1988 (7) TMI 93 - AT - Income Tax

Summary

Issues:
1. Appeal regarding carry forward of determined loss for the asst. yr. 1976-77.
2. Appeal regarding disallowance of claim of expenditure for the asst. yr. 1979-80.

Issue 1: Appeal regarding carry forward of determined loss for the asst. yr. 1976-77

The appellant contested the CIT(A)'s decision not to allow the carry forward of a determined loss of Rs. 2,26,754. The CIT(A) deemed the appeal incompetent based on s. 246(c) which specifies the grounds for appeal. The ITAT Bombay-D disagreed with the CIT(A) and cited legal precedents, including the Supreme Court's ruling in CIT vs. Kulu Valley Transport Co. Pvt Ltd., to support the appellant's right to carry forward the loss despite late filing. The ITAT held that the appellant's appeal was valid, and the loss determined should be allowed to be carried forward, emphasizing that the delay in filing should not deny the benefit of carry forward.

Issue 2: Appeal regarding disallowance of claim of expenditure for the asst. yr. 1979-80

The dispute revolved around the disallowance by the ITO of the claim of expenditure amounting to Rs. 3,31,900. The CIT(A) upheld the disallowance based on the provisions of r. 9A concerning the cost of production of a feature film. The ITAT Bombay-D analyzed the application of r. 9A and the method of accounting employed by the assessee, who followed a cash system. The ITAT emphasized the importance of s. 145, which mandates computing income in accordance with the method of accounting regularly employed by the assessee. Citing legal precedents such as CIT vs. McMillan & Co., the ITAT concluded that r. 9A is not mandatory and cannot override s. 145. The ITAT directed the ITO to recompute the income of the assessee on a cash basis for the asst. yr. 1979-80, emphasizing the need for proper scrutiny of the books of account.

In conclusion, the ITAT Bombay-D allowed the appeal for the asst. yr. 1976-77 regarding the carry forward of determined loss and treated the appeal for the asst. yr. 1979-80 as allowed for statistical purposes, directing the ITO to recompute the income on a cash basis.