COMMISSIONER OF INCOME TAX Vs. CHANDRAN R

JUDGEMENT

(1.) At the instance of the Revenue, the Income Tax Appellate Tribunal (in short, the Tribunal) has referred the following two questions of law for the decision of this Court.

(2.) The respondent is an assessee under the Income Tax Act. We are concerned with the assessment year 1976-77, for which the accounting period ended on 31-3-1976. The assessee is a bus operator. In the assessment proceedings, the assessee pleaded for carrying forward a loss of Rs. 18.500/-. This was declined by the Income Tax Officer. In appeal, this was confirmed by the Appellate Assistant Commissioner. The Appellate Assistant Commissioner distinguished the decision of the Supreme Court in C.I. T. v. Kulu Valley Transport Co. Ltd. (77 ITR 518) by holding that the said case was based on the provisions of the Income Tax Act, 1922, and there is no provision therein similar to S.80 of the Income Tax Act, 1961. The assessee carried the matter by way of further appeal before the Appellate Tribunal. After noting the rival contentions of the parties, the Tribunal held that the return filed by the assessee must be taken to have been filed under S.139(4) of the Income Tax Act. S.139(4) of the Income Tax Act, as it stood then, enabled the assessee to file a return at any time before an assessment is made, but within the particular time limit specified in S.139(4) (b) of the Act. In this case it was common ground that the return was filed under S.139(4) of the Act before an assessment was made. On this basis and also placing reliance on the decision of the Bombay High Court in Telster Advertising Pvt. Ltd. v. Commissioner of Income Tax (116 ITR 610) and the decision of the Supreme Court in Kulu Valley Transport Co. Ltd. case (77 ITR 518) the Appellate Tribunal held that the assessee is entitled to carry forward the loss. It is thereafter, at the instance of the Revenue, the questions of law, formulated hereinabove, have been referred for the decision of this Court.

(3.) We heard counsel for the Revenue, Mr. P. K. R. Menon and also counsel for the respondent Sri. S. Soman. The assessment relates to the year 1976-77. The accounting period ended on 31-3-1976. The return was due on or before 31-7-1976. The assessee filed the return only on 22-3-1978. The short question that arises for consideration is whether, in the return filed by the assessee, which could only be a return filed under S.139(4) of the Act, it is open to the assessee to insist that the loss incurred in the previous years must be determined and allowed to be carried forward. We find that construing the provisions of S.139(4) of the Income Tax Act 1961, read along with S.80 of the Act, as it stood at the relevant time, the Allahabad, Andhra Pradesh, Bombay, Calcutta, Delhi and Madhya Pradesh High court have taken the view that the return filed or deemed to have been filed under S.139(4) of the Act, before the assessment is made, should be considered and the assessee is entitled to carry forward the loss determined by the Income Tax Officer. See Commissioner of Income Tax v. Pratapgarh Cold Storage & Ice Factory (1980)3 Taxman 61, Case No. 15), C. P. Sarathy Mudaliar (114 ITR 687), Telster Advertising Pvt. Ltd. case (116 ITR 610), Presidency Medical Centre (P) Ltd. v. Commissioner of Income Tax (108 ITR 838), Commissioner of Income Tax v. Nagpur Steel & Alloys (P) Ltd. (169 ITR 466), Cooperative Marketing Society Ltd. v. Commissioner of Income Tax (143 ITR 99), Commissioner of Income Tax v. Bankipur Iron Works Ltd. [(1980) 3 Taxman 484] and Cooperative Marketing Society Ltd. v. Com-missioner of Income Tax [(1983) 34 CTR 290]. Five High Courts have unanimously taken the view that the return filed under S.139(4) of the Act is a return entitled to be considered and the assessee was permitted to carry forward the loss "of the previous years. The only judgment taking a different view is B.B. Danganavar v. Income Tax Officer (65 ITR 370). On a plain reading of S.139 read with S.80 of the Act, we have no doubt in our mind that the decision of the Supreme Court in Kulu Valley Transport Co. Ltd. case (77 ITR 518) will certainly apply herein on the basis of the statute as it existed then. There was subsequent amendment of S.80 of the Act by Taxation Law Amendment Act, 1984, which took effect from 1-4-1985 and still later by Direct Tax Laws (Amendment) Act, 1987 with effect from 1-4-1989. As the section stands at present, no loss, which has not been determined in pursuance of a return filed in accordance with the provisions of S.139(3) of the Act shall be carried forward and set off permitted. But we are concerned with the assessment year 1976-77, a period long before the above legislative amendment. As the law stood in the relevant assessment year 1976-77, in view of the decisions of various High Courts, referred to above, the assessee was entitled to carry forward the loss and the decision of the Supreme Court in Kulu Valley Transport Co. Ltd. case (77 ITR 518) will apply. The decision of the Tribunal, relying upon the decision of the Bombay High Court in Telster Advertising Pvt. Ltd. case (116 ITR 610) is justified in law. We therefore answer both the questions referred to this Court in the affirmative, against the Revenue and in favour of the assessee.