a return within the time allowed by or under the first two sub-sections of section 22 he could furnish a return at any time before the assessment is made. It is well-settled by now that a return can always be filed at any time before the assessment is made. The Income Tax Officer has to make the assessment on the return and he could not choose to ignore. The question that immediately arises is whether, in case of a voluntary return in which loss has been shown and determined the Income Tax Officer can decline to give the benefit under section 24(2) of carrying forward the loss on the ground that the assessee did not comply with the provisions of section 22(2A) of the Act. In other words, when there is an express provision in that sub-section which must be availed of if the assessee is to be entitled to the benefit of carrying forward of loss in any subsequent assessment can he take advantage of the provisions of section 22(3) and claim that since he has filed a voluntary return before any assessment has been made and, if it be determined that he has suffered a loss, he is entitled to carry forward that loss.

The argument on behalf of the assessee is that section 24(2) confers the right to carry forward the loss to the following year provided the conditions contained in the sub-section are satisfied There is no further requirement that has to be fulfilled so far as the substantive law is concerned section 22(2A) is merely a procedural provision and it also provides that once a return has been furnished in accordance therewith all the provisions of the Act become applicable as if it were a return under sub-section (1). That would attract section 22(3) and, therefore, a voluntary return can be filed even after the period mentioned in subsection (2A) has expired so long as the assessment has not taken place. It is pointed out that, supposing a return is filed showing income but the Income Tax Officer in the assessment proceedings holds that there has been a loss and the assessee was mistaken in showing a profit, the assessee in such circumstances can certainly claim the benefit of section 24(2). (Emphasis here italicised in print supplied). If that is possible, there is no reason or justification for holding that although he could claim the benefit of section 24(2) by filing a voluntary return in the given illustration, he would be deprived of that benefit if he filed a return voluntarily showing a loss except in compliance with section 22(2A). On the other hand, the contention on behalf of the revenue is that section 22 before its amendment in the year 1953 did not make any provision for the filing of a loss return voluntarily. Under section 22(1), returns which were invited were only of taxable income. No return which in the opinion of the person making it was a loss return was intended to be filed under section 22(1). It was only under section 22(2) that the return that was required to be filed was in pursuance of the individual notice given by the Income Tax Officer. Since by this notice a return in the prescribed form had to be filed by a person to whom the notice was issued whether it was profit or loss, a loss return could, therefore, be filed only in pursuance of a notice served under section 22(2) but not voluntarily. It is by virtue of the provisions contained in section 22(2A) that a loss return can be filed where a person has not been served under subsection (2) in order to get the benefit of the carrying forward of the loss under section 24(2). This is indeed expressly provided by subsection (2A) of section 22.

17. In order to appreciate the above decision of the Supreme Court, I consider it necessary to refer to the relevant provisions of the Income Tax Act, 1922 and the corresponding provisions under the Income Tax Act, 1961. The relevant provisions considered by their Lordships of the Supreme Court in the case of Kulu Valley Transport Co. (P) Ltd. (supra) are contained in sections 22 and 24 of the Income Tax Act, 1922 which are reproduced hereunder "Section 22-Return of income (1) The Income Tax Officer shall, on or before the 1st day of May in each year, give notice, by publication in the press and by publication in the prescribed manner, requiring every person whose total income during the previous year exceeded the maximum amount which is not chargeable to income-tax to furnish, within such period not being less than sixty days as may be specified in the notice a return, in the prescribed form and verified in the prescribed manner, setting forth (along with such other particulars as may be required by the notice) his total income and total world income during that year :

Provided that the Income Tax Officer may in his discretion extend the date for the delivery of the return in the case of any person or class of persons.

(2) In the case of any person whose total income is, in the Income Tax Officers opinion, of such an amount as to render such person liable to income-tax, the Income Tax Officer may serve a notice upon him requiring him to furnish, within such period, not being less than thirty days, as may be specified in the notice, a return in the prescribed form and verified in the prescribed manner setting forth (along with such other particulars as may be provided for in the notice) his total income and total world income during the previous year :

Provided that the Income Tax Officer may in his discretion extend the date for the delivery of the return.

(2A) If any person, who has not been served with a notice under subsection (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 subsection (1) or within such further time as the Income Tax Officer 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).

(3) If any person has not furnished a return within the time allowed by or under sub-section (1) or sub-section (2), or having furnished a return under either of those sub-sections, discovers any omission or wrong statement therein, he may furnish a return or a revised return, as the case may be, at any time before the assessment is made.

(4) The Income Tax Officer may serve on any person who has made a return under sub-section (1) or upon whom a notice has been served under sub-section (2) a notice requiring him, on a date to be therein specified, to produce, or cause to be produced, such accounts or documents as the Income Tax Officer may require, or to furnish in writing and verified in the prescribed manner information in such form and on such points or matters (including, with the previous approval of the Commissioner, a statement of all assets and liabilities not included in the accounts) as the Income Tax Officer may require for the purposes of this section :

Provided that the Income Tax Officer shall not require the production of any accounts relating to a period more than three years prior to the previous year.

(5) The prescribed form of the return referred to in sub-sections (1) and (2) shall, in the case of an assessee engaged in any business, profession or vocation, require him to furnish particulars of the location and style of the principle place wherein he carries on the business, profession or vocation and of any branches thereof, the names and addresses of his partners, if any, in such business, profession or vocation and the extent of the share of the assessee and the shares of all such partners in the profits of the business profession or vocation and any branches thereof.

Section 24-Set off of loss in computing aggregating income (1) Where any assessee sustains a loss of profits or gains in any year under any of the heads mentioned in section 6, he shall be entitled to have the amount of the loss set off against his income, profits or gains under any other head in that year.

Provided that in computing the profits and gains chargeable under the head Profits and gains of business, profession or vocation, any loss sustained in speculative transactions which are in the nature of a business shall not be taken into account except to the extent of the amount of profits and gains, if any, in any other business consisting of speculative transactions :

Provided further that where the assessee is an unregistered firm which has not been assessed under the provisions of clause (b) of sub-section (5) of section 23, any such loss shall be set off only against the income, profits and gains of the firm and not against the income, profits and gains of any of the partners of the firm; and where the assessee is a registered firm, any loss which cannot be set off against other income, profits and gains of the firm shall be apportioned between the partners of the firm and they alone shall be entitled to have the amount of the loss set off under this section.

