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TMI Blog2020 (12) TMI 164X X X X Extracts X X X X X X X X Extracts X X X X ..... r sources. 3. The solitary issue raised is whether the A.O. and the CIT(A) have erred in not allowing set off of brought forward losses/unabsorbed depreciation relating to assessment years 2002-2003 to 2004-2005 against the total income declared in the assessment years under consideration. 4. Since facts in these cases are more or less similar, we shall narrate the facts pertaining to assessment year 2005-2006 and adjudicate the issue raised. The decision rendered for assessment year 2005-2006 would apply mutatis mutandis for the other assessment years also. 5. The brief facts of the case are as follow: The assessee is a private limited company engaged in the business of software development. For the assessment year 2005-2006, the return of income was filed on 31.10.2005. The total income comprised of business income of 'NIL' which has arrived after claiming deduction u/s. 10A of the I.T. Act and thereafter, set off of earlier years losses against the remaining business income of Rs. 4,88,322. The income of other sources of Rs. 8,19,043 was offered to tax. In the said return of income filed, the assessee had inadvertently omitted to set off earlier years unabsorbed depr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to allow set off of earlier years unabsorbed losses against the total income. In other words, the benefit of set off of brought forward losses was restricted only to the business income and not income from other sources. 5.3. In appeal proceedings before the CIT(A), the assessee had raised a ground seeking the benefit of set off of brought forward losses. However, the same was not pressed since the assessee was in receipt of rectification order u/s. 154 of the I.T. Act, which gave the benefit of set off of brought forward losses. Further, the assessee filed an application dated 07.03.2014 and had requested the A.O. to pass order giving effect to the CIT(A)'s order. In the said application, the assessee had worked out the revised computation of total income wherein it had set off unabsorbed losses/depreciation with the total income. The A.O. gave effect to the CIT(A)'s order vide order dated 28.03.2017, wherein he had not given the benefit of set off of brought forward losses against the total income. It was claimed by the assessee that there was unabsorbed depreciation/losses, which ought to have been set off with the income from other sources while passing the order givin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er sources for assessment years 2002-2003 to 2008-2009, are as under:- Assess ment year Business income / (Business loss) (Rs.) A (Unabsorbed depreciation) (Rs.) B Total C = A+B Deduction claimed u/s 10A (Rs.) D Remaining business income E Set off of business loss F Income from other sources (Rs.) G Total income as per ROI H 2002-03 (25,13,709) (87,40,568) (1,12,54,277) - - - 80,04,872 80,04,872 2003-04 - (73,16,524) (73,16,524) - - - 29,74,058 29,74,058 2004-05 (99,35,330) (1,08,54,567) (2,07,89,897) - - - 11,40,822 11,40,822 2005-06 46,66,667 - 46,66,667 41,78,345 4,88,322 4,88,322 8,19,043 8,19,043 2006-07 4,58,86,633 - 4,58,86,633 4,01,72,120 57,14,513 - 7,48,850 64,63,363 2007-08 6,83,62,057 - 6,83,62,057 6,12,54,692 71,07,365 - 24,32,487 95,39,852 2008-09 3,73,66,826 - 3,73,66,826 2,07,16,012 1,66,50,814 63,59,649 2,30,10,463 9.1. The return of income for assessment years 2002-2003 to 2004-2005 are filed within the due date u/s. 139(1) of the I.T. Act. The details of return of income filed for assessment years 2002-2003 to 2004-2005 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oss to the assessee, not being a loss sustained in a speculation business, and such loss cannot be or is not wholly set off against income under any head of income in accordance with the provisions of section 71, so much of the loss as has not been so set off or, where he has no income under any other head, the whole loss shall, subject to the other provisions of this Chapter, be carried forward to the following assessment year, and- (i) it shall be set off against the profits and gains, if any, of any business or profession carried on by him and assessable for that assessment year; (ii) if the loss cannot be wholly so set off, the amount of loss not so set off shall be carried forward to the following assessment year and so on:" 9.4. Thus, section 72(1)(i) mandate set off of business loss with business income of a subsequent year. It is a statutory compulsion. It does not give any option to assessee to set off or not to set off. In other words, whether or not the assessee has set off the losses in the return of income, the income tax authorities are required to give effect to section 72(1)(i) and set off such losses. 9.5. Similarly, it is a settled principle that unabsorbed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otal income of the undertaking'. 18. For the aforesaid reasons we answer the appeals and the questions arising therein, as formulated at the outset of this order, by holding that though Section 10A, as amended, is a provision for deduction, the stage of deduction would be while computing the gross total income of the eligible undertaking under Chapter IV of the Act and not at the stage of computation of the total income under Chapter VI. All the appeals shall stand disposed of accordingly." 9.7. Thus, in view of section 72(2)(i), 32(2) and the aforesaid judgment of the Hon'ble Supreme Court, the business loss and unabsorbed depreciation of AY 2002-03 to AY 2004-05 ought to have been set off against the business income remaining after claiming deduction under section 10A and against the Income from other sources of the subsequent years. 9.8. The CBDT Circular No. 14 dated 11.04.1955 states that the income tax authorities are required to bring to the notice of the assessee any claim of relief, exemption, deduction etc. to which the assessee is legally entitled and allow the same even though the assessee may not have claimed the said relief, exemption, deduction etc. for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or before the completion of the assessment, whichever is earlier. The said provision refers to a return under sub- section (1). Sub-section (1) of section 139 provides for filing of a return of income on or before the due date, furnishing 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 manner and setting forth such other particulars as may be prescribed. If in such return the assessee discovers any omission or any wrong statements therein which has to be necessarily with reference to his income and if it is sought to be corrected, then it could be done only by resorting to a revised return under section 139(5) of the Act. The income contemplated by section 139(1) of the Act can only be the income which the assessee bona fide believes to be his income and not the income as finally assessed by the Assessing Officer. On the discovery of omission or wrong statement in the earlier return filed by the assessee he can safely file a revised return without recourse to the Assessing Officer in any way. Once such a revised return is filed under section 139(5), the effective return for the purpose of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 139(1) of the Act. As the tax liability is fastened on the assessee on the basis of the statutory provisions, if any statutory provision gives the assessee the tax benefit, the assessing authority is legally bound to consider the same and grant him relief. In the course of assessment the said claim cannot be rejected on the ground that the same is not made in the return filed under section 139(1) and on the ground that no revised return is filed under section 139(5) of the Act. What the assessee is claiming by way of a letter is to bring to notice of the assessing authority the statutory provisions as well as the provisions of the double taxation avoidance agreement under which the assessee is entitled to claim tax benefit, as the said benefit of tax was not claimed in the return filed under section 139(1) of the Act. Once the assessee files the necessary particulars and claims relief under the provisions of the double taxation avoidance agreement, the limitation placed by domestic law would yield to the tax relief provided for under the double taxation avoidance agreement. Therefore, the assessing authority was not justified in rejecting the said claim on the ground that n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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