1983 (10) TMI 80 - AT - Income Tax

Summary

Issues:
- Carry forward of loss for assessment year 1980-81
- Interpretation of section 72(3) of the Income-tax Act, 1961

Analysis:
1. The appeal before the Appellate Tribunal raised a significant question regarding the carry forward of loss. The assessee, a limited company, sought to set off the unabsorbed development rebate and business loss of 1971-72 against the profits of 1980-81.

2. The assessee's accounting year changed due to its parent company's amalgamation, resulting in the books being closed on 30-6-1979 instead of the usual 31-3-1979. This change led to no previous year for the assessment year 1979-80, with the subsequent assessment year being 1980-81, the subject of appeal.

3. The Income Tax Officer (ITO) found a profit for 1980-81 but did not adjust the business loss and development rebate from 1971-72 against it, claiming they had lapsed. The assessee contended that the loss from 1971-72 should have been adjusted first, which was rejected by the Commissioner (Appeals).

4. The crux of the issue revolved around the interpretation of section 72(3) of the Income-tax Act, 1961. The assessee argued that the assessment year mentioned in the Act should be considered in connection with the facts of each year, emphasizing the link between the accounting year and assessment year.

5. However, the Tribunal rejected the assessee's argument, citing the clear wording of section 72(3) which specifies that losses can be carried forward for eight assessment years immediately succeeding the initial assessment year. The Tribunal emphasized the importance of successive assessment years in carrying forward losses.

6. The Tribunal highlighted that while other sections in the statute focus on the previous year, section 72 primarily emphasizes the assessment year. The proviso to section 72(1) regarding the continuity of business in the previous year relevant to the assessment year was deemed applicable even in cases where there was no assessment year due to a change in the accounting year.

7. Ultimately, the Tribunal dismissed the appeal, upholding the strict interpretation of section 72(3) and emphasizing the necessity of considering successive assessment years for carrying forward losses.