Explanation 1Where the speculative transactions carried on are of such a nature as to constitute a business, the business shall be deemed to be distinct and separate from any other business.

Explanation 2A speculative transaction means a transaction which a contract for purchase and sale of any commodity including stocks and shares is periodically or ultimately settled otherwise than by the actual delivery or transfer of the commodity or scrips :

Provided that for the purposes of this section,

(a) a contract in respect of raw materials or merchandise entered into by a person in the course of his manufacturing or merchanting business to guard against loss through future price fluctuations in respect of his contracts for actual delivery of goods manufactured by him or merchandise sold by him; or

(b) a contract in respect of stocks and shares entered into by a dealer or investor therein to guard against loss in his holdings of stocks and shares through price fluctuations; or

(c) a contract entered into by a member of a forward market or a stock exchange in the course of any transaction in the nature of jobbing or arbitrage to guard against loss which may arise in the ordinary course of his business as such member; shall not be deemed to be a speculative transaction.

(2) Where any assessee sustains a loss of profits or gains in any year, being a previous year not earlier than the previous year for the assessment for the year ending on the 31-3-1940, in any business, profession or vocation, and the loss cannot be wholly set off under sub-section (1), so much of the loss is not so set off or the whole loss where the assessee had no other head of income shall be carried forward to the following year, and

(i) where the loss was sustained by him in a business consisting of speculative transactions, it shall be set off only against the profits and gains, if any, of any business in speculative transactions carried on by him in that year;

(ii) where the loss was sustained by him in any other business, profession or vocation, it shall be set off against the profits and gains, if any, of any business, profession or vocation carried on by him in that year : provided that the business, profession or vocation in which the loss was originally sustained continued to be carried on by him in that year; and

(iii) if the loss in either case cannot be wholly so set off, the amount of loss not so set off shall be carried forward to the following year and so on, but no loss shall be so carried forward for more than eight years :

Provided that

(a) omitted by Act XLI of 1954;

(b) where depreciation allowance is, under clause (b) of the proviso to clause (vi) of sub-section (2) of section 10, also to be carried forward, effect shall first be given to the provisions of this subsection,

(c) nothing herein contained shall entitle any assessee, being a registered firm, to have carried forward and set off any loss which has been apportioned between the partners, under the proviso to sub-section (1), or entitle any assessee, being a partner in an unregistered firm which has not been assessed under the provisions of clause (b) of sub-section (5) of section 23, to have carried forward and set off against his own income any loss sustained by the firm;

(d) where an unregistered firm is assessed under clause (b) of subsection (5) of section 23, during any year, its losses shall also be carried forward and set off under this section as if it were a registered firm;

(e) where a change has occurred in the constitution of a firm, nothing in this section shall be deemed to entitle the firm to have set off so much of the loss proportionate to the share of a retired or deceased partner computed in accordance with the provisions of clause (b) of sub-section (1) of section 16 as exceeds his share of profits, if any, of the previous year in the firm, or to entitle any partner to the benefit of any portion of the said loss which is not apportionable to him under the said clause (b), and where any person carrying on any business, profession or vocation has been succeeded in such capacity by another person, otherwise than by inheritance, nothing in this section shall be deemed to entitle any person other than the person incurring the loss to have it set off against his income, profits or gains;

(f) A loss arising in the previous years for the assessment for the years ending on the 31-3-1940, 1941, 1942, 1943 and 1944 shall be carried forward for one, two, three, four and five years respectively, and a loss arising in the previous years for the assessment for the years ending on the 31-3-1945, 1946, 1947, 1948 and 1949, shall be carried forward for six years, and such loss shall be set off only against the profits and gains, if any, of the assessee from the same business, profession or vocation.

(2A) Notwithstanding anything contained in sub-section (1), where the loss sustained is a loss falling under the head "Capital gains", such loss shall not be set off except against any profits and gains falling under that head.

(2B) Where an assessee sustains a loss such as is referred to in subsection (2A) and the loss cannot be wholly set off in accordance with the provisions of that sub-section, the portion not so set off shall be carried forward to the following year and set off against capital gains for that year, and if it cannot be so set off, the amount thereof not so set off shall be carried forward to the following year and so on, so however, that no such loss shall be carried forward for more than eight years :

Provided that where the loss sustained by an assessee, not being a company, in any previous year does not exceed five thousand rupees, it shall not be carried forward.

(3) When, in the course of the assessment of the total income of any assessee, it is established that a loss of profits or gains has taken place which he is entitled to have set off under the provisions of this section, the Income Tax Officer shall notify to the assessee by order in writing the amount of the loss as computed by him for the purposes of this section."

18. Section 139(1) to 139(5) of the Income Tax Act, 1961 as amended by the Taxation Laws (Amendment) Act, 1984 with effect from 1-4-1985 (corresponding to section 22 of the Income Tax Act, 1922) are reproduced hereunder :

"Section 139-Return of income (As on 1-4-1985) :

(1) Every person, if his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax, shall furnish a return of his income or the income of such other person during the previous year in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed

(a) in the case of every person whose total income, or the total income of any other person in respect of which he is assessable under this Act, includes any income from business or profession, before the expiry of four months from the end of the previous year or where there is more than one previous year, from the end of the previous year which expired last before the commencement of the assessment year, or before the 30th day of June of the assessment year, whichever is later,

(b) in the case of every other person, before the 30th day of June of the assessment year :

Provided that, on an application made in the prescribed manner, the Income Tax Officer may, in his discretion, extend the date for furnishing the return, and notwithstanding that the date is so extended, interest shall be chargeable in accordance with the provisions of sub-section (8).

(1A) Notwithstanding anything contained in sub-section (1), no person need furnish under that sub-section a return of his income or the income of any other person in respect of whose total income he is assessable under this Act, if his income or, as the case may be, the income of such other person during the previous year consisted only of income chargeable under the head "Salaries or of income chargeable under that head and also income of the nature referred to in any one or more of clauses (i) to (ix) of sub-section (1) of section 80L and the following conditions are fulfilled, namely :

(a) where he or such other person was employed during the previous year by a company, he or such other person was at no time during the previous year a director of the company or a beneficial owner of shares in the company (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits) carrying not less than twenty per cent of the voting power,

(b) his income or the income of such other person under the head "Salaries" exclusive of the value of all benefits or amenities not provided for by way of monetary payment, does not exceed eighteen thousand rupees;

(c) the amount of income of the nature referred to in clauses (i) to (ix) of sub-section (1) of section 80L, if any, does not, in the aggregate, exceed the maximum amount allowable as deduction in his case under that section; and

(d) the tax deductible at source under section 192 from the income chargeable under the head "Salaries has been deducted from that income.

