COMMISSIONER OF INCOME TAX Vs. PANDORA PRIVATE LIMITED

JUDGEMENT

(1.) AT the instance of the Revenue, the following question has been referred by the Income -tax Appellate Tribunal, Delhi Bench 'B' (for short 'the Tribunal'), under Section 256(1) of the Income -tax Act, 1961 (in short the 'Act'), for opinion of this court :

(2.) SINCE the question depends upon the interpretation of Section 80J(3), reference to the factual aspects in detail is unnecessary.

(3.) LEARNED counsel for the Revenue submitted that the true import of Section 80J(3) has not been considered by the Tribunal. There was no appearance on behalf of the assessed when the matter was called. The question came up for consideration of the Karnataka High Court in CIT v. Sree Valliappa Textiles Ltd. : [1987]166ITR548(KAR) . The following observation was made by the said High Court (page 556) : 'We are in respectful agreement with the view taken in all these cases that the right of an assessed to carry forward and set off under Section 80J(3) of the Act arises where there is profit in the subsequent year. But to carry forward and set off, the loss is to be computed in the previous year. If loss is not computed for the previous year, there is nothing for the assessed to carry forward and set off against the income for the subsequent year. The Income -tax Officer, computing the loss for the previous year cannot determine whether the loss so computed can or cannot be set offagainst the income of the subsequent year. It necessarily follows that the Income -tax Officer who deals with the assessment for the subsequent year and who is competent to carry forward the loss cannot compute the loss in the previous year. It is only when the loss in the previous year is computed, the Income -tax Officer dealing with the assessment for the subsequent year can decide whether that loss may be carried forward and set off against the income of the subsequent year. As rightly pointed out by Sri Srinivasan, Section 80J(1) and (3) have to be read together and not in isolation. We have first to ascertain the scope and ambit of Section 80J(1) and it is only thereafter consider the scope and ambit of Section 80J(3). It, thereforee, follows that there has to be computation of loss under Section 80J(1) and it is only the deficiency that can be carried forward and set off under Section 80J(3).'