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Issues involved: Determination of whether an assessee-company was entitled to carry forward a loss incurred in a specific assessment year for set off against profits of subsequent years, despite filing the return after the prescribed time under section 139(3) of the Income Tax Act, 1961.
Summary: The High Court of Bombay considered a case where an assessee-company, Telster Advertising Pvt. Ltd., filed its income-tax return for the assessment year 1964-65 after the prescribed time under section 139(3) of the Income Tax Act, 1961. The Income Tax Officer (ITO) assessed the loss but refused to carry it forward due to the delayed filing. The Appellate Authority and the Tribunal upheld this decision, citing precedents. The main question referred was whether the assessee was entitled to carry forward the loss despite the delayed filing. The assessee argued that the decision was contrary to the Calcutta High Court's ruling following the Supreme Court's decision in another case. The Supreme Court's decision in CIT v. Kulu Valley Transport Co. P. Ltd. was crucial, where it was held that losses could be carried forward even if returns were filed after the specified time, as long as they were filed before assessment. The Calcutta High Court's interpretation of section 139(4) of the Income Tax Act, 1961, further supported this position, emphasizing that a return filed within the time specified in sub-section (4) should be deemed in accordance with the law for loss carry forward purposes. Ultimately, the High Court of Bombay ruled in favor of the assessee, stating that the revenue must pay the costs. In conclusion, the judgment clarified that an assessee-company could carry forward a loss for set off against future profits, even if the return was filed after the prescribed time, as long as it was filed before assessment, based on the provisions of the Income Tax Act, 1961 and relevant court decisions.
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