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Income Tax Appellate Tribunal, DELHI BENCH “E”: NEW DELHI
Before: MS. SUSHMA CHOWLA & SHRI PRASHANT MAHARISHI
O R D E R PER PRASHANT MAHARISHI, A. M. 1. This appeal is filed for AY 2012-13 by the ld Additional Commissioner of Income- tax, Special Range-6, New Delhi [ The Ld AO] against the order of the ld CIT(A)-33, New Delhi [The ld CIT (A) ] dated 11.11.2016. 2. The ld AO has raised the following grounds of appeal:- “1. Whether in facts and circumstances of the case, the ld CIT(A) is legally justified in determining the business loss of Rs. 735615769/- for Assessment Year 2012-13 by allowing carried forward loss of Rs. 691894858/- in the case of belated return in his cryptic order without giving Assessment Year basis and reason for allowance of such carried forward loss.
2. Whether in facts and circumstances of the case the ld CIT (A) is legally justified in determining the business loss of Rs. 735615769/- for Assessment Year 2012-13 by allowing carried forward loss of Rs. 691894858/- in the case when the assessee had filed its return of income beyond stipulated time and by ignoring the provisions of section 139(3) of the Income Tax Act, 1961.”
Brief facts of the case shows that the assessee is a company engaged in the business of installation, testing and commissioning services for Nortel Group. For AY 2012-13, it filed its return of income on 02.01.2013 declaring total income of Rs. Nil. In the return of income the assessee has shown current year’s loss of Rs. 73,56,15,769/- which includes unabsorbed deprecation of Rs. 4,37,20,911/-. This return was filed by the assessee after due date prescribed u/s 139(1) of the Income Page | 1 Tax Act, 1961. The assessment u/s 143(3) of the Act was passed by the ld AO on 24.03.2015. The ld AO noted that the assessee company has filed return of loss on 02.01.2013 and claimed carry forward of the same u/s 72 of the Act. The assessee was asked to justify the same. The assessee submitted that out of total loss of Rs. 73,56,15,769/-, Rs. 4,37,20,911/- is on account of unabsorbed depreciation and balance of Rs. 69,18,94,858/- is a business loss for the year. The assessee submitted that as return of income is filed late, business loss of Rs. 69,18,94,858/- cannot be carried forward to subsequent year. However, the unabsorbed deprecation of Rs. 4,37,20,911/- is allowable to be carried forward. The ld AO held that the assessee could not claim carry forward and set off loss u/s 72 of the Act. Therefore, he made an addition/ disallowance of Rs. 69,18,94,858/- and assessed the unabsorbed depreciation of Rs. 4,37,20,911/- to be carried forward. Thus against the return loss of Rs. 73,56,15,769/- , he determined the loss of Rs. 4,37,20,911/-. He further held that assessee is eligible to carry forward the unabsorbed deprecation to that extent.
Against this order, the assessee preferred an appeal before the ld CIT (A) wherein, the assessee raised several claims. However, the only grievance of the revenue is with respect to carry forward of the losses, it is discussed by the ld CIT (A) in para 6 of this order. He held as under:-
“6. Ground no. 3 relates to reduction of assessed losses. In the Assessment order the A.O. has recorded as under:- “During the course of assessment proceedings, it is noticed that the assessee company had filed return of income/loss on 02.01.2013 and such losses were claimed for carry forward u/s 72 of the Act. The AR of the assessee company was asked to justify such expenses, which were carry forward u/s 72 of the Act even the return was filed after due date u/s 139(4) of the Act. As per section 139(3) of the Act, which reads as under: “If any person who has sustained a loss in any previous year under the head ‘profit and gains of business of profession and claims that the loss or any part of thereof should be carried under sub section(1) of section 72, he may furnish, with in time allowed under sub section (1) of section 139 of the Act”. 3.2 In response to query raised, the AR of the assessee company has furnished the reply on 03.07.2014, which is summarized as under.