T. V. RAJAGOPALA RAO, PRESIDENT :
This is an assessees appeal for asst. yr. 1992-93 against the order of the CIT(A)-II, Mumbai, dt. 25th Sept., 1995.
2. The only question involved in this appeal is whether investment allowance which remained unabsorbed and relating to the asst. yr. 1990-91 can be allowed to be carried forward and set off from the profit of the asst. yr. 1992-93 while completing the assessment proceedings for that year. Admittedly, the income-tax return for asst. yr. 1990-91 was filed long after the time prescribed under s. 139(1), (3) or (4) was over, i.e., on 2nd Feb., 1993. Copy of the income-tax return was furnished at pages 1 and 2 of the paper book filed on behalf of the assessee. The ITO did not accept the return and treated it as non est in the eye of law. In the said return, no doubt, unabsorbed investment allowance was shown at Rs. 24,74,385 and unabsorbed depreciation allowance was shown at Rs. 2,19,395. The Dy. CIT, Spl. Range 21, Mumbai, passed the following order dt. 10th Aug., 1993, regarding the return filed by the assessee on 2nd Feb., 1993, relating to year 1990-91 :
"This is to inform you that the return filed by you for the above assessment year on 2nd Feb., 1993, is not within the provisions of s. 139(4). Therefore, the return is treated as non est".
Against the said order dt. 10th Aug., 1993, the assessee did not file any appeal before the CIT(A). However, it filed a revision petition under s. 264 of the IT Act before the CIT, Bombay City-I. The learned CIT passed his revisionary orders on 21st Feb., 1995. Copy of the said order was filed before the Tribunal. In the course of the said orders, he held that the return should have been filed latest by 31st March, 1992, but the return was filed only on 2nd Feb., 1993. Therefore, the treatment for the return as non est is in order and no interference is called for with the order of the AO treating the order as non est. Regarding carry forward of investment allowance, he held that it is for the assessee to make a claim in the assessment order when such claim could be considered by the AO. If the assessee feels aggrieved, remedial action lies elsewhere the provisions of s. 119(2)(a) may also be considered for the purpose of moving the Board for relaxation of the time-limits fixed by the provisions of s. 139(4). Inter alia, with the above observations, the revision petition filed before him was rejected. For the asst. yrs. 1990-91 and 1991-92, the assessee returned only losses but not shown any income in its returns. For the asst. yr. 1991-92, the assessment was completed under s. 143(3). Copy of the said assessment order was furnished at pages 41 to 43 of the paper book filed by the assessee. While completing the said assessment, the assessed loss of Rs. 24,89,939, though ascertained, was not allowed to be carried forward as the provisions of s. 139(3) were not complied with. Asst. yr. 1992-93 was a profit year. The computation of income for the corresponding accounting year was furnished at pages 84-85 of the paper compilation filed. During the course of the assessment proceedings for that year, the assessee claimed that it is entitled to set off Rs. 24,74,385 as unabsorbed investment allowance relating to asst. yr. 1990-91, though no assessment was made for that year and though no decision was given by the AO for that year whether the amount is liable to be set off or not. The AO did not allow the set off, inter alia, of the unabsorbed investment allowance. While completing the assessment, the AO stated that as per CIT(A)s order No. CIT(A) XXVI/SR. 19/IT/31/92-93, dt. 19th Oct., 1994, investment allowance for 1984-85 is not allowed.