ExplanationOmitted by Taxation Laws (Amendment) Act, 1984 with effect from 1-4-1985.

(2) In the case of any person who, in the Income Tax Officers opinion, is assessable under this Act, whether on his own total income or on the total income of any other person during the previous year, the Income Tax Officer may, before the end of the relevant assessment year, issue a notice to him and serve the same upon him requiring him to furnish, within thirty days from the date of service of the notice, a return of his income or the income of such other person during the previous year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed :

Provided that, on an application made in the prescribed manner, the Income Tax Officer may, in his discretion, extend the date for furnishing the return and, notwithstanding that the date is so extended, interest shall be chargeable in accordance with the provisions of sub-section (8).

(3) If any person who has not been served with a notice under subsection (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) of section 74 or sub-section (3) of section 74A, he may furnish, within the time allowed under sub-section (1) or within such further time which, on an application made in the prescribed manner, the Income Tax Officer may, in his discretion, allow, 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 subsection (1).

(4) (a) Any person who has not furnished a return within the time allowed to him under sub-section (1) or sub-section (2) may before the assessment is made, furnish the return for any previous year at any time before the end of the period specified in clause (b), and the provisions of sub-section (8) shall apply in every such case;

(b) the period referred to in clause (a) shall be

(i) where the return relates to a previous year relevant to any assessment year commencing on or before the 1-4-1967, four years from the end of such assessment year,

(ii) where the return relates to a previous year relevant to the assessment year commencing on the 1-4-1968, three years from the end of the assessment year;

(iii) where the return relates to a previous year relevant to any other assessment year, two years from the end of such assessment year.

(4A) Every person in receipt of income derived from property held under trust or other legal obligation wholly for charitable or religious purposes or in part only for such purposes, or of income being voluntarily contributions referred to in sub-clause (iia) of clause (24) of section 2, shall, if the total income in respect of which he is assessable as a representative assessee (the total income for this purpose being computed under this Act without giving effect to the provisions of sections 11 and 12) exceeds the maximum amount which is not chargeable to income-tax, furnish a return of such income of the previous year in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and all the provisions of this Act shall, so far as may be, apply as if it were a return required to be furnished under sub-section (1).

(4B) The chief executive officer (whether such chief executive officer is known as Secretary or by any other designation) of every political party shall, if the total income in respect of which the political party is assessable (the total income for this purpose being computed under this Act without giving effect to the provisions of section 13(A) exceeds the maximum amount which is not chargeable to income-tax, furnish a return of such income of the previous year in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and all the provisions of this Act, shall, so far as may be, apply as if it were a return required to be furnished under sub-section (1).

(5) If any person having furnished a return under sub-section (1) or sub-section (2), discovers any omission or any wrong statement therein, he may furnish a revised return at any time before the assessment is made."

19. Under the Income Tax Act, 1961, provisions relating to set off and carry forward of loss are contained in sections 70 to 80 (corresponding to section of the 1922 Act). However, here we are concerned with section 80 only. Section 80 of Income Tax Act, 1961 as amended by the Taxation Laws (Amendment) Act, 1984 with effect from 1-4-1985 reads as under :

"Section 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 Income Tax Officer, 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."

20. Before proceeding further, I consider it relevant to refer to the decision of the Supreme Court in the case of Mangalam Chemicals & Fertilizers Ltd. v. Dy. CIT (1991) 21 Tax Gazette 193-C.A. No. 3235 of 1999, order dated 2-8-1991. In this case it was held that the statutory provisions are of two types-mandatory and procedural and that equal importance cannot be attached to the two areas of the statutory provisions. It was further held that whereas mandatory provisions of a Statute require strict interpretation and/or require to be strictly complied with, the same may not be true in regard to the statutory provisions which are procedural. The procedural provisions are to be construed liberally. It is in the light of this fundamental rule of interpretation that one has to identify the area to which the provisions of sections 22 and 24 of 1922 Act belong. The area of the corresponding provisions of the Income Tax Act, 1961, such as section 139 and section 80, shall have also to be identified.

21. I have reproduced the relevant extracts from the decision of the Supreme Court in the case of Kulu Valley Transport Co. (P) Ltd. (supra). It is noteworthy that their Lordships have expressed the view that section 22 of the Income Tax Act, 1922 is merely a procedural provision and that section 24 is a mandatory provision of the Statute. I have also reproduced the corresponding provisions of section 139 and section 80 of the Income Tax Act, 1961.

22. Applying the principle laid down by their Lordships of the Supreme Court in regard to the provisions of section 22 and section 24 of the Income Tax Act, 1922 to the corresponding provision of section 139 and section 80 of the Income Tax Act, 1961, it cannot be disputed that section 139 of the Income Tax Act, 1961 is a procedural statutory provision of the Income Tax Act, 1961 and section 80, which is part of Chapter-VI, is a substantive provision of the Income Tax Act, 1961. Their Lordships of the Supreme Court in the case of Kulu Valley Transport Co. (P) Ltd. (supra) have held that a return filed under section 22(3) of 1922 Act (corresponding to section 139(4) of 1961 Act) being a valid return in the eye of law, could not be ignored for the purpose of carry forward of loss as section 24(2) confers the right to carry forward the loss to the following year(s) provided the conditions contained in sub-section are satisfied. It is thus evident from the decision of the Supreme Court that the issue was decided in favour of the assessee as the conditions contained in section 24(2) for carry forward and set off of loss, if any, were satisfied or it may be said, there was no condition contained in the substantive provision of the Act for the carry forward of the loss to the following year(s) coming in conflict with the provisions of section 22 of the 1922 Act.

