Alwarpet Benefit Fund Limited, CHENNAI V. DCIT, CHENNAI

ITA 1376/CHNY/2014

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1654 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-09-2015
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 27-07-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 19-05-2014
• Court: TRIBUNAL
• Department Lawyers: S DASGUPTA
• Assessee Lawyers: A KANAGARAJC A
• Keywords: Reopening of assessment; Depreciation; Bad and doubtful debts; Capital receipt; Unabsorbed depreciation; Revenue expenditure
• Section: 143(3); 32; 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . , . ! '# , $ % BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI V. DURGA RAO, JUDICIAL MEMBER ./ I.T.A.NO.1376/MDS./2014 ( / ASSESSMENT YEAR : 2003-04) M/S.ALWARPET BENEFIT FUND LTD. NEW NO.40, OLD NO.75, VASANTH APARTMENTS, C.P.RAMASWAMY ROAD, CHENNAI 600 018. VS. DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE 1(1), CHENNAI-34. PAN AAACA 6254 D ( &' / APPELLANT ) ( ()&' / RESPONDENT ) / APPELLANT BY : MR.A.KANAGARAJ,C.A /RESPONDENT BY : MR.S.DASGUPTA, JCIT, D.R / DATE OF HEARING : 27.07.2015 ! /DATE OF PRONOUNCEMENT : 03.09.2015 * / O R D E R ITA NO.1376 /MDS/14 2 PER A.MOHAN ALANKAMONY , ACCOUNTANT MEMBER: THIS APPEAL IS FILED BY THE ASSESSEE , AGGRIEVED B Y THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(A)-I, CHENNA I DATED 25.03.2014 IN ITA NO.335/2010-11/A-I PASSED UNDER SEC.143(3) READ WITH SEC.147 & SEC. 250 OF THE ACT. 2. THE ASSESSEE HAS RAISED TEN ELABORATE GROUNDS I N ITS APPEAL; HOWEVER THE CRUXES OF THE ISSUES ARE THAT:- (I) THE LD. CIT (A) HAD ERRED IN CONFIRMING THE RE OPENING OF ASSESSMENT U/S.148 OF THE ACT. (II) THE LD. CIT (A) HAD ERRED IN CONFIRMING THE DISALLOWANCE OF REBATE ALLOWED TO CUSTOMERS TO THE EXTENT OF ` 3,94,59,120/- WHICH IS NOTHING BUT BAD DEBTS WRITTEN OFF IN THE B OOKS OF ACCOUNTS OF THE ASSESSEE RELATING TO INTEREST ACCRU ED ON ADVANCES ` 2,32,15,838/- & PRINCIPAL AMOUNT ` 1,62,43,282/-, WHEN THE ASSESSEE IS A NON-BANKING FINANCIAL INSTI TUTIONS (NBFC). (III) THE LD. CIT (A) HAD ERRED BY HOLDING THAT THE BUSINESS LOSSES CANNOT BE ALLOWED AS SET OFF IN THE CASE OF THE ASSESSEE ITA NO.1376 /MDS/14 3 DUE TO NON FILING OF RETURN BEFORE THE DUE DATE WIT HOUT CONSIDERING EXTRAORDINARY CIRCUMSTANCES FACED BY TH E ASSESSEE IN FINALIZING ITS ACCOUNTS. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE IS A NON- BANKING FINANCIAL COMPANY, FILED ITS RETURN OF INCO ME FOR THE ASSESSMENT YEAR 2003-04 ON 31.10.2003 ADMITTING ITS TOTAL LOSS OF ` 4,27,61,528/- AFTER CLAIMING EXPENDITURE IN THE NAT URE OF REBATE AND DISCOUNT OF ` 3,94,59,120/-. INITIALLY THE RETURN WAS PROCESSED U/S.143(1) ON 29.11.2003 ACCEPTING THE RETURN. HOW EVER DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2007-08, IT WAS REVEALED THAT THE ASSESSEE HAD STOPPED CREDI TING ITS ACCRUED INTEREST ON UNREALIZABLE LOANS AND ADOPTED CASH MET HOD FOR RECOGNIZING SUCH INTEREST INCOME. FOR THE ABOVE STA TED REASON THE LD. ASSESSING OFFICER OPINED THAT THE INTEREST WAIV ED DURING THE RELEVANT ASSESSMENT YEAR CANNOT BE CLAIMED AS DEDUC TION BECAUSE THE SAME WAS NOT OFFERED FOR INCOME IN THE EARLIER YEARS. SINCE THE