2015 (11) TMI 1819 - HC - Income Tax

Filing of belated returns - set off of unabsorbed depreciation investment allowance and 80J exemption denied - HELD THAT - This aspect of the matter is extensively considered in the case of Brahmavar 1998 (11) TMI 91 - KARNATAKA HIGH COURT and has held that there is no time limit provided for carry forward of depreciation of earlier years and unabsorbed depreciation and investment allowance stands differently than that of the business loss. In respect of other assesses other than in case of amalgamation the unabsorbed depreciation or investment allowance if claimed in a return filed after the time prescribed under Section 139(1) is not restricted. Belated filing of the returns would not curtail the right of the assessee to claim unabsorbed depreciation investment allowance and 80J exemption under the Act. Tribunal has proceeded hypertechnially in rejecting the claim of the assessee on the ground that rectification application was filed by the assessee before the Assessing Officer after giving effect to the order of the CIT(A). It is significant to note that in the Circular issued by the Central Board of Direct Taxes No. 14 (XL35) of 1955 dated April 11 1955 it has categorically held that the Officers of the Department must not take advantage of the ignorance of an assessee as to his rights. It is one of their duties to assist a taxpayer (assessee) in every reasonable way particularly in the matter of claiming and securing reliefs and in this regard the officers should take the initiative in guiding a taxpayer where proceedings or other particulars before them indicate whether some refund or relief is due to the assessee which would benefit the Department and it would inspire confidence in the assessee. In such view of the mater the Tribunal ought to have taken a wider look in allowing the claim of the assessee even if the return for the assessment year 1986-87 is belatedly filed which would not restrict the rights of the assessee to claim the benefit of unabsorbed depreciation investment allowance and 80J exemption. - Decided in favour of assessee.

Summary

Issues Involved:
1. Entitlement to claim set off of unabsorbed depreciation and investment allowance.
2. Distinction between business loss and unabsorbed depreciation and investment allowance.
3. Grant of relief for carry forward of depreciation, investment allowance, and 80J exemption.

Detailed Analysis:

Issue 1: Entitlement to claim set off of unabsorbed depreciation and investment allowance.

The appellant, a registered firm, filed its return for the assessment year 1987-88 declaring NIL income after setting off a net profit of Rs. 23,072 towards total loss. The Assessing Officer disallowed the carry forward of depreciation and set off of business losses. The appellant's appeal to the CIT(A) resulted in partial relief, but the issue of unabsorbed depreciation and investment allowance was not addressed. The ITAT dismissed the appellant's subsequent appeals, focusing on the belated filing of returns for the assessment year 1986-87. The appellant argued that the belated filing should not disqualify it from claiming benefits of unabsorbed depreciation and investment allowance. The court cited precedents, including Brahmavar Chemicals Pvt. Ltd. and Govind Nagar Sugar Ltd., which support the view that there is no time limit for carrying forward unabsorbed depreciation and investment allowance, distinguishing them from business losses. The court concluded that the belated filing does not restrain the appellant from claiming these benefits.

Issue 2: Distinction between business loss and unabsorbed depreciation and investment allowance.

The court emphasized that unabsorbed depreciation and investment allowance are treated differently from business losses under the Act. The appellant cited several judgments, including those from the Delhi High Court and Punjab and Haryana High Court, which held that unabsorbed depreciation can be carried forward even if the return for the relevant assessment year is filed belatedly. The court agreed with this distinction, noting that the legislative intent and judicial precedents support the appellant's claim. The court also referenced a CBDT Circular which instructs tax officers to assist taxpayers in claiming due reliefs, reinforcing the appellant's position.

Issue 3: Grant of relief for carry forward of depreciation, investment allowance, and 80J exemption.

The court found that the Tribunal erred in rejecting the appellant's claim based on the technicality of a belated rectification application. The court reiterated that the belated filing of returns does not restrict the appellant's right to claim unabsorbed depreciation, investment allowance, and 80J exemption. The court directed the Assessing Officer to reconsider the appellant's claims in light of the observations made in the judgment and relevant judicial precedents. The court allowed the appeals, remanding the matter back to the Assessing Officer for appropriate orders.

Conclusion:

The court allowed the appellant's appeals, recognizing the right to carry forward unabsorbed depreciation, investment allowance, and 80J exemption despite the belated filing of returns. The court distinguished these allowances from business losses and emphasized the duty of tax authorities to assist taxpayers in claiming due reliefs. The matter was remanded to the Assessing Officer for reconsideration and appropriate action.