3. We have heard Shri V. H. Patil, the learned advocate for the assessee, and Shri K. L. Tilakchand & Shri Ashutosh Dikshit, learned Departmental Representatives. It is contended by the learned counsel for the assessee that under the provisions of s. 80 even after they were amended under the Direct Tax Laws (Amendment) Act, 1981 (sic), the section does not concern itself with carry forward of unabsorbed investment allowance but confine itself only to carry forward and set off of losses. He argued that loss and investment allowance should (sic - not) be treated on par with each other. The learned CIT, who passed the s. 264 order, appeared to be of the view that unabsorbed depreciation relating to 1990-91 can be carried forward and adjusted from the profits of asst. yr. 1992-93 even though the depreciation was not quantified and was not ordered to be carried forward by the AO in any assessment for asst. yr. 1990-91. However, he was of the view that the same cannot be the case with investment allowance. The view thus held by the learned CIT is not correct in view of the following case law :
CIT vs. Manmohan Das (Decd.) (1966) 59 ITR 699 (SC), Pioneer Enterprises vs. ITO (1995) 53 ITD 435 (Coch); Associated Excavators & Dozers (P) Ltd. vs. ITO (1987) 28 TTJ (Cal) 495 : (1987) 20 ITD 351 (Cal), CIT vs. Dalmia Cement (Bharat) Ltd. (1976) 104 ITR 337 (Mad), Western India Oil Distributing Co. Ltd. vs. CIT (1980) 126 ITR 497 (Bom). He further argued that if one compared the wordings of ss. 32(2) and 32A(3), one finds that they are in pari materia with each other. Therefore, as far as carry forward and set off are concerned, the same treatment should be given for both for depreciation as well as for investment allowance. In fact, the Cochin Bench of the Tribunal (53 ITD 435) applied the ratio of the Supreme Court case in Manmohan Das (supra) both to the unabsorbed depreciation as well as unabsorbed investment allowance and ultimately allowed carry forward of unabsorbed depreciation and investment allowance relating to asst. yrs. 1986-87 to 1988-89 against the income for asst. yr. 1989-90. In fact, the facts of the case before the Tribunal for asst. yrs. 1986-87 to 1988-89 were that the returns were filed belatedly as in this case. It is the claim of the assessees counsel, Shri Patil, that the facts of the present case before us are quite similar to the facts before the Cochin Bench. Shri Patil then adverted to the Supreme Court in (1966) 59 ITR 699 (SC) and argued that in that case Their Lordships had laid down the following ratio as is set out at page 702 :
"Whether the loss of profits or gains in any year may be carried forward to the following year and set off against the profits and gains of the same business, profession or vocation under s. 24(2) has to be determined by the ITO who deals with the assessment of the subsequent year. It is for the ITO dealing with the assessment in the subsequent year to determine whether the loss of the previous year may set off against the profits of that year. A decision recorded by the ITO who computes the loss in the previous year under s. 24(3) that the loss cannot be set off against the income of the subsequent year is not binding on the assessee".
On the basis of this decision, it is sought to be argued that unabsorbed loss or unabsorbed investment allowance when they are not adjusted in any previous year, which was a loss year, can as well be adjusted in a subsequent year in which there was profit. Assessment year 1990-91, in the facts of the case before us, is a loss year. No doubt, there was no assessment made for that year. It is also true that depreciation or investment allowance was not determined for that year. However, the decision of the AO treating the income-tax return for that year as non est carries the implication that business loss or investment allowance is refused to be carried forward or ascertained for that asst. yr. (1990-91). In view of the Supreme Court decision, the order of the AO, which impliedly conveyed his refusal to carry forward and set off the unabsorbed depreciation or investment allowance, is not binding against the assessee since 1990-91 was a loss year. It was only in asst. yr. 1992-93 which was a year in which profit was earned by the assessee was the correct year in which the question of determination as well as carry forward of depreciation as well as investment allowance relating to asst. yr. 1990-91 are to be determined and also are to be set off. This having not been done or not ordered by either of the lower authorities, their orders are vitiated by an error of law and are, therefore, liable to be set aside by this Tribunal in this appeal. The learned counsel for the assessee also relied upon the decision of the Calcutta Bench of the Tribunal in the case of Associated Excavators & Dozers (P) Ltd. vs. ITO (supra) wherein it was held that if the income-tax return was filed much beyond the time - limit specified under s. 139(4), only carry forward of business loss on the basis of said return is not to be allowed. However, carry forward of unabsorbed depreciation on the basis of said return has to be allowed as s. 80 does not speak of unabsorbed depreciation. The learned counsel for the assessee persuaded us to take the stand that the nature of depreciation as well as unabsorbed investment allowance is one and the same and as such the Calcutta Tribunal decision equally holds good even in the case of unabsorbed investment allowance. Thus, he wants us to hold that even though the income-tax return was filed much beyond the time - limit prescribed under s. 139(4), still the assessee is not precluded to claim carry forward of investment allowance in asst. yr. 1992-93 since no sort of assessment was made for asst. yr. 1990-91.
