SECTION 80 l LOSS – SUBMISSION OF RETURN FOR
Effect of order passed by Board for Industrial and Financial Reconstruction under scheme for rehabilitation of sick units on determination of losses
1. Attention is invited to Circular No. 523, dated 5th October, 1988 wherein it was pointed out that if the Board for Industrial and Financial Reconstruction (BIFR) sanction a scheme under section 17(3) of the Sick Industrial Companies (Special Provisions) Act, 1985, specifically excluding or limiting the application of sections 41(1), 79 and 115J of the Income-tax Act, 1961 in respect of specified assessment years, then the Assessing Officer will have to take due cognizance of this order and give effect to the same.
2. The Central Board of Direct Taxes have since examined the question regarding carry forward and set-off of loss in the case of a sick company, where the return of loss has been filed beyond the time allowed under section 139(3). Under the existing provisions of section 80, no loss is allowed to be carried forward or set-off unless the return of loss has been filed in accordance with the provisions of section 139(3). CBDT have been advised that if a sick company fails to file the return of loss within the stipulated time specified in section 139(3), and a scheme made pursuant to an order under section 17(3) of the Sick Industrial Companies (Special Provisions) Act, 1985 is sanctioned by the BIFR under section 18 of that Act, specifying a particular tax treatment for the carry forward and set-off of loss incurred by the sick company, the said scheme will have overriding effect over the provisions of section 80 of the Income-tax Act. In such a situation, the Assessing Officer will have to take cognizance of the scheme and give effect to the carry forward and set-off of loss as provided for under the scheme.
3. It is, however, clarified that BIFR have no authority to pass orders under section l7(2) of the Sick Industrial Companies (Special Provisions) Act authorising a sick company to file its return late or directing the Assessing Officer to allow carry forward of such loss. However, BIFR have the authority to direct any operating agency to prepare a scheme under section 18 of the said Act. Such a scheme will automatically take into consideration the losses suffered by the sick company and may also lay down that carry forward of loss etc. should be allowed regardless of the fact that the return of income has not been filed within the time allowed under section 139(3). Once the scheme is sanctioned by BIFR, it will have overriding effect over the provisions of the Income-tax Act, 1961 in regard to the matters covered in Circular No. 523 of 5th October, 1988 and in this Circular.
Circular : No. 576, dated 31-8-1990.