- “Show cause as to why loss claimed at Rs.73,56,15,760/- claimed to be carried forward may not be rejected for carry forward because return is not tiled under section 139(1). As per the return of income filed for the subject AY. Nortel India has incurred tax loss of lNR 73,56,15,769 under normal provisions of the Act. Out of the aforesaid tax loss INR 4,37,20,911 is on account Page | 2 of unabsorbed depreciation and balance INR 69,18,94,858 pertains to business loss. As per section 139(3) of the Act, business loss of a particular year determined under section 72 of the Act is not allowed to be carried forward and set off if the return of income of that year is not filed within the time limit prescribed under section 139(1) of the Act. In the instant case, since the return of income of Nortel India for AY 2012-13 was a belated return, i.e. it was filed after the due date prescribed under section 139(1) of the Act, business loss of INR 69,18,94,858 cannot be carried forward to subsequent years. However, the aforesaid restriction does not apply to carry forward of unabsorbed depreciation which is governed by section 32 of the Act and not by section 72 of the Act. Section 32(2) of the Act provides that where any depreciation allowance or part of it cannot be given effect to in a particular year due to shortage of profits, then such allowance or part thereof respectively shall be carried forward and shall be treated as part of depreciation of the subsequent year and so on for the succeeding years. Neither section 139(3) nor section 32 lay down any pre-requisite of filing the return of income within prescribed time limit for carry forward of such unabsorbed depreciation. Hence, in the instant case, unabsorbed depreciation of INR 4,37,20,911 is permitted to be carried forward and set off in subsequent years. It has never been Nortel India’s claim that the entire loss of INR 73,56,15,769 should be earned forward for set off in subsequent years. It may be noted that under Schedule ‘CFL’ of the return from of the subject year, as per point (ix), current year loss is INR 103,53,91,879 and as per point (x), total loss earned forward to future years is INR 99,80,81,888 (including loss of INR 24,88,69,227 carried forward from AY 2011-12. The amounts as per points (ix) and (x) have been automatically computed from other schedules of the return form in the return form utility and have not been specifically input by Nortel India while filling the return form. These amounts only represent the loss incurred by Nortel India and not the amounts available for carry forward after application of section 139(3) of the Act. Given the format of thee return form utility downloaded from the income tax website, Nortel India never had the option to separately show the portion of business loss which is not being carried forward. In the next schedule in the return from of the subject AY, i.e. Schedule ‘IID’, Nortel India has disclosed the amount of unabsorbed depreciation of INR 4,37,20,911 being carried forward to subsequent year(s).” 3.3 The reply of the AR of the assessee has duly been considered and it is held that as per provision of section 139(3) of the Act, the assessee company is not entitled for carry forward and set off of losses u/s 72 of the Act, however, the assessee company has claimed for carry forward of the same. The return was filed on 02.01.2013 after due date, i.e. 30.11.2012. Further, it is observed that the assessee company has not pointed out this mistake, i.e. systems error in very beginning of the assessment proceedings, but rather, it has pointed out this mistake after the show cause was issued to the assessee company. Thus, the business loss of Rs.69,18,94,858/-, after excluding the un absorbed depreciation of Rs.4,37,20,911/- from the total loss of Rs.91,49197/-, is Page | 3 disallowed and the same is added back to the total income of the assessee company. ” 6.1. During the appellate proceedings the appellant has demonstrated from the Return of Income for A.Y. 2013-14 the fact that in view of late filing of Return the appellant had no carried forward the losses of A.Y. 2012-13 amounting to Rs.69,18,94,858/- to A.Y. 2013-14. Only Unabsorbed Depreciation amounting Rs.4,37,20,911/- was carried 6.2. I have considered the action of the A.O. and the submissions of the appellant. In view appellant’s suo-moto not carrying forward the loss as per the provisions of Section 80 to the next year, the action of the A.O. only reiterates the suo-moto action of the appellant. Section 80 reads as under:- Notwithstanding anything contained in this Chapter, no loss which has not been determined in pursuance of a return filed [in accordance with the provisions of sub- section (3) of section 139], shall be carried forward and set off under sub-section (1) of section 72 or sub-section (2) of section 73 or sub-section (1) [or sub-section (3)]of section 74 [or sub-section (3) of section 74A].” 6.3. It is clear/ from the above that for late filing of Return the assessee is not allowed to carry forward the current year loss to the next year. However, Section 80 does not interfere in the computation of current year loss. In view of this observation I determine the business loss for A.Y. 2012-13 @ Rs.73,56,15,769/- out of which only Rs. 4,37,20,911/- representing Unabsorbed Depreciation is allowed to be carried forward to the next year as is the treatment given by the appellant itself. The ground is allowed.”