Punjab-Haryana High Court
Commissioner Of Income-Tax vs Amrit Lal (Prop. Kismat Industries) on 12 April, 1989
Equivalent citations: [1989]180ITR251(P&H)
JUDGMENT S.S. Sodhi, J.
1. The matter here concerns the carrying forward of deductions under Section 80J of the Income-tax Act, 1961 (hereinafter referred to as "the Act").
2. The assessee, as a sole proprietor of Kismat Industries, Faridabad, carries on the business of manufacture of tractors and trolleys. Production commenced on January 7, 1972. The assessee filed a return for the assessment year 1972-73 declaring a loss of Rs. 41,651. No claim was made for any deduction under Section 80J of the Act for that year. The Income-tax Officer did not, therefore, determine the deduction admissible under this provision of law for the purposes of carrying it forward and setting it off against profits and gains in any subsequent year.
3. In the next assessment year, namely, 1973-74, the assessee, in the first instance, filed a return declaring an income of Rs. 11,769, but later filed a revised return showing a loss of Rs. 42,069. Deduction under Section 80J of the Act was claimed in the revised return for both the assessment years, 1972-73 and 1973-74. The Income-tax Officer determined and allowed deduction under Section 80J for the year 1973-74 and carried it forward for being set off against profits and gains in the subsequent years, but disallowed the claim for the assessment year 1972-73, on the ground that it had not been claimed in that year, that is, 1972-73. No appeal was filed against this order.
4. Next, for the assessment years 1974-75 and 1975-76, the assessee claimed deductions under Section 80J of the Act This claim for both these years was declined by the Income-tax Officer as there was a net loss in these years. This order too became final as no appeal was filed against it.
5. Finally, for the assessment year 1976-77, the assessee filed a return and claimed deduction under Section 80J to the extent of Rs. 1,404 for that year. Later, he filed a revised return claiming deduction under Section 80J to the extent of Rs. 1,59, 845, the details of the deductions claimed being as under :
Assessment year Amount of claim Rs.
1972-73 23,565 1973-74 23,212 1974-75 37,319 1975-76 35,715 1976-77 49,034 _________ 1,59,845 _________
6. The Income-tax Officer did not accept the assessee's claim for deduction of Rs. 23,565 for the assessment year 1972-73 on the ground that the earlier claim in this behalf had already been rejected while dealing with the assessment year 1973-74 and that that matter had become final. The claim for deduction of Rs. 23,212 in respect of 1973-74 was, however, admitted. As regards the assessment years 1974-75 and 1975-76, the claim for both these years was disallowed as it had already been rejected and this rejection had become final. Further, the Income-tax Officer observed that the preconditions for the claim under Section 80J of the Act for these two assessment years had not been fulfilled. The deduction to the extent of Rs. 1,404 for the assessment year 1976-77 was, however, allowed with the direction that this claim be carried forward and set off against profits and gains in the subsequent years.
7. When the matter went up in appeal, the Commissioner of Income-tax (Appeals) allowed the claim for 1974-75 and 1975-76 also, but as regards 1972-73, it was held that as this matter had become final by the order for the assessment year 1973-74, the assessee could not claim this benefit for that year.
8. The Tribunal, however, allowed the deduction claimed in respect of all the assessment years in question including the assessment year 1972-73, following the judgment of the High Court of Allahabad in Addl. CIT v. Sheetalaya [1979] 117 ITR 658 and the later judgment of the High Court of Madras in CIT v. Bluemount Ceramics Ltd. [1980] 123 ITR 385. It is in this factual background that the following question of law is now being referred for the opinion of this court:
"Whether, on the facts and in the circumstances of the case, the Tribunal has been right in law in holding that the assessee was entitled to the computation and carry forward of deduction under Section 80J for the assessment years 1972-73, 1974-75 and 1975-76 for being set off against the income of subsequent years ?"
9. As mentioned earlier, the Tribunal, in holding in favour of the assessee, followed the judgment of the High Court of Allahabad in Sheetalaya's case [ 1979] 117 ITR 658. It was laid down therein as under (at p. 660) :
"There is no requirement in any part of Section 80J that the assessee must make a definite claim and the Income-tax Officer must determine the amount of deduction before it can be carried forward in a case where admittedly the undertaking had suffered loss, which had been accepted while making the assessment on that basis. Since the provision is intended to provide an incentive by giving relief from tax and since it permits carry forward for seven years, it seems to us that the deduction should be permissible even in a case where the formality of making a claim has not been specifically done by the assessee in the first or the relevant assessment year, in a case where admittedly loss has been sustained and there is no profit or gain against which the deduction could at all be adjusted."
10. This view has subsequently been followed in a string of authorities, namely, Indian Aluminium Co. Ltd, v. CIT [1980] 122 ITR 660 (Cal) ; Bluemount Ceramics Ltd.'s case [1980] 123 ITR 385 (Mad); CIT v. Mattoo Worsted Spinning and Weaving Mills [1983] 139 ITR 1020 (J & K) ; CIT v. Ennore Foundries Ltd. [1985] 151 ITR 464 (Mad) ; CIT v. Veljan Hydrair (P.) Ltd. [1985] 151 ITR 734 (AP) and CIT v. M. A. Paper and Card Board Factory Pvt. Ltd. [1986] 160 ITR 877 (Cal).
11. Reliance on behalf of the Revenue was placed upon the judgment of the High Court of Karnataka in CIT v. Sree Valliappa Textiles Ltd. [1987] 166 ITR 548, where it was held that it is only when a loss in the previous year is computed, that the Income-tax Officer dealing with the assessment for the subsequent year can decide whether that loss may be carried forward and set off against the income of the subsequent year and it necessarily follows, therefore, that the Income-tax Officer who deals with the assessment for the subsequent year and who is competent to carry forward the loss cannot compute the loss in the previous year and, consequently, if loss is not computed for the previous year, there is nothing for the assessee to carry forward and set off against the income for the subsequent year.
12. In holding so, the court purported to follow the judgment of the Supreme Court in Addl. CIT v. Gurjargravures P. Ltd. [1978] 111 ITR 1 (SC) |which was also noticed in Sheetalaya's case [1979] 117 ITR 658 (All) but distinguished it with the following observations (at p. 661 of 117 ITR):
"In that case, in the first year, the assessee did not make any claim under Section 84. In subsequent years, he made the claim and was given relief. In yet another subsequent year, the assessee wanted for the first time to raise in an appeal the question of grant of relief under Section 84 for the first year. The Supreme Court held that this was not admissible. Merely because the claim had been allowed in subsequent years, it could not be assumed that the prescribed conditions justifying a claim for exemption under Section 84 were also fulfilled in the first year. It was emphasised that there was no material to support the claim. Neither of these two facts have been found to be present in our case. It has not been suggested that there is no material to calculate or compute the claim. It is evident that the assessee made the claim for the first year because it felt that it was allowable for that year. In other words, for the first year, there must have been profits, else the question did not arise. The assessee was not claiming carry forward. For these reasons, this case is not helpful..."
13. With respect, the view of the High Court of Allahabad in Sheetalaya's case [1979] 117 ITR 658 is indeed to be preferred as, in our view, there is no bar to the Income-tax Officer dealing with the assessment for the subsequent year to compute the loss in the previous year for the purpose of Section 80 J of the Act.
14. The question posed has thus to be answered in the affirmative, in favour of the assessee and against the Revenue. This reference is disposed of accordingly. There will, however, be no order as to costs.