4. The next decision relied upon by the assessees counsel was the Madras High Court decision in the case of Dalmia Cement (Bharat) Ltd. vs. ITO (supra). The facts of the said case were that for the asst. yr. 1960-61 the assessee claimed to set off the losses of the earlier assessment years beginning from 1950-51. This claim was rejected by the ITO holding that during the year in question that the assessee was getting income from a partnership firm, while the business in which the losses were claimed in the earlier years was not being carried on by the assessee in the year in question. This was confirmed on appeal by the AAC. In further appeal, the Tribunal held that the assessee-company would be entitled to bring forward the losses of earlier years and set off against its share income during the two years 1960-61 and 1961-62 on the ground that the losses were incurred in the same business which was originally being carried on by the assessee as a proprietary concern and later on in partnership with others. In reference by the Department, the High Court held that the Tribunal while dealing with the appeals for 1960-61 and 1961-62 has to actually determine the taxable income of the assessee for those years and for this purpose it has necessarily to find out whether the assessee is entitled to carry forward the losses and set them off against the profits of the year in question and if in law the assessee is entitled to carry forward and set off the losses of the previous years in the assessment year in question, the Tribunal cannot refuse to consider the question on the ground that the losses in respect of which the set off has been claimed relate to some earlier years. The Tribunal had jurisdiction to direct the ITO to quantify the losses for the earlier assessment years and allow the set off for the years 1960-61 and 1961-62 and hence the view of the Tribunal was justified. In view of the ratio of the Madras High Court, Shri Patil, learned Advocate for the assessee, argued that the lower authorities are duty-bound to determine both quantum as well as the question of carry forward of depreciation as well as development rebate relating to asst. yr. 1990-91 in making assessment for asst. yr. 1992-93 which is exactly the case put forward by the assessee. Therefore, the lower authorities went wrong in not considering the claim of the assessee and thus, the impugned order of the CIT(A) is liable to be set aside.
4.1. Next, the learned counsel for the assessee relied upon the Bombay High Court decision in Western India Oil Distributing Co. Ltd. vs. CIT (supra). The ratio of this decision very much relied upon by the learned counsel is succinctly stated in the opening para of the head note, which is as follows :
"If in an earlier year it has been held that the correct head of income applicable to the assessees case is under s. 12 of the Indian IT Act, 1922, i.e., Income from other sources, and for that reason the benefit of carrying forward of unabsorbed depreciation is denied to the assessee, such a decision will not bind the assessee in subsequent year in which he wants to claim the set off. He can have the question determined in the later year although in the earlier year in which the decision was given the assessee rested content with the order of the ITO and did not carry the matter any further. The decision of the ITO does not bind the assessee in the very next year or the year thereafter or in any following year. The fact that the question is sought to be redetermined after a lapse of a number of years would have no bearing on the application of this principle."
Thus, the argument of Shri Patil is that even though the assessee did not file any appeal against the order of the AO treating the income-tax return of the assessee as non est, still the question of determination and carry forward of unabsorbed investment allowance can be raised in the assessment made for asst. yr. 1992-93, which is a profit year. Thus, on any count, runs the argument of Shri Patil that the assessee should succeed in this appeal.
