COMMISSIONER OF INCOME TAX Vs. BRIGADIER PARMANAND

JUDGEMENT

(1.) The Income-tax Appellate Tribunal, New Delhi has referred the following question of law under Section 256(2) of the Income-tax Act, 1961, hereinafter referred to as 'the Act' for opinion to this Court:

(2.) The present Reference relates to the assessment year 1986-87.

(3.) The respondent-assessee is an individual. He had filed return of income showing loss of Rs. 2,75,850. While completing the assessment, the Assessing Officer observed that the loss for the earlier year could not be allowed to be carried forward and set off as per provisions of section 80 of the Act and he, accordingly, completed the assessment on a total income of Rs. 21,740. Feeling aggrieved the respondent preferred an appeal before the Deputy Commissioner of Income-tax (Appeals), who had held that the Assessing Officer was not justified in refusing to carry forward unabsorbed depreciation and section 80 did not speak of unabsorbed depreciation. The Dy. Commissioner of Income-tax (Appeals), therefore, directed to carry forward the unabsorbed depreciation amounting to Rs. 1,98,476 for the assessment year in question. Revenue feeling aggrieved preferred an appeal before the Tribunal. The Tribunal has dismissed the appeal by the following orders:-- The order of the Dy. Commissioner of Income-tax (Appeals) shows that the assessee's claim for carry forward and set off was in respect of unabeorbed depreciation and not in respect of business losses falling under Sections 72, 73, 74 or 74A of the IT Act, Section 72 deals with carry forward of unabsorbed business loss other than losses on account of depreciation has been specifically provided for in Section 32(2). The manner of carry forward in the two provisions is different. Unabsorbed depreciation is carried forward and added to the depreciation of the following year. The total amount of depreciation thus arriving is deemed to be depreciation of the following year. The total amount of depreciation thus arriving is deemed to be depreciation of the subsequent year. In view of the amendment introduced in Section 80 w.e.f. 1-4-1985, business losses other than unabsorbed depreciation can be carried forward and set off under Sections 72, 73, 74 and 74A if such losses have been determined in pursuance of a return filed under Section 139(1). If return has not been filed under Section 139(1) or within such time as may be allowed by the ITO, in such a case, business loss other than unabsorbed depreciation cannot be allowed to be carried forward and set off in the subsequent years in view of the amended provisions of Section 80. However, Section 80 is not at all applicable to unabsorbed depreciation for which provision is separately made under Section 32(2). The provisions contained under Section 32(2) does not confine the benefit of carry forward of unabsorbed depreciation only to cases where a return is filed under Section 139(1) or within such time as may be allowed by the ITO. I am, therefore, of the opinion that the Dy. Commissioner of Income-tax (Appeals) was justified in allowing the assessee's claim for carry forward and set off and unabsorbed depreciation of the earlier year.