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Cit vs Covelong Beach Hotel (India) Ltd. on 11 November, 2002

Madras High Court
Cit vs Covelong Beach Hotel (India) Ltd. on 11 November, 2002
Equivalent citations: 2003 129 TAXMAN 473 Mad
Author: N Balasubramanian


ORDER

N.V. Balasubramanian, J.

The Income Tax Appellate Tribunal has stated the case under section 256(1) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) and referred the following common question of law for the assessment years 1986-87 and 1987-88 :

“On the facts and in the circumstances of the case, whether the Income Tax Appellate Tribunal was right in law in holding, that the assessee is entitled to set off of business loss pertaining to assessment year 1978-79 in computing the taxable income for the assessment years beyond 1986-87 ?”

2. The question that arises in both the tax cases is whether the assessee is entitled to carry forward the business loss relating to the assessment year 1978-79 beyond the assessment year 1986-87. The issue has arisen because at the option of the assessee there was a change in the previous year with the result there was no assessment for the assessee for the assessment year 1983-84. The submission of the assessee was that the loss in question arose in the assessment year 1978-79 should be taken into account while computing the income beyond the assessment year 1986-87 by carry forwarding the loss determined for the assessment year 1978-79 and that the assessment year 1983-84 has to be excluded as there was no assessment.

3. The Income Tax Officer rejected the claim of the assessee, which was also affirmed by the Commissioner (Appeals). The Appellate Tribunal accepting the claim of the assessee held that since there was no assessment for the year 1983-84, the assessment year 1983-84 has to be excluded and the period of eight years, as provided under section 72(3) of the Act, has to be determined by excluding the assessment year 1983-84. The revenue has challenged the order of the Income Tax Appellate Tribunal and hence this reference.

4. We heard the learned senior standing counsel for the Income Tax Department and Mr. P.P.S. Janarthana Raja, learned counsel appearing for the assessee.

5. It is fairly brought to the attention of the court the decision of the Supreme Court in Premier Cable Co. Ltd. v. CIT (1999) 237 ITR 202 (SC) and submitted that the ratio laid down in the above Supreme Court decision would apply to the facts of the case on hand. The Supreme Court was considering a similar question relating to change in the previous year when there was no assessment for one year due to change of previous year and the question considered was whether the assessee is entitled to carry forward the development rebate or deduction under section 80J of the Act beyond the period admissible for the carry forward to the development rebate and the deduction under section 80J of the Act and the Supreme Court held as under :

“……..The unabsorbed development rebate under section 33 and the unabsorbed deduction under section 80J may be carried forward only for the eight and four assessment years, respectively, that follow the assessment year relevant to the previous year in which the said development rebate and deduction were first earned. The fact that, in the instance case, the assessee did not have a previous year relevant to a particular assessment year that fell within these spans of eight and four assessment years, respectively, is of no consequence to the calculation of the periods for which the aforesaid development rebate and deduction can be carried forward.” (p. 208)

Though the decision of the Supreme Court was rendered with reference to the carry forward of the development rebate and carry forward the deduction under section 80J of the Act, we hold that the principles laid down by the Supreme Court would equally apply to carry forward of business loss as well as the language employed under section 33(ii) of the Act is similar to the language employed in sub-section (3) of section 72 of the Act, which provides that no loss shall be carried forward for more than eight assessment years immediately succeeding the assessment year for which the loss was first computed. Though there was no assessment for the assessment year 1983-84 due to change in the previous year still that assessment year has to be reckoned and taken into account for the purpose of determination of the eight assessment years under section 72(3) of the Act to carry forward its business loss. We, therefore, hold that the assessee is not entitled to carry forward the loss determined for the assessment year 1978-79 beyond the period of eight years notwithstanding the fact that due to change in the previous year there was no assessment for one assessment year during the said period of eight assessment years allowed to carry forward the business loss and the change in previous year is of no consequence in determining the period of carried forward business loss provided under section 72(3) of the Act. Accordingly, we answer the question of law referred to us in both the cases in the negative and in favour of the revenue and against the assessee. Under the circumstances, there will be no order as to costs.

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