SOME LOSSES CAN BE CARRY FORWARD EVEN IF RETURN IS FILE AFTER DUE DATE OF FILLING OF RETURN OF INCOME
Many times people file return of income on or before due date is to take benefit of carry forward of losses.
Carry forward of loss is very important as far as the tax planning is concern. However one of the most common way of losing the benefit of adjustment of carry forward losses is late filing of return i.e filing return of income after the due dates. Thus , section 80 get activated. Section 80 , given below, lays down that the carry forward of losses is allow only when the return is filed within due dates.
- 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) 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.Section 80 Clearly Following Losses Shall Not Be Carried Forward And Adjusted Till Loss Is Determined U/S 139(1) i.e., Within Due Date.
• 72(1)- Business Loss
• 73(2) Speculation Loss
• 74(1)-Losses Under Capital Gains
• 74A(3)- Income From Owning And Maintaining Race Horses
There Are Some Losses Which Are Not Affect by Section 80 :
Unabsorb depreciation of past years had to be add to depreciation of the current year and the aggregate unabsorb and current year’s depreciation had to be deduct from the total income of the assessment year.This is affirm in by Supreme Court in CIT v. Jaipuria China Clay Mines (P.) Ltd.
 59 ITR 555. Thus carry forward and adjustment fo depreciation, though of nature of business expenditure, is not dealt in section 72 of the Income Tax Act. Section 32 itself states how it will be carry and how it is to be adjust. Judicial reliance can be place on the decision of Karnataka High court in Brahmavar Chemicals (p) ltd vs CIT 239 ITR 867 (Kar) or 107 CTR 397 (All). Similarly ,it has be hold in the following cases that unabsorb depreciation forms part of the current years depreciation and therefore it can be carry forward and set-off even though the return was file belatedly.
o CIT Vs Virmani Industries (P) Ltd (1995) 216 ITR 607 (SC)
o CIT Vs Joseph Rajappan (1999) 238 ITR 271 (Kar)
o CIT vs. Govind Nagar Sugar Ltd ( 2011) 334 ITR 13 (Delhi)
The Hon’ble Punjab & Haryana High Court in CIT v. Haryana Hotels Ltd. 276 ITR 521/148 Taxman 373 (Punj. & Har.) held as under
“After giving our thoughtful consideration, we are unable to accept the view as laid down by the Madras High Court in Sri Rajarathinam Transports (P.) Ltd.’s case (supra). Under section 32(2) of the Act, the unabsorb depreciation of earlier previous years forms part of the current year’s depreciation and there after allowance for depreciation is given from the current year’s income.
There is no such provision in section 72 of the Act by virtue of which business losses of earlier years shall form part of the current year’s business losses and be allow to be set off from current year’s income. However, only the business losses of earlier years which are notify by the Assessing Officer are allow to be carry forward and set off from the current year’s income.
Similarly, there is no provision under the Act which makes it mandatory. For the assessee to file return for carry forward and set-off of unabsorbed depreciation. Which is to be notified by the Assessing Officer as in the case of unabsorbed business loss. Thus, from a reading of the provisions of the Act, the distinction between unabsorbed depreciation and unabsorbed business loss for the purposes of set off and carry forward is clear”.
- Expenditure on Scientifc Research : Section 35
It has been provided in section 35(4) that provision of section 32(2) will apply for any capital expenditure. On approved scientific research deduction allowable u/s 35(1)(iv) of the Income Tax Act. As the depreciation allowance is not govern by section 72 , its ( allowance under section 35(4) shall also be not affect by section 80 which prohibits carry forward of loss in case of late filing of return.
Please note that only capital expenditure allowable u/s 35(1)(iv) is not affect by late filing, loss due to other revenue expenditure is not allow to be carry forward .
- Loss in case of specified business : section 35AD
Section 35AD of the IT Act provides deduction. For certain specified businesses like setting up and operating. A cold chain facility or setting up and operating. A warehousing facility for storage of agricultural purpose. Building and operating a new hotel of two star or above category and other business. In such case also , if losses are incurre , one can carry-forward and set-off for indefinite period . However , it should be note that losses can be adjust with only against the profit of any such ‘Specific business’ in the subsequent years. Further, the loss can be carry forward for an indefinite period.
The express provision of carry forward and loss of specific business u/s 35AD is provide in section 73A of the I.T.Act which is not mention in either section 80 or section 139(3) . Therefore, its carry forward and adjustment is not affect due to filing of return.
- Unabsorbed Expenditure (Loss) on Family Planning : Section 36(1)(ix)
Section 36(1)(ix) provides that any expenditure bona fideincurred by a company. For the purpose of promoting family planning amongst its employees is allowable . Proviso to this provision clearly states that :
Provided further that the provisions of sub-section. (2) of section 32 and of sub-section .(2) of section. 72 shall apply in relation to deductions allowable under this clause as they apply in relation to deductions allowable in respect of depreciation .
In other words , like depreciation, this allowance is also not affect by section 80 of the Income Tax Act.
- Loss From House PropertyThere is no mention of loss from house property in either section 80 or section 139(3) , therefore it is clear that legislature has not provided any restriction regarding filing of return u/s 139(1) . As such loss can always be carriyforward and adjusted as per the provision u/s 72B of the Income Tax Act.
- Loss from Other Sources
There is no mention of loss from house property in either section 80 or section 139(3). Therefore it is clear that legislature has not provided. Any restriction regarding filing of return u/s 139(1) .As such loss can always be carry forward and adjust. As per the provision u/s 72B of the Income Tax Act.