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TMI Blog2011 (3) TMI 1023X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of carry forward of unabsorbed loss including unabsorbed depreciation i.e., Assessing Officer did not allow the assessee to carry forward the unabsorbed loss including depreciation. The assessee preferred an appeal before the Commissioner of Income-tax (Appeals) [hereinafter, referred to as 'CIT(A)'], who vide order dated 18th April, 2005 while confirming the order of the Assessing Officer, held that the assessee was not allowed to carry forward the losses by virtue of section 80 of the Act as it had not filed loss return within the time prescribed under section 139(3) of the Act. In the appeal preferred by the assessee, the ITAT allowed unabsorbed depreciation for this year and also for the assessment year 2000-01. The ITAT relied upon the judgments of Madras High Court in Sri Hari Mills Ltd. v. First ITO [1967] 65 ITR 348 and Sathappa Textiles (P.) Ltd. v. Second I.T.O. [1969] 71 ITR 260 of Karnataka High Court in Brahmaver Chemicals (P.) Ltd. v. Second ITO [1999] 239 ITR 807 and also on the judgment of Punjab and Haryana High Court in CIT v. Haryana Hotels Ltd. [2005] 276 ITR 521. The ITAT also relied upon the circular issued by CBDT dated 24th June, 1969 in Instructi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd gains, if any, of any business or profession carried on by him and assessable for that assessment year." 5. Section 80 of the Act reads as under:- "80. Submission Of Return For Losses.-"Notwithstanding anything contained in this Chapter, no loss which has not been determined in pursuance of a return filed in accordance with the provisions of sub-section (3) of section 139, shall be carried forward and set off under sub-section (1) of section 72 or sub-section (2) of section 73 or sub-section (1) or sub-section (3) of section 74 or sub-section (3) of section 74A." 6. The relevant provision of section 139(1) and (3) of the Act read as under:- "139 Return of income (1) Everyperson,- (a) being a company or a firm; or (b) being a person other than a company, if his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax, shall, on or before the due date, furnish a return of his income or the income of such other person during the previous year, in the prescribed form and verified in the prescribed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovides that for any assessment year any loss computed in respect of speculation business has not been wholly set off under sub-section (1), so much of the loss as is not set off or the whole loss where the assessee had no income from any other speculation business, shall be carried forward on certain conditions. section 74 deals with losses under the head 'capital gains', which is not relevant for the present case. On examining the aforesaid provisions, as referred in section 80 of the Act, prima facie, these sections do not cover or deal with procedure of setting off of unabsorbed depreciation and investment allowance. 10. Section 32 of the Act deals with different types of depreciations. From a plain reading of provisions of sections 72 and 32 it is manifestly clear that section 72 deals with carry forward of unabsorbed business losses other than losses on account of depreciation and that is so because the carry forward depreciation has been provided under section 32(2) of the Act. The manner of carry forward in the two provisions is entirely different. In this manner of interpretation of the provisions of losses as noted above, we may see that sections 80 and 139(3) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned unabsorbed could be set off against the income of the accounting period for relevant to the assessment year 1965-66. " 12. In the case of Haryana Hotels Ltd. (supra), the question for consideration was same as is before us in the present case. Referring to various decisions of different Courts it was held as under:- "Under section 32(2) of the Act the unabsorbed depreciation of earlier previous years forms part of the current year's depreciation and thereafter allowance for depreciation is given from the current year's income. There is no such provision in section 72 of the Act by virtue of which business losses of earlier years shall form part of the current year's business losses and be allowed to be set off from current year's income. However, only the business losses of earlier years which are notified by the Assessing Officer are allowed to be carried forward and set off from the current year's income. Similarly, there is no provision under the Act which makes it mandatory for the assessee to file return for carry forward and set off of unabsorbed depreciation which is to be notified by the Assessing Officer as in the case of unabsorbed business loss. Thus, from a readin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that where any allowance or part thereof is, under sub-section (2) of section 32 or sub-section (4) of section 35, to be carried forward; effect shall first be given to the provisions of section 72. In other words, section 72(2) contemplates the loss other than the unabsorbed depreciation being given a priority in the matter of set-off, as there is a time-limit within which such loss can be adjusted. Under section 72(3) the loss other than from depreciation is eligible for being carried forward and set-off only for a period of eight assessment year immediately succeeding the assessment year for which the loss was first computed; in the case of unabsorbed depreciation allowance, there is no such time-limit. The Legislature has, therefore, made a specific provision for priority in setting off the loss other than unabsorbed depreciation allowance so that the unabsorbed depreciation allowance can be carried forward if necessary without any time-limit and set off in the appropriate succeeding years. It is thus clear that there is a separate identity maintained under the statute with reference to the unabsorbed depreciation allowance though at the time of computation it forms part of 'l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deals with the different types of depreciation whereas section 80 deals with carry forward of unabsorbed losses other than losses on account of depreciation. If that was not so, there was no need for Legislature to provide specific provision for carrying forward of depreciation under section 32 of the Act. It has already been noted that in case of Nagapatinam Import & Export Corpn. (supra), which was relied by our High Court in the case of J. Patel & Co. (supra) whereby, it was held that section 72 contemplates loss other than unabsorbed depreciation and there was a time-limit within which loss can be adjusted, whereas in the case of unabsorbed depreciation there is no time-limit and further that under the statute there is a separate identity with respect to unabsorbed depreciation though at the time of computation, it becomes a part of loss. 17. From the above, it comes out that the effect of section 32(2) is that unabsorbed depreciation of a year becomes part of depreciation of subsequent year by legal fiction and when it becomes part of current year depreciation it is liable to be set off against any other income, irrespective of the fact that the earlier years return was filed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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