ASSESSEE HAD NOT DISCLOSED MATERIAL INFORMATION ON THESE ASPECTS, THE LD. ASSESSING OFFICER WAS OF THE VIEW THAT INCO ME CHARGEABLE TO ITA NO.1376 /MDS/14 4 TAX HAD ESCAPED ASSESSMENT AND THEREFORE A NOTICE U /S.148 WAS ISSUED ON 04.03.2010 WITH RESPECT TO THE RELEVANT A SSESSMENT YEAR. IN RESPONSE, THE ASSESSEE RESPONDED VIDE ITS LETTER DATED 10.03.2010 STATING THAT THE RETURN OF INCOME FILED ON 31.10.20 03 FOR THE ASSESSMENT YEAR 2003-04 MAY BE TREATED AS RETURN FI LED IN RESPONSE TO NOTICE U/S.148 OF THE ACT. THE ASSESSEE ALSO RE QUESTED FOR FURNISHING THE REASONS FOR REOPENING WHICH WAS COMP LIED BY THE LD. ASSESSING OFFICER VIDE LETTER DT 17.02.2010. SUBSE QUENTLY THE ASSESSMENT WAS COMPLETED U/S.143(3) R.W.S 147 OF TH E ACT ON 08.12.2010 WHEREIN THE LD. ASSESSING OFFICER DISALL OWED ` 3,94,59,120/- BEING THE CLAIM OF THE ASSESSEE TOWAR DS REBATE AND DISCOUNT AND DENIED TO CARRY FORWARD THE ASSESSEES BUSINESS LOSS OF EARLIER YEARS WHERE THE RETURN OF INCOME WAS NOT FI LED WITHIN THE TIME LIMIT PRESCRIBED U/S.139(3) OF THE ACT. 4.1 WHILE DOING SO, THE LD. ASSESSING OFFICER OBS ERVED AS UNDER:- REBATE & DISCOUNT ON LOAN RS.3,94,59,120/-: - THE ASSESSEE HAS DEBITED AN AMOUNT OF ` 3,94,59,120/- UNDER THE HEAD REBATE AND DISCOUNT ALLOWED ON LOANS IN THE P&L A/C. REBATES & DISCOUN TS ON LOAN ARE CAPITAL IN NATURE. SINCE LOANS ARE CAPITAL IN NATURE, HENCE, A S A COROLLARY, ANY REBATE ITA NO.1376 /MDS/14 5 ON SUCH CAPITAL RECEIPT IS ALSO A CAPITAL ITEM. MO REOVER, IN THE INSTANT CASE, INTEREST ON LOANS IS ALSO BEING OFFERED TO TAX ONLY ON CASH BASIS, AND NOT ON MERCANTILE BASIS. HENCE, EVEN IF IN PRINCIPLE ANY R EBATE ON INTEREST ACCRUED OFFERED TO TAX EARLIER IS HELD TO BE ALLOWABLE, THE SAME IS NOT SO IN THE ASSESSEES CASE. HENCE, REBATE & DISCOUNTS CLAIMED ARE DISALLOWED AND ` 3,94,59,120/- IS ADDED TO RETURNED INCOME. 4.2 FURTHER, THE LD. ASSESSING OFFICER HELD THAT T HE CARRY FORWARD OF BUSINESS LOSS CANNOT BE ALLOWED TO THE RELEVANT ASS ESSMENT YEAR BECAUSE THE ASSESSEE HAD NOT FILED ITS RETURN OF IN COME FOR THE ASSESSMENT YEARS 1999-2000, 2000-01 & 2001-02 WITHI N THE TIME LIMIT PROVIDED U/S.139(1) OF THE ACT. 5.1 ON APPEAL, THE LD. CIT (A) UPHELD THE REOPENI NG BEYOND THE PERIOD OF 4 YEARS BY OBSERVING AS UNDER:- IT WAS ALSO NOTICED DURING THE ASSESSMENT PROCEEDI NGS FOR A.Y 07-08 THAT THE ASSESSEE HAS STOPPED SHOWING INTEREST ON U NREALIZED LOANS ON ACCRUAL BASIS. SINCE THE REASONS FOR SHOWING THE W AIVER OR REBATE ON LOANS AS REVENUE EXPENDITURE WAS NOT FORTHCOMING FROM THE RECORDS, THE ASSESSING OFFICER HAS REOPENED THE ASSESSMENT AND R EDUCED THE CLAIM FROM THE LOSSES RETURNED BY THE APPELLANT IN HIS RE -ASSESSMENT AND REDUCED THE CLAIM FROM THE LOSSES RETURNED BY THE APPELLANT IN HIS RE-ASSESSMENT U/S.147. FURTHER, IT IS THE PREROGATIVE OF THE ASSE SSING OFFICER TO VERIFY THE CORRECTNESS OF THE CLAIM BY REOPENING THE ASSESSMEN T U/S.147 BY FOLLOWING DUE PROCEDURE. THEREFORE, THE OBJECTION RAISED BY T HE APPELLANT FOR ITA NO.1376 /MDS/14 6 REOPENING THE ASSESSMENT DOES NOT MERIT MUCH. FURTH ER THE REOPENING OF ASSESSMENT IS CONSIDERED VALID IN THE FOLLOWING DEC ISIONS. (I) HONBLE GUJARAT HIGH COURT REPORTED IN 33 TAXM AN.COM 426 (II) HONBLE DELHI HIGH COURT REPORTED IN 358 ITR 1 44 (III) HONBLE SUPREME COURT REPORTED IN 102 ITR 287 (IV) HONBLE GUJARAT HIGH COURT REPORTED IN 236 ITR 832 (V) ITAT CHENNAI TRIBUNAL IN CHENNAI PETROLEUM COR PN.