July 2011
Loss return: Carry forward of unabsorbed depreciation: Section 32(2), section 80 and section 139(3) of Income-tax Act, 1961: A.Ys. 2000-01 and 2001-02: Section 80 and section 139(3) apply to business loss and not to unabsorbed depreciation covered by section 32(2): Period of limitation for filing loss return not applicable.
By K. B. Bhujle, Advocate
fiogf49gjkf0d
[CIT v. Govind Nagar Sugar Ltd., 334 ITR 13 (Del.)]
For the A.Y. 2001-02, the assessee filed loss return belatedly on 31-3-2003. The AO computed the loss at Rs.6,03,14,560, but did not allow the assessee to carry forward the loss including the depreciation by relying on the provisions of sections 80 and 139(3) of the Income-tax Act, 1961. The Tribunal allowed the carry forward of the depreciation of the relevant year and also of the A.Y. 2000-01.
On appeal by the Revenue, the Delhi High Court upheld the decision of the Tribunal and held as under:
“(i) Sections 80 and 139(3) of the Act apply to business losses and not to unabsorbed depreciation which was exclusively governed by section 32(2) of the Act. That being so, the period of limitation for filing loss return as provided u/s.139(1) would not be applicable for carrying forward of unabsorbed depreciation and investment allowance.
(ii) U/s.32(2), unabsorbed depreciation of a year becomes part of depreciation of subsequent year by legal fiction and when it becomes part of the current years depreciation it was liable to be set off against any other income, irrespective of whether the earlier years return was filed in time or not.”