23. In the light of the principle of law laid down by their Lordships of the Supreme Court in the case of Kulu Valley Transport Co. (P) Ltd. (supra), if one were to interpret section 139, as it applied up to assessment year 1984-85, it would not be difficult to comprehend that the restriction for carry forward of loss placed under section 139(3) may not be applicable in view of the provisions of section 139(4) of Income Tax Act, 1961. This is so because similar restriction had been placed under section 22(2A) of 1922 Act by insertion of an amendment under the Income Tax (Amendment) Act, 1953 with effect from 1-4-1952 corresponding to section 139(3) of the Income Tax Act, 1961. However, this interpretation placed on the provision of the 1922 Act is based on the vital fact that there was no such restriction for carry forward of the loss to the following year(s) under section 24(2) of the 1922 Act, corresponding to the restriction placed under section 80 of 1961 Act with effect from 1-4-1985.

24. As pointed out earlier, section 80 of 1961 Act belongs to an area of substantive provisions of the Act. Under the 1922 Act there was no restriction corresponding to restrictions placed under section 80 of the 1961 Act for carry forward and set off of losses, which distinguishes the decision of the Honble Supreme Court for the purposes of applying the principle laid down in the case of Kulu Valley Transport Co. (P) Ltd. (supra) to the facts of this case.

25. It may also be pertinent to mention that the restriction under section 80 up to 31-3-1985 was of such a nature that the decision of the Supreme Court in the case of Kulu Valley Transport Co. (P) Ltd. (supra) was applicable. In order to appreciate this view, it may be relevant to refer to section 80 of Income Tax Act, 1961, as it existed before 1-4-1985, which is reproduced as under :

"Section 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 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 or subsection (3) of section 74A."

26. It is thus observed that the law up to 31-3-1985 was in pari materia with the law as it existed in 1922 Act, because section 80 of 1961 Act provided for carry forward of losses to the following year(s) subject to the condition that the return was filed under section 139. Applying the analogy in the case of Kulu Valley Transport Co. (P) Ltd. (supra), it cannot be said that the return filed under section 139(4) is not a return filed under section 139 of the Income Tax Act, 1961. Therefore, if any assessee had filed a return under section 139(4), the loss determined in pursuance of such return was required to be carried forward for the purpose of set off in the following year(s). This also explains the basis for the decision of the Calcutta High Court in the case of Bangabasi Theatres (P) Ltd. (supra) where it was held that the decision of the court in Presidency Medical Centre (P) Ltd.s case (supra) to the effect that the loss on the basis of belated return filed under section 139(4) is to be carried forward and set off notwithstanding the non-fulfilment of condition under section 139(3) will cover the assessment year 1984-85 also. In the case of Presidency Medical Centre (P) Ltd. (supra), the issue related to assessment year 1964-65 and their Lordships found the principle laid down by the Supreme Court in Kulu Valley Transport Co. (P) Ltd.s case (supra) applicable under the provisions of Income Tax Act, 1961 as well.

27. After the amendment of section 80 with effect from 1-4-1985 the condition imposed for the carry forward and set off of loss is that the loss which is eligible for carry forward and set off should be determined in pursuance of a return filed within the time allowed under section 139(1) or within the time extended time under the said section. Thus the condition imposed under section 80 (which is a substantive provision of the Act) with effect from 1-4-1985, is materially different than the condition prevailing up to 31-3-1985. Since section 80 of the 1961 Act belongs to the area of mandatory provisions of the Act, it was necessary to satisfy the conditions for being entitled to the benefit of carry forward and set off of loss to the following year(s). Their Lordships of the Supreme Court in the case of Kulu Valley Transport Co. (P) Ltd. (supra) did not lay down the law that the mandatory condition under the substantive provision of the Act is to be overlooked. As pointed out earlier, their Lordships of the Supreme Court found that there was no restriction under section 24(2) in conflict to the provisions of section 22(3) of 1922 Act for the purpose of determination of the loss and for its carry forward and set off to the following year(s). That being so, in my humble view, the decision of the Honble Supreme Court in the case of Kulu Valley Transport Co. (P) Ltd. (supra) is not applicable for assessment years 1985-86 and 1986-87. I, therefore, reiterate that the decision of the Honble Supreme Court rests on the provisions of the Act as they existed at the relevant point of time and in view of the amendment of section 80 of the 1961 Act by the Taxation Laws (Amendment) Act, 1984 with effect from 1-4-1985, the ratio decidendi laid down by their Lordships of the Supreme Court in the aforementioned decision is not applicable to the facts of this case.

28. Having said so let me now proceed to consider position of law applicable for assessment years 1985-86 and 1986-87. It is well-settled principle of law that in relation to any assessment year the law applicable is the law as it stands on the first day of the relevant assessment year. One of the cases in which this the principle has been enunciated is in the case of Reliance Jute & Industries Ltd. (supra). It is also well-established principle of law that all the provisions relevant for deciding the issue have got to be read together and not in a disjointed manner. This principle has been laid down by the Honble Supreme Court in the case of Sardar Arjun Singh Ahluwalia (supra). As pointed out earlier. Section 139 of Income Tax Act, 1961 falls under Chapter-XIV which deals with the procedure for filing of the return. Section 80 of 1961 Act falls under Chapter-VI which deals with aggregation of income and set off or carry forward of loss. Strict compliance to the provisions of section 80 being mandatory provision of the Statute is warranted. At this stage it may be relevant to find out the legislative intention behind amending of section 80 of the 1961 Act with effect from 1-4-1985. The intention of the legislature can be found with the aid of the CBDT circulars issued from time to time relating to the provisions for carry forward of loss under the Income Tax Act, 1961. As already pointed out, section 80 was amended by the Taxation Laws (Amendment) Act, 1984 and the CBDT issued explanatory notes on the Amended Act vide Circular No. 397 dated 16-10-1984. Relevant portion of the circular is reproduced hereunder :

"14.1 Under the existing provisions of section 80 relating to submission of return for losses, no loss is allowed to be carried forward and set off under section 72(1), 73(2), 74(1) or 74A(3) unless such loss has been determined in pursuance of a return filed under section 139.

14.2 The Amending Act has amended section 80 of the Act to provide that such loss shall not be allowed to be carried forward and set off unless such loss determined in pursuance of a return filed within the time allowed under section 139(1) for furnishing a voluntary return of income or within such further time as may be allowed by the Income Tax Officer.

14.3 The amendment takes effect from 1-4-1985, and will, accordingly, apply in relating to any loss for the assessment year 1985-86 and subsequent years."