5. Vehemently contesting the tenability of the arguments advanced by Shri Patil, Shri Tilakchand, the learned Departmental Representative, contended that the facts of the case before us should be carefully kept in mind and with reference to those facts the law is to be applied and the authorities cited by Shri Patil should not be followed without reference to the facts. He reminded that the assessee filed its return for asst. yr. 1990-91 on 2nd Feb., 1993, which was much beyond the time prescribed under s. 139(4). Thereupon, the AO passed the order which is already brought to our notice and which is found at page 3 of the paper book filed on behalf of the assessee. He treated the return as non est. No appeal was filed against the said order. Having missed the bus, can the assessee revive the claim in asst. yr. 1992-93 without agitating the same for asst. yr. 1990-91, questions Shri Tilakchand. Shri Tilakchand also brings to our notice that the revision petition under s. 264 referred by the assessee on 4th Aug., 1994, stood rejected on 21st Feb., 1995. The learned CIT(A) passed the quantum order for asst. yr. 1992-93 on 25th Sept., 1995. Next, Shri Tilakchand questions the correctness of the argument advanced by Shri Patil that the nature of depreciation and investment allowance is one and the same and they should be treated on par with each other. He argued that depreciation, whether claimed or not, is to be allowed while arriving at the true commercial profits earned by a businessman-assessee. Since it is a charge on profits, it was so held even by the latest Andhra Pradesh High Court decision in the case of CIT vs. Andhra Cotton Mills (1996) 219 ITR 404 (AP), and while holding the said proposition, the Andhra Pradesh High Court followed the Supreme Court decision in CIT vs. Mother India Refrigeration Industries Pvt. Ltd. (1985) 155 ITR 711 (SC). Submitting that there was difference in important legal incidence between depreciation and investment allowance, the learned Departmental Representative submitted that depreciation is to be allowed whether it is claimed or not. However, the claim of investment allowance should be specifically prayed for in the return. Further, for carrying forward depreciation, there was no time-limit prescribed, whereas for carrying forward investment allowance the time-limit was only 8 years and beyond 8 years it cannot be carried forward.
6. Countering the argument of Shri Patil that s. 80 takes into consideration only the business losses but not either depreciation or investment allowance, the learned Departmental Representative contended that commercial profits or losses can be ascertained after duly taking into consideration ss. 28 to 43. Secs. 32(2) and 32A come in between ss. 28 to 43. Therefore, there is no meaning in arguing that s. 80 concerns itself only with business losses and not with either depreciation or investment allowance. Shri Tilakchand distinguished each of the decisions relied upon by the assessee in support of her case. He submitted broadly that in none of the cases cited the situation was obtaining as in the facts of this case -that no sort of assessment was made. For instance, in the case of Associated Excavators & Dozers (P) Ltd. (supra), the assessment was completed under s. 144 for asst. yr. 1978-79 for non-filing of the return. Then, the assessment was reopened under s. 146 of the IT Act. Thereafter, the return was filed disclosing a loss. The ITO made the assessment determining the business loss at Rs. 71,244 and depreciation at Rs. 21,518. However, in this case, no assessment was made at all either under s. 144 or under s. 143(1) or under any other section of the IT Act. Similarly, the learned. Departmental Representative argued that the decision of the Cochin Bench of Tribunal reported in 53 ITD 435 (supra) was also distinguishable on facts. The facts of that case were that though the income-tax returns for asst. yrs. 1986-87 to 1989-90 were filed belatedly showing nil income and claimed carry forward of unabsorbed depreciation and unabsorbed investment allowance, the AO accepted the returns under s. 143(1) in respect of those years but declined to carry forward unabsorbed depreciation and unabsorbed investment allowance. In Manmohan Das (1966) 59 ITR 699 (SC) (supra), the assessment was made for asst. yr. 1950-51 notifying the business loss but refusing to order carry forward of the said loss to the subsequent year. The question there was whether such determined loss can be carried forward in the subsequent year (1951-52), which is a year of profit. Thus, it is clearly distinguishable on the facts of the present case. Adverting to the Madras High Court decision reported in (1976) 104 ITR 337 (Mad) (supra) relied on by the assessees counsel, the learned Departmental Representative pointed out that the very same case went before the Supreme Court and the said decision of the Madras High Court was reversed by the Honble Supreme Court in CIT vs. Dalmia Cement (Bharat) Ltd. (1995) 216 ITR 79 (SC). The facts of that case and the decision rendered both by Tribunal as well as by the High Court and Supreme Court were stated at the headnote at page 80 and 81 of the decision (216 ITR 79), which is as follows :