(ITA NO.66/11- 12/LTU(A) DT.8.1.13) (VI) HONBLE DELHI HIGH COURT REPORTED IN 197 TAXMA N 415 (2011) (VII) HONBLE HIGH COURT OF MUMBAI REPORTED IN 30 T AXMAN.COM 211(2013), (VIII) ABOVE ALL, IT IS THE PREROGATIVE OF THE ASS ESSING OFFICER/REVENUE TO REOPEN THE ASSESSMENT IF THE ASSESSING OFFICER HAS FOUND IN THE COURSE OF TIME THAT CERTAIN AMOUNTS WHICH SHOULD HAVE BEEN BR OUGHT TO TAX HAVE ESCAPED ASSESSMENT. THE POWERS WERE CLEARLY ENACTED U/S.149 RWS 151 OF THE ACT. AS PER THESE PROVISIONS WHAT THE ASSESSING OFFICER IS SUPPOSED TO FULFILL IS TO SEE WHETHER THE ESCAPEMENT OF INCOME OF AT LEAST RS.50,000/- IS THERE OR NOT IF IT IS WITHIN FOUR YEARS AND RS.1 L AKHS IF IT IS BEYOND FOUR YEARS, WHETHER IT IS A CASE OF 143(3) AND WHETHER HE HAS T AKEN APPROVAL FROM HIS SENIOR OFFICERS AS PER THE PROVISIONS. ONCE THE ASS ESSING OFFICER FULFILLS THESE REQUIREMENTS THEN HE CAN REOPEN THE ASSESSMEN T BY RECORDING THE REASONS. THE ASSESSING OFFICER WILL BE WITHIN HIS J URISDICTION TO REOPEN THE ASSESSMENT AND HIS JURISDICTION CANNOT BE CHALLENGE D PER SE. 4.2.1 IN VIEW OF THE ABOVE DISCUSSION, THE OBJECTIO N RAISED FOR REOPENING THE ASSESSMENT ON MERE TECHNICALITY IS DEFEATED. LET US MOVE ON TO THE MERITS OF THE CASE. ITA NO.1376 /MDS/14 7 5.2 ON THE ISSUE OF THE CLAIM OF REBATE AND DISCOU NT, THE LD. CIT (A) AGREED WITH THE VIEW OF THE LD. ASSESSING OFFICER B Y STATING AS FOLLOWS:- I HAVE CAREFULLY CONSIDERED THE FACTS AND CIRCUMST ANCES OF THE CASE. WHEN LOANS ARE ADVANCED, EITHER AS A FINANCE COMPANY OR AS A REGULAR BUSINESS HOUSE, THE INTEREST WILL BE CREDITED TO THE P&L A/C AND THE BALANCE RECEIVABLE ON ACCOUNT OF PRINCIPLE AND UNPAID INTER EST, IF ANY, IN THE BALANCE-SHEET AS SUNDRY DEBTORS RECEIVABLES. FROM THE FACTS OF THE CASE AS OBSERVED BY THE ASSESSING OFFICER, I AGREE THAT THE AMOUNT REMAINED AS RECEIVABLES IN THE BALANCE-SHEET WILL BE A CAPITAL ITEM AND THE WAIVER OF SUCH ITEM, PART OR FULL, SHOULD BE ADJUSTED FROM TH AT ACCOUNT ONLY AS SUCH IT WILL NOT PARTAKE THE CHARACTER OF REVENUE AND NOT E LIGIBLE TO CLAIM AS EXPENDITURE IN THE P&L A/C. IN VIEW OF THIS THE DIS ALLOWANCE MADE BY THE ASSESSING OFFICER IS SUSTAINED. THE GROUND IS DISMI SSED. 5.3 WITH RESPECT TO THE ISSUE OF CARRY FORWARD AN D SETOFF OF BUSINESS LOSSES, THE LD. CIT(A) ALLOWED THE SAME TO THE EXTE NT OF UNABSORBED DEPRECIATION, HOWEVER DENIED THE BUSINESS LOSSES TO BE CARRY FORWARD AND SET OFF BECAUSE THE ASSESSEE HAD NOT FILED THE RETURN OF INCOME WITHIN THE TIME LIMIT PROVIDED U/S.139(1) OF THE AC T. 6.1 BEFORE US, LD. A.R SUBMITTED WITH RESPECT TO ALL THE THREE ISSUES I.E., IN REGARD TO REOPENING OF ASSESSMENT U/S.148 OF THE ACT, ITA NO.1376 /MDS/14 8 DISALLOWANCE OF BAD DEBTS AND DISALLOWANCE OF THE C LAIM OF SET OFF OF UNABSORBED BUSINESS LOSSES OF THE EARLIER YEARS AS FOLLOWS:- 6.2. REOPENING OF ASSESSMENT U/S.148 OF THE ACT :- THE ASSESSMENT WAS REOPENED ON THE BASIS OF OBSER VATION IN THE ASSESSMENT PROCEEDINGS OF ASSESSMENT YEAR 2007- 08, WHICH