29. Subsequently, section 80 was further amended by the Taxation Laws (Amendment & Misc. Provisions) Act, 1986. The CBDT had issued explanatory notes in regard to the said Act vide Circular No. 469 dated 23-9-1986. The relevant portion of the said circular is reproduced hereunder :

"(Section 11 of the Amending Act)

(vi) Providing the date by which a return showing loss is to be furnished and treatment of returns below taxable limit.

9.1 Under the existing provisions of section 139(3) of the Income Tax Act, as amended by the Taxation Laws (Amendment) Act, 1970, the Income Tax Officer on an application made to him for this purpose is empowered to extend, in his discretion, the time for furnishing a return of loss. By the Amending Act this power of the Income Tax Officer has been withdrawn. Accordingly, as per the amended provision, if the assessee is to get the benefit of the determination of the loss or any part thereof and for its carry forward under section 72(1) or section 73(2) or section 74(1) or section 74A(3) of the Income Tax Act, he should file the return voluntarily within the period specified in section 139(1) or by the 31st day of July of the assessment year relevant to the previous year during which the loss was sustained. Further, as per clause (a) of the proviso to the newly inserted sub-section (10) to section 139 of the Income Tax Act, which overrides anything contained in any other provision of the Income Tax Act, a return of loss which has been furnished after the thirty first day of July of the assessment year during which the loss was sustained, shall be deemed never to have been furnished.

9.2 The above amendment shall come into force with effect from 1-4-1987, and will, accordingly, apply to the assessment year 1987-88 and subsequent years.

9.3 section 139(1) of the Income Tax Act provides that every person, if his total income or the total income of any other person in respect of which he is assessable during the previous year exceeded the maximum amount which is not chargeable to income-tax, shall furnish a return of his income or the income of such other person in the prescribed form and verified in the prescribed manner. This return has to be furnished within the specified period. It was held by the Supreme Court in the case of CIT v. Ranchhoddas Karsondas (1959) 36 ITR 569 (SC), that a return disclosing income below taxable limit submitted voluntarily under section 22(1) of the Indian Income Tax Act, 1922 (corresponding to section 139(1) of the Income Tax Act, 1961), is a good return and such a return voluntarily made before the assessment cannot be ignored by the Income Tax Officer. This decision has been superseded by the Amending Act by inserting sub-section (10) after sub-section (9) of section 139. The new sub-section (10) provides that notwithstanding anything contained in any other provision of this Act, a return of income which shows the total income below the maximum amount which is not chargeable to tax shall be deemed never to have been furnished. As per the proviso to this sub-section, a return of income below taxable limit shall not be treated as non est in the following circumstances :

(a) a return furnished in response to a notice under section 148(2);

(b) a return of a partner of a firm;

(c) a return of a person who has claimed exemption of income from property held for charitable or religious purposes;

(d) a return of loss which has been furnished before the 21st day of July of the assessment year relevant to the previous year during which the loss was sustained,

(e) a return furnished under sub-section (4B) in respect of a political party;

(f) a return furnished in support of a claim for refund under section 237.

9.4 These amendments shall come into force with effect from 1-4-1986, will be applicable to the assessment year 1986-87 and subsequent years.

9.5 It may be clarified that the assessments already completed before the enactment of the Amending Act will not be rectified. Further, keeping in view the fact that the new sub-section (3) comes into force with effect from 1-4-1987, a return of loss filed for the assessment year 1986-87 or earlier years within the prescribed period as per the existing provisions will not be denied the benefit of the carry forward of loss".

30. The intention of the legislature to put a curb on carry forward of loss is evident from the above circulars. In my humble view, the Tribunal in the case of United Dairies (P) Ltd. (supra) has erred to observe that the CBDT Circular No. 397 dated 16-9-1984 has been superseded by Circular No. 469 dated 23-9-1986. In fact, Circular No. 469 supplements the former and explains the position of law on the basis of subsequent amendments made. Therefore, the observation of the Bench with due respect, I feel, is contrary to the provisions of the Act and contents of the Circular. It may also be pertinent to mention that in Circular No. 469 (supra) in para 9.5, it has been mentioned that the assessments already completed before the enactment of Amendment Act will not be rectified. This has got to be understood in the light of the amendment taking place with effect from 1-4-1987. The CBDT has specifically clarified that the return of loss filed for assessment year 1986-87 or earlier year within the prescribed period as per the existing provisions will not be denied the benefit of carry forward of loss. What the Circular No. 469 clarifies is that the amendment of section 80 with effect from 1-4-1987 will not affect the legal position as it existed before the coming into force of the amendment. It nowhere states that the amendment taking place with effect from 1-4-1985 would have to be over looked. Therefore, the claim that the Circular No. 469 supersedes Circular No. 397 is not well-founded.

31. It may also be pertinent to mention that CBDT had issued Instructions No. 1528 to the effect that the decision of the Supreme Court in the case of Kulu Valley Transport Co. (P) Ltd. (supra) is no longer applicable in view of the incorporation of section 139(8)(a) of the 1961 Act for levy of interest. However, in the subsequent Instructions No. 1607 dated 14-3-1985 it was clarified that the said instructions would be effective for assessment year 1984-85 only. In para 3 of the said Instructions, it has been clarified by the Board as under :

"3. As regards assessment years subsequent to assessment year 1984-85, section 80 of the Income Tax Act, 1961 has been amended by Taxation Laws (Amendment) Act, 1984 with effect from 9-4-1985. Under the amended provisions carry forward and set off loss will not be allowed unless it has been determined in pursuance of a return filed within the time allowed under section 139(1) or the time extended by the Income Tax Officer."

32. Thus, none of the circulars/instructions issued by the Board support the claim of the assessee that the amended provisions of section 80 with effect from 1-4-1985 are not applicable in view of the decision of the Supreme Court in the case of Kulu Valley Transport Co. (P) Ltd. (supra). In fact, if all the circulars read carefully support the claim of the revenue rather than the claim of the assessee. The contention advanced on behalf of the assessee that the circulars issued in contravention of law are not binding is of no consequence as I find that none of the circulars relied upon by the revenue is in contravention of the law, as alleged. I, accordingly, dismiss this contention also raised on behalf of the assessee.

