Kerala High Court
Commissioner Of Income-Tax vs R. Chandran on 28 February, 1991
Equivalent citations: [1991]191ITR329(KER)
Author: K.S. Paripoornan
Bench: K.S. Paripoornan
JUDGMENT K.S. Parjpoornan, J.
1. At the instance of the Revenue, the Income-
tax Appellate Tribunal (in short, "the Tribunal") has referred the following two questions of law for the decision of this court:
"1. Whether, on the facts and in the circumstances of the case, the assessee is entitled to carry forward the loss determined by the Income-tax Officer?
2. Whether, on the facts and in the circumstances of the case and on an interpretation of the relevant provisions of the statute, the Tribunal is right in holding that 'the return must be taken to have been filed under Section 139(4)' ?"
2. The respondent is an assessee under the Income-tax Act. We are concerned with the assessment year 1976-77 for which the accounting period ended on March 31, 1976. The assessee is a bus operator. In the assessment proceedings, the assessee pleaded for carrying forward a loss of Rs. 18,500. This was declined by the Income-tax Officer. In appeal, this was confirmed by the Appellate Assistant Commissioner. The Appellate Assistant Commissioner distinguished the decision of the Supreme Court in CIT v. Kulu Valley Transport Co. P. Ltd. [1970] 77 ITR 518 by holding that the said case was based on the provisions of the Indian Income-tax Act, 1922, and there is no provision therein similar to Section 80 of the Income-tax Act, 1961. The assessee carried the matter by way of further appeal before the Appellate Tribunal. After noting the rival contentions of the parties, the Tribunal held that the return filed by the assessee must be taken to have been filed under Section 139(4) of the Income-tax Act, 1961. Section 139(4) of the Income-tax Act, as it stood then, enabled the assessee to file a return at any time before an assessment is made, but within the particular time limit specified in Section 139(4)(b) of the Act. In this case, it was common ground that the return was filed under Section 139(4) of the Act before an assessment was made. On this basis and also placing reliance on the decision of the Bombay High Court in Telster Advertising Pvt. Ltd. v. CIT [1979] 116 ITR 610 and the decision of the Supreme Court in Kulu Valley Transport Co. P. Ltd.'s case [1970] 77 ITR 518, the Appellate Tribunal held that the assessee is entitled to carry forward the loss. It is thereafter at the 'instance of the Revenue the questions of law formulated hereinabove have been referred for the decision of this court.
3. We heard counsel for the Revenue, Mr. P. K. R. Menon, and also counsel for the respondent, Sri S. Soman. The assessment relates to the year 1976-77. The accounting period ended on March 31, 1976. The return was due on or before July 31, 1976. The assessee filed the return only on March 22, 1978. The short question that arises for consideration is whether, in the return filed by the assessee, which could only be a return filed under Section 139(4) of the Act, it is open to the assessee to insist that the loss incurred in the previous years must be determined and allowed to be carried forward. We find that, construing the provisions of Section 139(4) of the Income-tax Act, 1961, read along with Section 80 of the Act, as it stood at the relevant time, the Allahabad, Andhra Pradesh, Bombay, Calcutta, Delhi and Madhya Pradesh High Courts have taken the view that the return filed or deemed to have been filed under Section 139(4) of the Act, before the assessment is made, should be considered and the assessee is entitled to carry forward the loss determined by the Income-tax Officer--See CIT v. Pratapgarh Cold Storage and Ice Factory [1980] 3 Taxman (Sh.N.) 61 ; [1982] UPTC 129 (All), C.P. Sarathy Mudaliar v. CIT [1978] 114 ITR 687 (AP), Telster Advertising Pvt. Ltd.'s case [1979] 116 ITR 610 (Bom), Presidency Medical Centre (P.) Ltd. v. CIT [1977] 108 ITR 838 (Cal), CIT v. Nagpur Steel and Alloys (P.) Ltd. [1988] 169 ITR 466 (Cal), Co-operative Marketing Society Ltd. v. CIT [1983] 143 ITR 99 (MP) and CIT v. Bankipur Iron Works Ltd. [1980] 3 Taxman 484. Five High Courts have unanimously taken the view that the return filed under Section 139(4) of the Act is a return entitled to be considered and the assessee was permitted to carry forward the loss of the previous years. The only judgment taking a different view is B. B. Danganavar v. ITO [1967] 65 ITR 370 (MP). On a plain reading of Section 139 read with Section 80 of the Act, we have no doubt in our mind that the decision of the Supreme Court in Kulu Valley Transport Co. P. Ltd.'s case [ 1970] 77 ITR 518 will certainly apply herein on the basis of the statute as it existed then. There was a subsequent amendment of Section 80 of the Act by the Taxation Laws (Amendment) Act, 1984, which took effect from April 1, 1985, and still later by the Direct Tax Laws (Amendment) Act, 1987, with effect from April 1, 1989. As the section stands at present, no loss which has not been determined in pursuance of a return filed in accordance with the provisions of Section 139(3) of the Act shall be carried forward and set off is to be permitted. But, we are concerned with the assessment year 1976-77, which period is long before the above legislative amendment. As the law stood in the relevant assessment year 1976-77, in view of the decisions of various High Courts referred to above, the assessee was entitled to carry forward the loss and the decision of the Supreme Court in Kulu Valley Transport Co. P. Ltd.'s case [1970] 77 ITR 518 will apply. The decision of the Tribunal, relying upon the decision of the Bombay High Court in Telster Advertising Pvt. Ltd.'s case [1979] 116 ITR 610 is justified in law. We, therefore, answer both the questions referred to this court in the affirmative, against the Revenue and in favour of the assessee.
4. The reference is answered as above.
5. A copy of this judgment under the seal of this court and the signature of the Registrar will be forwarded to the Income-tax Appellate Tribunal, Cochin Bench.