IS NOT CORRECT. MOREOVER THE REASON GIVEN BY THE ASSES SING OFFICER IS NOT APPLICABLE TO THE APPELLANT IN VIEW OF THE PROV ISIONS OF SECTION 36(1)(2) WITH REGARD TO MONEY LENDING BUSINESS. HEN CE HE IS NOT JUSTIFIED IN IGNORING THE OBJECTION OF THE APPELLAN T AND DISALLOWING EXPENSES CLAIMED INVOKING THE PROVISIONS OF SECTION 148 ASSESSMENT MADE ON THE BASIS OF WRONG REASONING IS NOT VALID I N LAW. 6.3. DISALLOWANCE OF BAD DEBTS:- THE LD. A.R. SUBMITTED THAT THE INTEREST PORTION WRITTEN OFF DURING THE RELEVANT ASSESSMENT YEAR WAS ALREADY CRE DITED AS INCOME IN THE HANDS OF THE ASSESSEE FOR THE EARLIER ASSESS MENT YEARS AND ONLY SUCH INTEREST PORTION WHICH HAS BECOME BAD AND IRRECOVERABLE HAS BEEN WRITTEN OFF IN THE BOOKS OF ACCOUNT DURING THE RELEVANT ASSESSMENT YEAR. THEREFORE THE PRESUMPTION OF THE REVENUE THAT THE ITA NO.1376 /MDS/14 9 INTEREST WRITTEN OFF DURING THE RELEVANT ASSESSMENT YEAR WAS NOT TREATED AS INCOME DURING THE EARLIER YEARS IS ERRON EOUS. HE FURTHER SUBMITTED THAT THE PRINCIPLE PORTION OF THE ADVANCE S WRITTEN OFF IN THE BOOKS OF ACCOUNTS WHICH ARE BAD AND IRRECOVERABLE I S AN ALLOWABLE DEDUCTION UNDER THE PROVISIONS OF THE ACT BECAUSE T HE ASSESSEE WAS IN THE BUSINESS OF MONEY LENDING. RELIANCE WAS PLA CED IN THE DECISIONS OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF P.C.DHARMALINGAM MUDALIAR VS. CIT (1985) 152 ITR ( MAD. & ROWLAT J.CURTIS V.J. & G. OLD FIELD LTD (1925 9TC 319). IT WAS THEREFORE PLEADED THAT BOTH THE IRRECOVERABLE AMOUNT OF INTER EST AND PRINCIPLE ARISING OUT OF MONEY LENDING BUSINESS MAY BE ALLOWE D AS DEDUCTION FOR THE RELEVANT ASSESSMENT YEAR. 6.4. DISALLOWANCE OF THE CLAIM OF SET OFF OF UNABSO RBED BUSINESS LOSSES OF THE EARLIER YEAR:- ON THIS ISSUE LD. A.R SUBMITTED BEFORE US THAT TH E COMPANY WAS TAKEN OVER BY THE COMMISSIONERS APPOINTED BY T HE HONBLE HIGH COURT OF MADRAS IN ORDER TO INVESTIGATE THE REAL FI NANCIAL POSITION AND THE AFFAIRS OF THE COMPANY THROUGH SPECIAL AUDITORS . THEREFORE, THERE ITA NO.1376 /MDS/14 10 WAS A DELAY IN FINALIZATION OF ACCOUNTS AND FILING OF INCOME-TAX RETURNS FOR THE ASSESSMENT YEARS 1999-00 TO 2001-02. DURING THAT PERIOD THERE WAS CARRY FORWARD OF UNABSORBED BUSINESS LOS S OF ` 16,14,67,681/- AND UNABSORBED DEPRECIATION OF ` 2,66,29,279/- AGGREGATING ` 18,80,96,960/-. THOUGH THE LD. CIT (A) ALLOWED TO SET OFF UNABSORBED DEPRECIATION, SETTING OFF OF BUSINES S LOSS WAS DENIED SINCE THERE WAS A DELAY IN FILING OF THE RETURN SPE CIFIED U/S.139 OF THE ACT. IT WAS THEREFORE PLEADED THAT IN VIEW OF THE E XTRAORDINARY CIRCUMSTANCES THE SET OFF OF BUSINESS LOSSES MAY BE ALLOWED. 7. LD. D.R VEHEMENTLY ARGUED IN SUPPORT OF THE ORD ERS OF THE REVENUE AND PLEADED THAT THE ORDERS OF THE LD. CIT (A) MAY BE CONFIRMED. 8. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY PER USED THE MATERIALS AVAILABLE ON RECORD. 