33. I would like to refer to some decisions cited on behalf of the parties for canvassing their respective point of view. The learned Judicial Member as also the assessees representative has placed reliance on the following decisions of the Calcutta High Court

(a) Bangabasi Theatres (P) Ltd.s case (supra); and

(b) Presidency Medical Centre (P) Ltd.s case (supra).

In the case of Presidency Medical Centre (P) Ltd. (supra), the issue related to assessment year 1964-65. Their Lordships of the Calcutta High Court held that a belated return filed under section 139(4) was to be taken into account for determination of the loss and the assessee to be allowed carry forward and set off of loss to the following year(s). It is to be noted that the restriction placed under section 80 of 1961 Act before 1-4-1985 was that the return should have been filed by the assessee under section 139 of 1961 Act. Since admittedly the return had been filed by the assessee under section 139, therefore, the decision is not applicable in regard to the provisions of the Act applicable for assessment year 1985-86 onwards. The following observation of their Lordships, however, is noteworthy :

"We have noticed the changes made by the Income Tax Act, 1961. The main significant change seems to be that the discretion that was given to the Income Tax Officer to extend the time for filing the return has been taken away. But the right of the assessee to file the return before the period of assessment and before the period mentioned in subsection (4) of section 139, if it is made within the period stipulated in sub-section (1) of section 139, which is similar to the time mentioned in sub-sections (1) and (2) of section 22 of the 1922 Act, is not in any way affected. If that is the position the return can be filed within the time specified by sub-section (4) of section 139 and once that return is filed within that time, it would be deemed to be in accordance with law and then loss had to be determined under the relevant provisions of the 1961 Act which embodies principles similar to section 24(2) of the old Act in this respect. If that is the position, in our opinion, the alteration in the new Act by which there has been curtailment of right of the Income Tax Officer to extend the time, does not materially affect the situation in this case."

As is evident from the above finding, the observations relate to the law as it existed up to 31-3-1985. The decision is not an authority for the law as applicable with effect from 1-4-1985.

34. In the case of Bangabasi Theatres (P) Ltd. (supra), the issue related to assessment year 1984-85 and on the basis of provisions of section 80, as it applied for assessment year 1984-85, it was held that the assessee was entitled to carry forward and set off of business loss notwithstanding the fact that the return of income had not been filed within the time allowed under section 139(3) but within the time allowed under section 139(4) of 1961 Act. As in the case of Presidency Medical Centre (P) Ltd. (supra), the issue involved in this case related to assessment year prior to 1985-86 and, therefore, the decision is of no assistance relating to the controversy involved in the years under appeal. The following observations of the Honble court can at best be understood as obiter dicta and in any case it does not advance the case of the assessee :

"2. The only contention raised before us is whether in view of the Circular No. 1807, dated 14-5-1985 the decision rendered in Presidency Medical Centre (P) Ltd.s case (supra) will govern the assessment year 1984-85. It has been laid down in the said Circular that the department accepted the decision in Presidency Medical Centre (P) Ltd.s case (supra) prior to assessment year 1984-85. We are concerned here with the assessment year 1984-85. In our view the amendment was made in section 139(1) only from 1-4-1987 which will govern the assessment year 1987-88 and subsequent years. We do not find that the assessment years 1984-85 to 1986-87 will be separately treated because of the said Circular of the Board. We may mention that an amendment was made in section 139 in 1970. The principle in Presidency Medical Centre (P) Ltd.s case (supra) was applied by this court even after the said amendment had been made in 1970. This court in CIT v. Nagpur Steel & Alloys Ltd, (1988) 169 ITR 466 (Kol) considered a similar case. In that case one of the questions were as follows :

Whether, on the facts and in the circumstances of the case and having regard to the provisions of section 139(3) of the Income Tax Act, 1961, limiting the time within which loss should be declared, the Tribunal was justified in holding that the assessee was entitled to carry forward the loss even though the loss return was filed within the time prescribed under section 139(3) as amended by the Taxation Laws (Amendment) Act, 1970 ?

This court following the decision in Presidency Medical Centre (P) Ltd.s case (supra) answered the said question in the affirmative and in favour of the assessee. In our view, the said decision will cover the assessment year 1984-85. The changes made in 1986 which will come into force on and from the assessment year 1987-88 will not take out the assessment year 1984-85 from the ambit of the decision in Presidency Medical Centre (P) Ltd.s case (supra). In that view of the matter, we answer the question in this reference in the affirmative and in favour of the assessee."

35. In the case of Regent Estates Ltd. (supra), the Tribunal decided the issue in favour of the assessee for assessment year 1986-87 on the basis of Circular No. 469 dated 23-9-1986 which, according to the Tribunal, explained the amendment made in section 80 by Taxation Laws (Amendment) Act, 1984 with effect from 1-4-1985. The Bench refer-red to the decision of the Calcutta High Court in the case of Presidency Medical Centre (P) Ltd. (supra) and Circular No. 469 of CBDT to hold that it was clear from the decision and the circular that the assessee is entitled for the carry forward of loss, even for assessment year 1984-85. I have pointed out elsewhere in this order that Circular No. 469 dated 23-9-1986 explained the amendment made under the Taxation Laws (Amendment & Miscellaneous Provisions) Act, 1986 effective from 1-4-1987. As already pointed out, the decision of the Calcutta High Court in the case of Presidency Medical Centre (P) Ltd. (supra) related to assessment year 1964-65 and the amendment in section 80 with effect from 1-4-1985 was neither relevant nor considered by the Honble High Court.

36. It is thus evident that the decision of the Tribunal in the case of Regent Estates Ltd. (supra) is per incuriam. In the case of Gurnam Kaur (supra), their Lordships of the Supreme Court held that a decision should be treated per incuriam when it is given in ignorance of the terms of a Statute or of a rule having the force of a Statute. I may also mention that a decision per incuriam means through inadvertence. A decision when given in ignorance of the terms of the Statute or of a rule having the force of law is a decision per incuriam In this case, reliance on the decision of the Calcutta High Court and the CBDT circulars is misplaced and, accordingly, the decision of the Tribunal is rendered irrelevant and not having any persuasive value.

