1968 (2) TMI 24 - HC - Income Tax

Return rejected - Where an assessee claims to carry over business loss and at the same time carry over unabsorbed depreciation and development rebate, they have all to be included in one return - as the return was filed out of time so far as sub-section (2A) of section 22 is concerned, his client would not be entitled to the benefit of carry forward of the business loss for the year

Summary

Issues: Proper rejection of a return under section 22(2A) of the Income-tax Act, 1922, treatment of unabsorbed depreciation and development rebate in the return, validity of a composite return including business loss, and the impact of filing out of time under section 22(2A).

Analysis:
The judgment discusses the rejection of a return by the petitioner as out of time under section 22(2A) of the Income-tax Act, 1922. The petitioner, a private limited company, filed a return for the assessment year 1960-61 showing a loss under the "business" head. The return included unabsorbed depreciation but it was unclear if it also included development rebate. The court referred to previous cases to establish the correct principle for such returns. It was clarified that carrying forward unabsorbed depreciation and development rebate does not fall under section 24(2) and does not depend on compliance with section 22(2A). The return, if covering unabsorbed depreciation and development rebate, falls under section 22(2) and should be considered on its merits.

The judgment emphasized that when an assessee claims to carry over business loss along with unabsorbed depreciation and development rebate, all claims should be included in one return. The Act does not require separate returns for different sections. Therefore, a composite return should serve both section 22(2) and section 22(2A). If part of the return is out of time under section 22(2A, it does not automatically mean the entire return should be rejected. The part related to unabsorbed depreciation and development rebate should be considered valid and taken into account separately. The failure to comply with section 22(2A) only affects the benefit of carrying forward loss, not the validity of the return for other matters.

The judgment also noted that the petitioner, through their representative, acknowledged that due to the late filing under section 22(2A), they would not be entitled to carry forward the business loss for the year. The petition was allowed with no costs, affirming the validity of the return for consideration by the revenue, limited to unabsorbed depreciation and development rebate, subject to factual examination.