Income Tax Appellate Tribunal - Patna
Assistant Commissioner Of Income-Tax vs Vigyan Prakashan (P.) Ltd. on 23 December, 1996
Equivalent citations: [1998]64ITD166(PAT)
ORDER
Shri Sikander Khan, Accountant Member
1. These three appeals have been filed by the revenue against consolidated order dated 15-1-1992 of the ld. CIT(A), Ranchi, for the assessment years (A.Y.s) 1985-86, 1986-87 and 1987-88. Since common grounds are involved, the appeal are considered together and decided by a common order for the sake of convenience.
2. None appeared for and on behalf of the assessee though opportunity was given. However, written argument was filed. These appeals are, therefore, decided on the basis of materials on the file and after considering the written argument and hearing the ld. Departmental Representative (D.R.).
3. The assessee is a Private Limited Company which derives income from printing newspapers for Prabhat Khabar.
4. The returns for the three years in question were filed on 17-3-1988 declaring losses of Rs. 2,96,157, Rs. 2,72,950 and Rs. 7,04,450 respectively. The assessments were completed on total losses of Rs. 2,67,340 and Rs. 35,999 for the assessment years 1985-86 and 1986-87 respectively and on a total income of Rs. 1,25,380 for assessment year 1987-88. These computations were made after considering depreciation of Rs. 3,93,997, Rs. 3,37,846 and Rs. 2,96,219 for the three years respectively. In the assessment order for assessment year 1985-86 the Assessing Officer held that the benefit of carry forward of loss is not allowed to the assessee as the return was filed late.
5. Aggrieved, the assessee preferred first appeals for all the three years in question before the ld. CIT(A) who partly allowed the appeals. As regards the contention that the Assessing Officer was not correct in disallowing carry forward of unabsorbed depreciation for assessment year 1985-86, the ld. CIT(A) directed the Assessing Officer to allow the benefit of carry forward of unabsorbed depreciation in assessment year 1985-96 which could be set off against the profit made in assessment year 1987-88 and in subsequent assessment year. He held that the assessee could not be denied the benefit of carry forward of unabsorbed depreciation under section 32(2) of the Act even if the return had not been filed in accordance with the provisions of section 139(3). The provisions of section 32(2) and 139(3) of the Act were quite clear in the matters. He accepted the assessee's contention that the carry forward of unabsorbed depreciation was allowable under section 32(2) of the Act and that the assessee had not claimed any carry forward under section 72(1) or 73(2) or 74(1) and (3) or 74A(3) as required under section 139(3) of the Act.
6. The revenue is aggrieved by the aforesaid findings of the ld. CIT(A) and has preferred second appeals before this Tribunal for all the three years probably because the ld. CIT(A)'s finding regarding unabsorbed depreciation in 1985-86 would have consequential effect in the assessment years 1986-87 and 1987-88.
7. The ld. Departmental Representative (D.R.) submitted before us that the order of the ld. CIT(A) was erroneous inasmuch as sections 72 and 139(3) were equally applicable to unabsorbed depreciation because it was part of the losses. She relied on the Hon'ble Supreme Court's decision in Garden Silk Wvg. Factory v. CIT [1991] 189 ITR 512/56 Taxman 4K.
8. In the written submission filed on behalf of the assessee it has been submitted that section 72 refers to the business loss the concept of which was different from the concept of depreciation allowance under section 32(1) which is permitted to be carried forward as per section 32(2). Section 72 deals with losses and not with depreciation. Then in the written argument following distinctions have been made between unabsorbed losses and unabsorbed depreciation :
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"Unabsorbed loss Unabsorbed depreciation
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1. Can be carried forward 1. There is no time limit. It is
for set off for only added to the depreciation of
eight years succeeding year.
2. Can be set off against 2. Can be set off against profit
profit of a business in of a business/any other sources
a succeeding year. of income of any other head.
3. The business in which 3. It is not necessary that for
original loss sustained a business in respect of which
must be continued in depreciation was allowed is
the succeeding year. carried on in the succeeding year.
4. Loss must be determined 4. No such restriction is there
in pursuance of a even if the return is not filed
returned filed under 139(1) for an assessment year due to
section 139(1) subject negative income the assessee can
to section 80 and section set off unabsorbed portion of
139(10). depreciation of that year
against the income of succeeding
year."
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9. We have given careful consideration to the facts and circumstances of the case and the submissions and contentions of the rival parties. We have also carefully perused the relevant sections. We are inclined to agree with the ld. CIT(A) that the assessee was entitled to carry forward of unabsorbed depreciation despite the fact that the return for assessment year 1985-86 was not filed within the time wallowed under section 139(3). Section 139(3) does not cover carry forward of unabsorbed depreciation under section 32(2). As such, for the purpose of carry forward of unabsorbed depreciation it was not necessary that the return was filed within the time prescribed under section 139(3).
10. We find substantial force in the observations of the ld. CIT(A) that the carry forward of unabsorbed depreciation is governed by section 32(2) and the same was not governed by section 72(1) of the Act. This view is further strengthened by a perusal of section 72(2) of the Act which provides that "where any allowance or part thereof is, under sub-section (2) of section 32 or sub-section (4) of section 35, to be carried forward, effect shall first be given to the provisions of this section." This provision of section 72(2) also indicates segregation of unabsorbed depreciation from unabsorbed loss. It is also worth mentioning here that the carry forward of unabsorbed depreciation was allowable without any limit of the number of the succeeding years whereas carry forward of unabsorbed loss is to be allowed for 8 years only. This position and several other distinguishing features, as mentioned in the written argument, discussed above, clearly place the carry forward of unabsorbed depreciation and carry forward of unabsorbed loss altogether in different compartments.
11. No doubt, in commercial and accountancy parlance the word 'Loss' includes depreciation. To this extent observations in the decision of the Hon'ble Supreme Court Garden Silk Wvg. Factory's case (supra), relied upon by the ld. D.R., is relevant. But the facts of that case were not similar and were distinguishable. The issue involved in that case was also not similar. Therefore, the Hon'ble Supreme Court's observations in that case are not applicable in the present case.
12. The special treatment for carry forward of unabsorbed depreciation under section 32(2) of the Act places the matter in different shape from the common commercial and accounting principles.
13. In the above view of the matter we hold that the unabsorbed depreciation of assessment year 1985-86 was eligible for carry forward as per section 32(2) of the Act. Accordingly, we confirm the order of the ld. CIT(A) for all the three years.
14. In the result, all the three departmental appeals are dismissed.