37. In the case of United Dairies (P) Ltd. (supra), reliance has been placed on the decision of the Calcutta Bench of the Tribunal in the case of Regent Estates Ltd. (supra). In this case also, the Tribunal accepted the contention on behalf of the assessee that Circular No. 397 dated 16-10-1984, on the basis of which the jurisdictional High Court of Calcutta had rendered the decision in the case of Krishna Chandra Dutta (Cookme) (P) Ltd. (supra), in favour of the revenue was superseded the Circular No. 469 dated 23-9-1986. As already pointed out. Circular No. 469 (supra) was relating to an amendment made with effect from 1-4-1987 and had no relevance to the amendment made with effect from 1-4-1985 and Circular No. 397 dated 16-10-1994. Thus, the abovementioned decision of the Tribunal is also per incuriam and the decisions of the jurisdictional High Court relied upon are distinguishable on facts as well as in law.

38. That brings me to the decision of Madhya Pradesh High Court in the case of Dogar Tools (P) Ltd. (supra) in favour of the assessee. In this case, their Lordships of the Madhya Pradesh High Court held that the decision of the Supreme Court in the case of Kulu Valley Transport Co. (P) Ltd. (supra) was applicable till assessment year 1988-89 and as such the assessee was entitled to the benefit of carry forward of loss determined in pursuance of a return filed under section 139(4) notwithstanding the fact that the return of income was not filed within the time allowed under section 139(3). In this case, the Tribunal had cancelled the order of the Commissioner passed under section 263 on the ground that the decision of the Supreme Court in the case of Kulu Valley Transport Co. (P) Ltd. (supra) was good law till assessment year 1988-89. Their Lordships of the Madhya Pradesh High Court have accepted the finding of the Tribunal. It is relevant to note that the Honble High Court have discussed the relevant provisions of the Act and no reason have been given for confirming the view adopted by the Tribunal. However, I may hasten to add that the mere fact that the Honble High Court has not dwelled upon the provisions of the Act and not given the reasoning for arriving at the conclusion does not render the decision as ineffective for any Tribunal of subordinate jurisdiction. This decision is in favour of the assessee and, therefore, I feel myself duty bound to consider the same with utmost respect.

39. At this stage it would be relevant to point out that the Kerala High Court in the case of Smt. Gunavathy Dharamsy (supra) held that with effect from 1-4-1985 no loss would be allowed to be carried forward or set off unless the return under section 139(1) had been filed within the time allowed under sub-section (1) of section 139 or filing the return or within such further time allowed by the Income Tax Officer. Their Lordships of the Kerala High Court have considered the provisions of the 1922 Act vis-a-vis the corresponding provisions under the 1961 Act. The legislative history and the amendments effected to section 80 have also been taken into account in arriving at the conclusion. Their Lordships have pointed out that the reliance on the decision of the Apex Court in CIT v. Manmohan Das (1966) 59 ITR 699 (SC) by the Tribunal was misplaced as that was a decision rendered under the Income Tax Act, 1922 whereafter the position has substantially been changed. Their Lordships have also pointed out that the Tribunal did not notice the provisions of section 80 as it stood at the relevant time.

40. Thus it is seen that the issue involved herein has been decided directly by two High Courts. Whereas the Madhya Pradesh High Court in the case of Dogar Tools (P) Ltd. (supra) has taken a view in favour of the assessee by accepting the decision of the Tribunal without reference to the relevant provisions of the Act, the Kerala High Court in the case of Smt. Gunavathy Dharamsy (supra) has elaborately considered the provisions of the Act and arrived at a decision to the contrary.

41. In the event of divergent views having been taken by the various High Courts other than the jurisdictional High Court, the Tribunal is bound to adopt a view on merits taking into consideration the diverse views. In the case of CIT v. Bharat Saw Mill (1992) 198 ITR 553 (Ori), the Tribunal had decided the appeal on noting a divergence of opinion amongst several High Courts and following the view favourable to the assessee. Their Lordships of the Orissa High Court held that such an approach was not proper. It was held that the Tribunal was bound to decide the case on merits taking into consideration the diverse views and arrive at a decision on its own. Their Lordships of Punjab & Haryana High Court in the case of Nandlal Sohanlal v. CIT (1977) 110 ITR 170 (FB) held as under :

"I am afraid I cannot subscribe to the proposition that a judge faced with a conflict of precedent should abdicate his judgment and accept the view which is favourable to the assessee. It is only where a judge finds that no equally reasonable views are possible and he is unable to decide which is the better view, that he may adopt the rule of interpretation that the view favourable to the assessee might be accepted.

Their Lordships of the Supreme Court in the case of Kripashankar Dayashanker Worah (supra) held as under :

It is true that a taxing provision must receive a strict construction at the hands of the courts and if there is any ambiguity, the benefit of that ambiguity must go to the assessee. But that is not the same thing as saying that a taxing provision should not receive a reasonable construction. If the intention of the legislature is clear and beyond doubt then the fact that the provision could have been more artistically drafted cannot be a ground to treat any part of a provision as otiose. So long as the intention of the legislature is clear and beyond doubt, the courts have to carry out that intention."

42. Their Lordships of the Supreme Court in the case of CIT v. Cellulose Products of India Ltd. (1991) 192 ITR 155 (SC) explained the circumstances under which the rule of interpretation with a provision granting relief should be construed liberally so as to effectuate the object thereof may be taken recourse to. Their Lordships held- "It is only when there is any genuine doubt about the interpretation of a fiscal statute or where two opinions are capable of being formed that the rule of interpretation that a provision granting relief should be construed liberally so as to effectuate the object thereof may be taken recourse to."

43. Dealing with the contentions advanced on the basis of the decisions of the Supreme Court in the cases of CIT v. Vegetable Products Ltd. (1973) 88 ITR 192 (SC) and CIT v. Naga Hills Tea Co. Ltd. (1973) 89 ITR 236 (SC) that the view favourable to the assessee should be adopted, their Lordships of the Bombay High Court in the case of CIT v. Thana Electricity Supply Ltd. (1994) 206 ITR 727 (Bom) held as under :

We have considered the submission. We have also carefully considered the decisions of the Supreme Court. We, however, find it difficult to accept this submission, as in our opinion, the observations of the Supreme Court in those decisions have been stretched too far. The Supreme Court in CIT v. Vegetable Products Ltd. (1973) 88 ITR 192 (SC) (at page 195), merely observed :

If we find that language to be ambiguous or capable of more meanings than one, then we have to adopt that interpretation which favours the assessee, more particularly so because the provision relates to imposition of penalty."