8.1 GROUND NO.1 - REOPENING U/S.148 OF THE ACT. FROM THE ORDERS OF THE REVENUE AND THE SUBMISSION OF THE ASSESSEE, IT IS EVIDENT THAT THE LD. ASSESSING OFFI CER HAS REOPENED ITA NO.1376 /MDS/14 11 THE ASSESSMENT FOR THE RELEVANT ASSESSMENT YEAR 200 3-04 BECAUSE DURING THE ASSESSMENT PROCEEDINGS FOR THE ASSESSMEN T YEAR 2007-08 IT CAME TO LIGHT THAT THE ASSESSEE HAD STOPPED CRED ITING IN ITS BOOKS OF ACCOUNTS THE ACCRUED INTEREST ON THE LOANS AND ADVA NCES MADE BY THE ASSESSEE IN ITS LENDING BUSINESS AND AT THE SAM E TIME HAD CLAIMED BAD DEBTS ON INTEREST RECEIVABLES. SINCE TH ERE WAS A PROBABILITY THAT THE ASSESSEE COULD HAVE CLAIMED BA D DEBTS ERRONEOUSLY ON THE INTEREST THAT WAS NOT OFFERED AS INCOME IN THE EARLIER YEARS, THE LD.A.O HAD RE-OPENED THE ASSESSM ENT. THE FACT THAT THE ASSESSEE HAD CHANGED ITS METHOD BY TREATIN G THE ACCRUED INTEREST ON CASH BASIS AS AGAINST MERCANTILE BASIS CAME TO LIGHT ONLY DURING THE ASSESSMENT PROCEEDING FOR THE ASSESSMENT YEAR 2007-08. THEREFORE, THERE WAS A VALID REASON FOR THE ASSESSI NG OFFICER TO BELIEVE THAT THE CERTAIN INCOME HAD ESCAPED ASSESSM ENT. IN THESE CIRCUMSTANCES, WE FIND THAT THE LD. CIT (A) WAS JUS TIFIED TO REOPEN THE ASSESSMENT OF THE ASSESSEE INVOKING THE PROVISIONS OF SECTION 147 & SECTION 148 OF THE ACT. SINCE THE LD. CIT (A) HAD UPHELD THE VIEW OF THE LD. ASSESSING OFFICER BY JUDICIOUSLY RELYING ON THE VARIOUS DECISIONS OF THE HONBLE HIGH COURTS AND TRIBUNAL C ITED IN HIS ORDER, ITA NO.1376 /MDS/14 12 WE DO NOT FIND IT NECESSARY TO INTERFERE IN HIS DEC ISION. THEREFORE, THIS GROUND RAISED BY THE ASSESSEE IS DECIDED AGAINST IT . 8.2 GROUND NO.2 - DISALLOWANCE OF BAD DEBTS THE ASSESSEE HAD CLAIMED BAD DEBTS ON ACCOUNT OF ACCRUED INTEREST FOR ` 2,32,15,838/- AND LOSS OF ADVANCES MADE DURING THE COURSE OF ITS MONEY LENDING BUSINESS FOR ` 1,62,43,282/-. THE CLAIM OF THE ASSESSEE WAS THAT IT HAD RECOGNIZED ` 2,32,15,838/- AS ITS INCOME DURING THE EARLIER YEARS AND SINCE THE SAME WAS FOU ND NOT RECOVERABLE, THE ASSESSEE HAD WRITTEN OFF THE SAME FROM ITS BOOKS OF ACCOUNTS TREATING IT AS BAD DEBTS. SIMILARLY THE AS SESSEE HAD CLAIMED THAT DURING THE YEAR IT WAS FOUND THAT THE PRINCIPL E AMOUNT OF ` 1,62,43,282/- BEING THE ADVANCES MADE BY THE ASSESS EE IN THE EARLIER YEARS IN THE COURSE OF THE ASSESSEES MONEY LENDING BUSINESS, THE SAME WAS WRITTEN OFF AS BAD DEBTS IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE DURING THE RELEVANT ASSESSMENT YEAR. IT W AS THEREFORE PLEADED THAT BOTH THESE AMOUNTS WERE ALLOWABLE DEDU CTION AS PER THE PROVISIONS OF THE ACT. WE FIND MERIT IN THE CONTEN TION OF THE ASSESSEE. IF THE ASSESSEE HAD CREDITED THE ACCRUED INTEREST IN ITS ITA NO.1376 /MDS/14 13 BOOKS OF ACCOUNTS, ON ACCOUNT OF LOANS AND ADVANCES AND SUBSEQUENTLY IF THE SAME HAS BECOME IRRECOVERABLE, THE ASSESSEE IS ENTITLED TO WRITE OFF THE SAME AS BAD DEBTS IN ITS BOOKS OF ACCOUNTS AND CLAIM DEDUCTION AS PER THE PROVISIONS OF THE AC T. SIMILARLY SINCE THE BUSINESS OF THE ASSESSEE IS MONEY LENDING, THE LOANS AND ADVANCES MADE BY THE ASSESSEE, IF IT BECOMES IRRECO VERABLE, THE SAME SHALL BE ALLOWED AS DEDUCTION PROVIDED IT IS W RITTEN OFF IN THE BOOKS OF ITS ACCOUNTS. THE ASSESSEE HAD RELIED IN THE DECISION OF HONBLE DELI HIGH COURT RENDERED ON 3 RD JUNE 2011 IN THE CASE ALL GROWTH FINANCE & INVESTMENT PVT LTD., VS. CIT REPORTED IN ITA NO.682/2011 WHERE THE HONBLE HIGH COURT HAD DECIDE D THE IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE. THE RELEVANT PORTI ON OF THE ORDER IS REPRODUCED HEREIN BELOW FOR REFERENCE:- 6. THE MAIN CONTENTION