Case Law Details
RELEVANT PARAGRAPH
11. Having heard the learned counsel for the Revenue as well as the assessee we are of the view that the answers to the questions framed has to be found in favor of the assessee and against Revenue for the reasons given hereinafter. It is clear upon perusal of the facts and circumstances quoted by us herein above that if JISCO had to have a successful rights issue it was incumbent that it received a subscription equivalent to at least 90% of the issue. The condition with respect to the same imposed by SEBI while approving the rights issue was quite explicit in that regard. The fact that there was an arrangement between JISCO and UT1 as also the fact that upon receipt of the face value of Rs 500/- per debenture JISCO would issue DW which would enable the holder to acquire one equity share in the JISCO, was clearly part and parcel of the terms and conditions of the issue. The arrangement between a public financial institution- UTI and JISCO for part financing the investment had been examined by the Tribunal in the first round. The Tribunal after noting the benefit which had accrued both to the assessee, and UTI, that is, while the assessee had acquired an equity share on the other hand UTI had acquired not only a SRNCD of a face value of Rs 500/- at the rate of Rs 389/- but also a yield of nearly 24%; it reversed the orders of the Assessing Officer and the CIT( A) and held that the assessee was entitled to claim a loss on sale of SRNCD to UTI as a “business loss” at the rate of Rs 111/- per SRNCD. By the very same order dated 05.06.2000 the Tribunal directed the Assessing Officer to allow deduction of loss at the rate of Rs 111/- per SRNCD.
12. The Assessing Officer (Joint Commissioner of Income Tax) while giving effect to the order of the Tribunal dated 05.06.2000 verified the loss of SRNCD. Upon verification of the loss the Assessing Officer adjusted the loss on the sale of 11,98,000 SRNCD at the rate of Rs 111/-per SRNCD amounting to Rs 13,29,78,000/ – against an income of Rs 7,01,96,195/- and arrived at a loss of Rs 6,27,81,805/ – under Section 143(3) of the Act. The Assessing officer, however, observed that the assessee was not entitled to carry forward the said assessed loss of Rs 6,27,81,805/- and set it off against its future income as the loss had been determined during the course of the proceedings by virtue of a letter dated 24.03.1998 filed before the Assessing Officer in the first round and was not loss determined in pursuance of a return filed in accordance with the provisions of Section 139(2) of the Act and hence, could not be carried forward and set off under Section 80 of the Act. This view was sustained by the CIT(A). We are of the view that the Tribunal correctly appreciated the provisions of Section 80 of the Act read with Section 139(3) of the Act and allowed the carry forward of loss for the purposes of set off against income of the subsequent year(s). A plain reading of provision of Section 80 of the Act permits an assessee to carry forward a loss and seek its set off under Section 72(1) or 73(2) or sub-section (1) of Section 74 or 74A(3) except when, the loss has not been determined in pursuance of a return filed in accordance with provisions of sub-section (3) of Section 139. Section 80 of the Act reads as follows:-
“‘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 subsection (3) of Section 139 shall be carried forward and set off under sub-section (I) 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.”
12.1 In the instant case, there is no doubt that the assessee had filed a return under Section 139 of the Act within the prescribed time. It is also not disputed that a loss had been claimed even though the same had been claimed to the extent of Rs 90/- and that too as a capital loss with respect to DWs issued to the assessee, on the assessee investing in the rights issue of JISCO. The assessee carried out a course correction by claiming a loss on sale of SRNCDs to UTI at Rs 111/- per SRNCD as they had sold SRNCDs of a face value of Rs 500/- to UTI at Rs 389/- per SRNCD. The Tribunal in the first round in its order dated 05.06.2000 came to a conclusion based on the judgments of the Supreme Court as well as those of various High Courts that what was important and relevant was the true legal effect of a transaction and in coming to the said conclusion the view that the assessee may take in the return of income or the treatment that is meted out in the books of accounts or the method of accounting that an assessee uses are not relevant in considering the effect to be given to the transactions which are governed by the provisions of the Act. The Tribunal went on to observe while allowing the claim of loss by the assessee that the fact that in the return filed by the assessee wherein the assessee does not take a proper position, cannot be a ground to take advantage of the ignorance of the assessee if the assessee is otherwise entitled to relief and/or claim of loss as in the instant case. Keeping the aforesaid rationale in mind the Tribunal vide order dated 05.06.2000 had directed the Assessing Officer to allow the assessee’s claim of loss on sale of SRNCDs at the rate of Rs 111/- as a business loss. It is evident that the Assessing Officer (Jt. Commissioner of Income Tax) in the second round while giving effect to the orders of the Tribunal dated 05.06.2000 was determining the income/loss in pursuance of an original return filed by the assessee under . Section 139 of the Act. In the return the assessee had claimed erroneously a loss to a lesser extent that is at Rs 91/- against DWs as against SRNCDs which was corrected pursuant to a stand taken before conclusion of proceedings by the Assessing Officer in the first round and a stand which was sustained by the Tribunal by its order dated 05.06.2000. In view of the said circumstances obtaining in the present case the Tribunal in the second round vide the impugned judgment has correctly held in our opinion, that both the CIT(A) and the Assessing Officer had misdirected themselves in law in preventing the carry. Forward and the set off of the assessed loss against subsequent profits as the conditions prescribed for triggering the provisions of section 80 of the Act were not present in the instant case.