Similarly, in CIT v. Naga Hills Tea Co. Ltd. (1973) 89 ITR 236 (SC), at page 240, the Supreme Court had observed as follows :

"If a provision of a taxing statute can be reasonably interpreted in two ways, that interpretation which is favourable to the assessee, has got to be accepted. This is a well-accepted view of law.

The above observations will be applicable only if the court which is called upon to decide the issue is satisfied that two views are reasonably possible, one of them being favourable to the assessee. As observed by the Supreme Court in Escorts Ltd. v. Union of India (1993) 199 ITR 43 (SC) (at page 60) :

"In our view, there was no difficulty at all in the interpretation of the provisions. The mere fact that a baseless claim was raised by some overenthusiastic assessees who sought a double allowance or that such claim may perhaps have been accepted by some authorities is not sufficient to attribute any ambiguity or doubt as to the true scope of the provision."

It is, therefore, clear that it is the satisfaction of the court interpreting the law that the language of the taxing provision is ambiguous or reasonably capable of more meanings than one, which is material. If the court does not think so, the fact that two different views have been advanced by parties and argued forcefully, or that one such view which is favourable to the assessee has been accepted by sonic Tribunal or High Court, by itself will not be sufficient to attract the principle of beneficial interpretation.

44. I have elaborately discussed the various provisions of the Act and sought to justify the conclusion that the decision of the Supreme Court in the case of Kulu Valley Transport Co. (P) Ltd. (supra) is inapplicable after the amendment of section 80 of 1961 Act with effect from 1-4-1985. I am tempted to refer to the decision of the jurisdictional High Court of Calcutta in the case of Krishna Chandra Dutta (Cookme) (P) Ltd. (supra) where their Lordships of the Calcutta High Court referred to the CBDT Circular No. 397 dated 16-10-1984 and held as under :

"Our attention has also been drawn to paragraphs 14.1, 14.2 and 14.3 of Circular No. 397 ((1985) 152 ITR (St) 291 dated 16-10-1984. The extract of the relevant portion of the said Circular is set out below (see 152 ITR (St) 36) :

Submission of return of loss-section 80 :

14.1 Under the existing provisions of section 80 relating to submission of return for losses, no loss is allowed to be carried forward and set off under section 72(1), 73(2), 74(1) or 74A(3) unless such loss has been determined in pursuance of a return filed under section 139.

14.2 The Amending Act has amended section 80 of the Act to provide that such loss shall not be allowed to be carried forward and set off unless such loss is determined in pursuance of a return filed within the time allowed under section 139(1) for furnishing a voluntary return of income or within such further time as may be allowed by the Income Tax Officer.

14.3 The amendment takes effect from 1-4-1985, and will accordingly, apply in relation to any loss for assessment year 1985-86 and subsequent years. (Section 18 of the Amending Act).

"We find that the position as clarified by the Board is based on the correct construction of the provisions. We also share the view that the amendment shall apply to loss arising in assessment year 1985-86 and not in the earlier years" (Emphasis here italicised in print supplied) Admittedly, the matter involved in the case before the Calcutta High Court was relating to assessment year 1983-84 and the issue involved was as to whether in respect of the return filed after 1-4-1985, the amended provisions of section 80 of 1961 Act with effect from 1-4-1985 were attracted. The above observation of their Lordships quoted by me, it has been argued, is thus obiter dicta and not ratio decidedly. However, in the present case it is observed that there is a divergence of opinion amongst the two High Courts, viz., that of Madhya Pradesh High Court and of Kerala High Court. Apart from the reasons given above for following the decision of the Kerala High Court in preference to the decision of the Madhya Pradesh High Court, the added reason for following the said decision is that obiter dicta in the case of Krishna Chandra Dutta (Cookme) (P) Ltd. (supra) of the jurisdictional High Court of Calcutta also affirms the view taken by the Kerala High Court. Therefore, when the said decision of the Madhya Pradesh High Court in the case of Dogar Tools (P) Ltd. (supra) is placed on one side of the scale of justice and that of the Kerala High Court in the case of Smt. Gunavathy Dharamsy (supra) on the other side coupled with the decision of jurisdictional High Court in the case of Krishna Chandra Dutta (Cookme) (P) Ltd. (supra), it is not difficult to appreciate that the balance is titled heavily on the side of Kerala High Court judgment. It may also be pertinent to mention that the Calcutta Bench of the Tribunal in the case of Asstt. CIT v. M.K. Chatterjee (IT Appeal No. 213 (Cal) of 1998, order dated 27-9-2002) has also decided the issue in favour of the revenue. Though different reasoning has been adopted in that order than the reasoning given by me in this order, yet the conclusion is the same as arrived at by me.

45. Taking the totality of the facts and circumstances of the case into consideration in the light of the legal principles discussed, I concur "with the conclusion of the learned Accountant Member that the assessee is not entitled to carry forward and set off of losses determined for assessment years 1985-86 and 1986-87 as the condition for such carry forward of loss placed under section 80 of the 1961 Act is admittedly not satisfied in this case.

46. The case records may be placed before the Division Bench for passing consequential order in accordance with majority view.

ORDER B.K. Mitra, J.M. On a difference of opinions between the Members constituting this Division Bench, the following question was referred to a Third Member for his opinion under section 255(4) of the Income Tax Act, 1961 :

"Whether, on the facts and in the circumstances of the case, the Tribunal should have allowed carry forward of the loss aggregating to Rs. 179.64 crores, for assessment years 1985-86 and 1986-87 or the Tribunal should have declined the carry forward of the aforesaid losses of Rs. 179.64 crores in view of the amendment in section 80 with effect from 1-4-1985 and in view of the fact that income-tax returns were filed beyond the time limit allowed under section 139(1) ?"

2. Honble Vice President (KZ) has, as Third Member in this case and taking the totality of the facts and circumstances of the case into consideration in the light of the legal principles discussed in his order, concurred with the conclusion of the Accountant Member that the assessee is not entitled to carry forward and set off of losses determined for assessment years 1985-86 and 1986-87 as the conditions for such carry forward of loss placed under section 80 of the 1961 Act are not satisfied.

3. In accordance with the majority view, therefore, the appeals are dismissed.