2015 (6) TMI 7 - HC - Income Tax

Entitled to carry forward and set off the business loss - Held that - Section 80 finds place in Chapter VI. The assessee obviously is seeking to get benefit of the provisions contained in Chapter-VI. The provisions of Chapter VI are regulated by section 80 which emphatically lays down that the benefit of carry forward of losses cannot be allowed unless the return has been filed within the time provided in sub-section (1) of Section 139 or within such further time as may be allowed by the ITO. Admittedly, the assessee did not file return within the time prescribed by sub-section (1) or within the time extended by the ITO. There is, as such, nothing that the Court can do to assist the assessee. Assessee Company was not entitled to carry forward and set off the business loss Tribunal was justified in law in holding that the provisions contained in Section 80 of the Income Tax Act, 1961 are substantive in nature - Decided against assesse.

Summary

Issues:
1. Interpretation of Sections 80 and 139 of the Income Tax Act, 1961 for carry forward and set off of business losses.
2. Whether provisions of Section 80 are substantive in nature.
3. Comparison of restrictions under Section 80 with Section 24(2) of the 1922 Act.

Analysis:

Issue 1: Interpretation of Sections 80 and 139
The appeals revolved around the denial of the assessee's claim to carry forward and set off substantial business losses for the assessment years 1985-86 and 1986-87. The key contention was whether the assessee's belatedly filed returns could still qualify for the benefit of carrying forward losses. The appellant argued that the Supreme Court's decision in CIT vs. Kullu Valley Transport Co. Pvt. Ltd. supported their case, emphasizing the equivalence of Section 139 of the 1961 Act with Section 22 of the 1922 Act. However, the court rejected this argument, emphasizing the specific provisions of Section 80, which mandate that losses can only be carried forward if returns are filed within the prescribed time limits.

Issue 2: Nature of Section 80 Provisions
The court addressed the appellant's argument that Section 80 should not apply to returns declaring profits, contending that the applicability of Section 80 is tied to the benefits sought under sections 72, 73, and 74, regardless of whether the return initially declared income or loss. The court upheld the substantive nature of Section 80, emphasizing its pivotal role in regulating the carry forward and set off of losses under Chapter VI of the Income Tax Act.

Issue 3: Comparison with Section 24(2) of the 1922 Act
The court noted the absence of Section 80 in the 1922 Act and highlighted the non-obstante clause in Section 80 of the 1961 Act, which unequivocally mandates timely filing of returns for claiming the benefit of carrying forward losses. The court dismissed the appellant's reliance on the judgment in CIT vs. Kullu Valley Transport Co. Pvt. Ltd., underscoring the specific provisions of Section 80 and its overriding effect on the allowance of losses.

In conclusion, the court dismissed both appeals, ruling against the appellant's claim to carry forward and set off business losses due to the non-compliance with the prescribed timelines under Section 80 of the Income Tax Act, 1961. The judgment affirmed the substantive nature of Section 80 and its critical role in determining the eligibility for carrying forward losses, emphasizing strict adherence to statutory provisions for such allowances.