1996 (2) TMI 174 - AT - Income Tax

A Firm, A Partner, Assessing Officer, Assessment Year, Business Loss, Carry Forward, Registered Firm, Return Filed Beyond Time, Set Off

Issues Involved:
1. Carry forward of business loss by the assessee.
2. Timeliness of the return of loss filed by the partner.
3. Applicability of section 139(10) proviso (b) to the assessee.
4. Ambiguity of taxing provisions.

Detailed Analysis:

Issue 1: Carry Forward of Business Loss by the Assessee

The primary issue is whether the business loss of Rs. 88,634 can be carried forward by the assessee, who is a partner in a registered firm, AICAM INDIA. The firm filed its return within the statutory time, and the AO allowed the loss to be carried forward. However, the CIT(A) disallowed the carry forward of the business loss for the assessee, stating that the return of loss was not filed under section 139(3) by the due date, i.e., 31st July 1987. The Tribunal upheld this decision, emphasizing that under section 75(1), only the partners are entitled to carry forward and set off the business loss, not the firm itself. This is supported by the M.P. High Court decision in Kalani Udyog v. ITO, which held that a registered firm is not entitled to carry forward and set off unabsorbed loss.

Issue 2: Timeliness of the Return of Loss Filed by the Partner

The assessee filed the return of loss on 10-2-1988, which was beyond the stipulated time of 30-6-1987 as per section 139(3). The Tribunal noted that the return of loss must be filed within the prescribed time to be eligible for carry forward of the business loss. Since the assessee did not comply with this requirement, the carry forward of the business loss was rightly disallowed by the CIT(A). This position is further supported by section 80, which states that no loss shall be carried forward unless determined in pursuance of a return filed within the time allowed under section 139(1).

Issue 3: Applicability of Section 139(10) Proviso (b) to the Assessee

The Tribunal examined whether the return of loss furnished by the assessee falls under the mischief of section 139(10). It concluded that the return is valid as per the Board's Circular No. 493 dated 21-9-1987, and not non est under section 139(10). However, this does not aid the assessee in carrying forward the business loss, as the return was filed late. The Tribunal held that section 139(10) rather supports the Revenue's stance.

Issue 4: Ambiguity of Taxing Provisions

The Tribunal addressed the argument that the taxing provisions are ambiguous and capable of more than one interpretation. It found no conflicting decisions or evidence of ambiguity in the provisions of the Act applicable to the case. The provisions were deemed plain, simple, explicit, and straightforward. Consequently, the Tribunal rejected the argument that the interpretation should favor the assessee, citing the M.P. High Court decision in Kalani Udyog, which emphasized literal construction in interpreting taxing statutes.

Conclusion:

The Tribunal upheld the CIT(A)'s decision to disallow the carry forward of the business loss of Rs. 88,634 by the assessee. The appeal was dismissed on the grounds that the return of loss was filed late, and the provisions of the Act clearly stipulate that only timely filed losses can be carried forward. The Tribunal found no ambiguity in the relevant taxing provisions and ruled against the assessee on all issues.

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