"The respondent-assessee was a public limited company. During the years 1945 to 1956, it claimed to have suffered losses in its business. On 23rd April, 1956, the respondent-assessee filed its returns, for the first-time, for the previous years relating, inter alia, to the asst. yrs. 1952-53 to 1954-55. The ITO informed the assessee that no cognizance could be taken of the said returns as they had been filed beyond the period stipulated under s. 22(1) and s. 22(2A) of the Act. In respect of the asst. yrs. 1955-56, 1956-57, 1957-58, 1958-59 and 1959-60, for which years the returns were filed in time, the ITO found that the assessee had suffered losses and determined the same for each of the said years. For the asst. yr. 1960-61, the assessee filed, in the first instance, a return disclosing a profit of Rs. 1,00,136, but later filed a revised return showing a loss of Rs. 60,351 after bringing forward and setting off the losses of the earlier assessment years commencing from the asst. yr. 1950-51. The ITO rejected the assessees claim but the Tribunal allowed it. The Tribunal rejected the contention urged by the Revenue before it that inasmuch as the losses had not been quantified for the asst. yrs. 1952-53 to 1954-55, the assessee was not entitled to carry forward the losses of those years for being set off. It also rejected the Revenues contention that during the course of assessment for the asst. yr. 1960-61 or for that matter 1961-62, the Tribunal could not direct the quantification of the losses in respect of the said three earlier assessment years, viz., asst. yrs. 1952-53 to 1954-55. On a reference, the High Court held that the Tribunal, while dealing with the assessment for the years 1960-61 and 1961-62, was justified in directing the ITO to determine the losses in relation to the asst. yrs. 1952-53 to 1954-55 for the purpose of granting relief to the assessee under s. 24(1) and 24(2) in relation to the assessment years in question. On appeal to the Supreme Court :
Held, that the failure in this case related to the anterior stage, namely, failure to make an assessment and determine the loss. Hence, the principle in Khushal Chand Dagas case (1961) 42 ITR 177 (SC) was not applicable. The assessee having failed to appeal against the intimation of the ITO refusing to take cognizance of loss returns filed by the assessee for the asst. yrs. 1952-53 to 1954-55, could not claim in the assessment proceedings relating to subsequent years that the loss in the said earlier assessment years (1952-53 to 1954-55) be determined, carried forward and set off against the profits of the subsequent year or years, as the case may be".
It is also mentioned in the headnote at page 81 that the decision of the Madras High Court in CIT vs. Dalmia Cement (Bharat) Ltd. (supra) was partly reversed by the Honble Supreme Court. It is significant that the appeal itself is against the Madras High Courts judgment in (1976) 104 ITR 337 (Mad) (supra) and it was partly reversed. Therefore, the learned Departmental Representative argued that the learned counsel of the assessee can no more rely upon (1976) 104 ITR 337 (Mad) for the purpose for which he intended to use it in his arguments. The learned Departmental Representative pointed out that the facts of the case before us fall under the first category of cases dealt with by the Honble Supreme Court, i.e., it is a case where the ITO refused to make an assessment on the basis of the return filed. Against the said order of refusal to make an assessment, there was no appeal taken by the assessee. Therefore, the Honble Supreme Courts decision cited above fully applies to the facts of the case and the assessees appeal is liable to be dismissed in limine. For all the above reasons, it is submitted, that the assessee has no case whatsoever and the appeal is incompetent.
7. Thus, after hearing both the sides fully and completely and after perusing the records of the case, we are of the opinion that the arguments of the learned Departmental Representative should be upheld. For the asst. yr. 1990-91, the AO made no sort of assessment. The return filed by the assessee for that year was treated as non est as per the order of the AO at page 3 of the paper book. The assessee, no doubt, claimed depreciation and investment allowance for that year. However, since no assessment was made, there was no scope for the AO to carry forward of depreciation as well as investment allowance claim of the assessee. Assessment year 1991-92 was also a loss year. According to the assessee, asst. yr. 1992-93, which is before this Tribunal, is the proper year in which the claim of depreciation and investment allowance for the asst. yr. 1990-91 should be considered. However, in view of the clear Supreme Court decision in 216 ITR 79 (supra) relied upon by the learned Departmental Representative, the claim of the learned counsel for the assessee is not tenable in view of the fact that the assessment itself was not completed for asst. yr. 1990-91 and we find it easy to decide the appeal against the assessee on this sole point. We, therefore, dismiss the appeal.