OF THE LEARNED COUNSEL FOR THE APPELLANT/ASSESSEE IS THAT WRITING OFF THE BAD DEBT BY ITSELF IS ENOUGH TO CLAIM THE DEDUCTION OF BAD DEBT UNDER SECTION 36(2) OF THE ACT. HE SUBMITTED THAT THIS SECTION DOES NOT REQUIRE THAT T HE ENTIRE MONEY LENT, WHICH HAS BECOME IRRECOVERABLE, NEED TO BE SHOWN AS INCOME IN THE CASE OF A NON-BANKING MONEY LENDING BUSINESS. HE SUBMITT ED THAT THE ONLY REQUIREMENT IS THAT THE MONEY SHOULD HAVE BEEN LENT IN THE ORDINARY COURSE OF BUSINESS IN THE HOPE OF EARNING INTEREST. ON THE OTHER HAND, LEARNED COUNSEL FOR THE REVENUE SUBMITTED THAT THE DEBT OR PART THEREOF WAS NOT ITA NO.1376 /MDS/14 14 SHOWN AS INCOME IN THE PREVIOUS YEAR IN WHICH THE A MOUNT OF SUCH DEBT OR PART THEREOF WAS WRITTEN OFF AND SO CONDITIONS UNDE R SUB-SECTION (2) OF SECTION 36 ARE NOT FULFILLED AND THEREFORE, THE AMO UNT COULD NOT BE TAKEN AS BAD DEBT. THE CONTENTION RAISED BY BOTH THE LEARNED COUNSEL CENTERED AROUND THE INTERPRETATION OF SUB-SECTION 2(1) OF SE CTION 36, WHICH READS AS UNDER: (2) IN MAKING ANY DEDUCTION FOR A BAD DEBT OR PART THEREOF THE FOLLOWING PROVISIONS SHALL APPLY-[(I) NO SUCH DEDUCTION SHALL BE ALLOWED UNLESS SUCH DEBT OR PART THEREOF HAS BEEN TAKEN INTO ACCOUNT IN COMPUTING THE INCOME OF THE ASSESSEE OF THE PREVIOUS YEAR IN WHICH THE AMOU NT OF SUCH DEBT OR PART THEREOF IS WRITTEN OFF OR OF AN EARLIER PREVIOUS YE AR, OR REPRESENTS MONEY LENT IN THE ORDINARY COURSE OF BUSINESS OF BANKING OR MO NEY LENDING WHICH IS CARRIED ON BY THE ASSESSEE ;L 7. LEARNED COUNSEL FOR THE APPELLANT/ASSESSEE HAS T RIED TO INTERPRET THE SECTION IN TWO PARTS. HE SUBMITTED THAT THE REQUIRE MENT OF THE FIRST PART OF THE SECTION WOULD NOT BE APPLICABLE TO THE SECOND P ART OF THE SECTION WHICH RELATES TO MONEY LENT IN THE ORDINARY COURSE OF BUS INESS OF BANKING OR MONEY LENDING CARRIED ON BY THE ASSESSEE. THE SECON D PART OF THE SECTION, AS POINTED OUT, HAS BEEN HIGHLIGHTED BY US IN THE C LAUSE (I) OF SUB-SECTION (2) WHICH HAS BEEN REPRODUCED ABOVE. 8. FOR THE TIME BEING, WITHOUT GOING IN TO THIS INT ERPRETATION OF TWO PARTS OF CLAUSE (I) OF SUB-SECTION (2), IT MAY BE STATED THA T THE PROVISION OF SECTION 36(1)(VII) READ WITH SECTION 36(2)(I) OF THE ACT WO ULD COME INTO PLAY ONLY IF; FIRSTLY THE AMOUNT OF LOAN OR PART THEREOF WHICH IS CLAIMED AS DEDUCTION SHOULD BE ESTABLISHED TO HAVE BECOME BAD DEBT AND S ECONDLY, THE AMOUNT SHOULD HAVE BEEN SHOWN TO HAVE BECOME IRRECOVERABLE AND WRITTEN OFF FROM THE ACCOUNTS OF THE ASSESSEE OR FROM THE ACCOUNT IN WHICH THE CLAIM IS MADE. ITA NO.1376 /MDS/14 15 9. THE DIVISION BENCH OF OUR HIGH COURT IN THE CASE OF CIT V. MORGAN SECURITIES AND CREDITS (2007) 292 ITR 339, WHILE IN TERPRETING SECTION 36(1)(VII) AND 36(2)(I) OBSERVED AS UNDER: 5. A CONJOINT READING OF SECTION 36(2) AND SECTION 36(I)(VII) MAKES IT CLEAR THAT THE ASSESSED WOULD BE ENTITLED TO A DEDUCTION OF THE AMOUNT OF ANY BAD DEBT WHICH HAS BEEN WRITTEN OFF AS IRRECOVERABLE IN ITS ACCOUNTS FOR THE PREVIOUS YEAR. ANY LINGERING DOUBT WOULD VANISH ON A CAREFUL READING OF CIRCULAR NUMBER 551 DATED 23.1.1990, THE RELEVANT P ORTION OF WHICH READS AS FOLLOWS: 6.6 THE OLD PROVISIONS OF CLAUSE (VII) OF SUB-SECTI ON (1) READ WITH SUB- SECTION (2) OF THE SECTION LAID DOWN CONDITIONS NEC ESSARY FOR ALLOWABILITY OF BAD DEBTS. IT WAS PROVIDED THAT THE DEBT MUST BE ES TABLISHED TO HAVE BECOME BAD IN THE PREVIOUS YEAR. THIS LED TO ENORMO US LITIGATION ON THE QUESTION OF ALLOWABILITY OF BAD DEBT IN A PARTICULA R YEAR, BECAUSE THE BAD DEBT WAS NOT NECESSARILY ALLOWED BY THE ASSESSING O FFICER IN THE YEAR IN WHICH THE SAME HAD BEEN WRITTEN OFF ON THE GROUND T HAT THE DEBT WAS NOT ESTABLISHED TO HAVE BECOME BAD IN THE YEAR. IN ORDE R TO ELIMINATE THE DISPUTES IN THE MATTER OF DETERMINING THE YEAR IN W HICH A BAD DEBT CAN BE ALLOWED AND ALSO TO RATIONALIZE THE PROVISIONS, THE AMENDING ACT, 1987 HAS AMENDED CLAUSE (VII) OF SUB-SECTION (1) AND CLAUSE (I) OF SUB-SECTION (2) OF THE SECTION TO PROVIDE THAT THE CLAIM FOR BAD DEBT WILL BE ALLOWED IN THE YEAR IN WHICH SUCH A BAD DEBT HAS BEEN WRITTEN OFF AS IR RECOVERABLE IN THE ACCOUNTS OF THE ASSESSED. 6.7 CLAUSES (III) AND (IV) OF SUB-SECTION (2) OF TH E SECTION PROVIDED FOR ALLOWING DEDUCTION FOR A BAD DEBT IN AN EARLIER OR LATER PREVIOUS YEAR, IF THE INCOME TAX OFFICER WAS SATISFIED THAT THE DEBT DID NOT BECOME BAD IN THE YEAR IN WHICH IT WAS WRITTEN OFF BY THE ASSESSED. T HESE CLAUSES HAVE BECOME REDUNDANT, AS THE BAD DEBTS ARE NOW BEING ST RAIGHTWAY ALLOWED IN ITA NO.1376 /MDS/14 16 THE YEAR OF WRITE OFF. THE AMENDING ACT, 1987 HAS, THEREFORE, AMENDED THESE CLAUSES TO WITHDRAW THEM AFTER THE ASSESSMENT YEAR 1988- 89. 7. IT IS OUR VIEW THAT THE CIRCULAR NUMBER 551 LEAV ES NO SCOPE FOR DEBATE SINCE IT SPECIFICALLY NOTICES THE PREVIOUS PRACTICE OF HAVING TO ESTABLISH THAT A DEBT HAD BECOME BAD IN THE PREVIOUS YEAR, WHICH HAD GENERATED ENORMOUS LITIGATION ON THE QUESTION OF ALLOWABILITY OF BAD D EBT IN A PARTICULAR YEAR. THE CIRCULAR EXPRESSED THE HOPE THAT THIS LITIGATION WO ULD BE ELIMINATED BY PERMITTING A DEBT TO BE TREATED AS A BAD OR RECOVER ABLE NO SOONER IT WAS WRITTEN OFF IN THE BOOKS OF THE ASSESSED CONCERNED. 10. THERE IS NO DISPUTE WITH REGARD TO THE ABOVE ME NTIONED PROPOSITION OF LAW AS INTERPRETED BY THE DECISION OF OUR HIGH COUR T IN THE CASE OF MORGAN SECURITIES (SUPRA). HOWEVER, THE PRESENT CASE RELAT ES TO ASSESSEE WHICH IS UNDISPUTEDLY A NBFC AND IS IN THE BUSINESS OF MONEY LENDING AND HAS BEEN MAKING ADVANCES TO DIFFERENT CONCERNS, TWO OF THEM BEING THOSE TO WHOM ADVANCES WERE MADE AND WHICH ARE CLAIMED AS BAD DEB TS AS NOTED ABOVE. IN THE MANNER THE LEARNED COUNSEL FOR THE APPELLANT HAS INTERPRETED CLAUSE (I) OF SUB-SECTION (2) HE STATES THAT THE SECOND PA RT OF THIS CLAUSE STARTING FROM OR REPRESENTS MONEY LENT BY THE ASSESSEE AS HIGHLIGHTED BY US DEALS WITH THE DIFFERENT TYPES OF ACTIVITIES, NOT AT ALL RELATED TO THOSE WITH THE FIRST PART OF BUSINESS ACTIVITIES. IN OTHER WORDS, HIS SUBMISSION WAS THAT IN THE CASE OF ADVANCES/LOANS MADE BY ANY CONCERN DOIN G THE BUSINESS OF BANKING OR MONEY LENDING, IT WAS NOT OBLIGATORY THA T SUCH ADVANCES/IOANS OR PART THEREOF SHOULD BE SHOWN TO HAVE BECOME IRRECOV ERABLE AND CONSEQUENTLY WRITTEN OFF IN THE ACCOUNTS OF THE ASS ESSEE IN THE PREVIOUS YEAR. THIS MANNER OF INTERPRETATION WAS NOT ACCEPTA BLE TO THE LEARNED COUNSEL FOR THE REVENUE WHO SUBMITTED THAT FOR CLAI MING DEDUCTION OF ANY AMOUNT AS BAD DEBT IT WAS NECESSARY TO ESTABLISH TH AT THE AMOUNT HAS BECOME NOT ONLY BAD DEBT, BUT THE SAME WAS ALSO SHO WN TO HAVE BECOME IRRECOVERABLE AND WRITTEN OFF IN THE ACCOUNTS OF TH E ASSESSEE FOR THE ITA NO.1376 /MDS/14 17 PREVIOUS YEAR. THE INTERPRETATION OF SECTION 36(2) CLAUSE (I) CAME BEFORE THE DIVISION BENCH OF MADRAS HIGH COURT IN THE CASE OF PC.DHARMAIINGA MUDALIAR V. COMMISSIONER OF INCOME TAX (1985) 152 I TR (MAD). RELYING UPON THE FAMOUS JUDGMENT OF ROWLATT J., IN CURTIS V . J. & G. OLDFIELD LTD. 11925] 9 TC 319, THE DIVISION BENCH HELD AS UNDER:- THE FIRST LIMB OF S. 36(2)(I)(A) OF THE PRESENT AC T ONLY INCORPORATES ROWLATT J.S PRINCIPLE; THAT LIMB EXACTS VERY CLEARLY THAT NO DEDUCTION SHALL BE ALLOWED FOR A BAD DEBT, UNLESS SUCH DEBT HAS BEEN T AKEN INTO ACCOUNT IN COMPUTING THE INCOME OF THE ASSESSEE FOR THE PREVIO US YEAR OR FOR AN EARLIER PREVIOUS YEAR. IT IS IMPLICIT IN THIS EXPRESS CONDI TION THAT THE DEBT SHOULD HAVE ARISEN IN THE COURSE OF CARRYING ON HIS BUSINE SS. IN THE SECOND LIMB OF S. 36(2)(I)(A), THIS CONDITION IS NOT REPEATED, FOR THE SIMPLE REASON THAT THE SECOND LIMB DEALS WITH MONEY-LENDING AND BANKING BU SINESS IN WHICH THE MONEY ITSELF IS REGARDED AS A STOCK-IN-TRADE AND, T HEREFORE, THE MONEY LENT WOULD CERTAINLY COME INTO THE REVENUE ACCOUNT, AND, HENCE, IT WAS PERHAPS THOUGHT TO BE UNNECESSARY TO EMPHASIZE THE OBVIOUS BY SAYING THAT MONEY LENT IN A MONEY-LENDING OR BANKING BUSINESS MUST HA VE BEEN TAKEN INTO ACCOUNT IN THE COMPUTATION OF MONEY LENDING OR BANK ING BUSINESS. THE ONLY REQUIREMENT WHICH WAS WORTHWHILE TO MAKE MENTION OF IN A BANKING OR MONEY-LENDING BUSINESS IS THAT IT MUST HAVE BEEN MO NEY LENT IN THE COURSE OF THE BUSINESS OF THE ASSESSEE. THEREFORE, TAKING THE PROVISION IN S. 36(2)(I)(A) AS A WHOLE, IT IS NECESSARY IN EVERY CA SE TO FIND IF A DEBT IN A MONEY- LENDING OR BANKING BUSINESS OR A DEBT IN A N ON-MONEY-LENDING OR A NON-BANKING BUSINESS MUST HAVE BEEN INCURRED IN THE COURSE OF THE ASSESSEES BUSINESS. THE SECOND LIMB IS THAT IN THE CASE OF NON-MONEY- LENDING OR NON-BANKING BUSINESS, A DEBT IN ORDER TO BE A BAD DEBT MUST HAVE BEEN TAKEN INTO ACCOUNT IN THE COMPUTATION OF THE INCOME OF THE ITA NO.1376 /MDS/14 18 ASSESSEE. THIS PARTICULAR REQUIREMENT TAKES CARE TO EXCLUDE WHAT MAY BE CALLED CAPITAL DEBTS FROM QUALIFYING FOR WRITE-OFF AS BAD DEBTS 11. IN THE PRESENT CASE THERE IS NO DISPUTE THAT TH E AMOUNTS OF DEBTS IN QUESTION WERE ADVANCED BY THE ASSESSEE IN THE ORDIN ARY COURSE OF MONEY LENDING. THE QUESTION FOR CONSIDERATION WOULD BE AS TO WHETHER THE CONDITION PRESCRIBED IN THE FIRST LIMB FOR TAKING T HE DEBT INTO ACCOUNT WHILE COMPUTING THE INCOME CAN BE READ IN THE SECOND LIMB ALSO AND WHETHER THAT CAN BE DONE DESPITE THE CONSTRUCTION OF THE SECOND LIMB IN THE MANNER WHICH IS SEPARATED FROM THE FIRST LIMB BY USE OF C OMMA PRECEDING THE WORD OR WHICH CLEARLY DIVIDES THE PROVISION IN TWO PAR TS, VIZ., (I) FIRST PART, DEALING WITH NON-MONEY LENDING BUSINESS; AND (II) SECOND PA RT, DEALING WITH MONEY LENDING BUSINESS ALONE AND THE DIVISION IS INTENDED TO ENSURE THE FULFILLMENT OF CONDITIONS FOR ALLOWANCE OF BAD DEBTS PECULIAR T O EACH LIMB CONCERNED. 12. THE CONTROVERSY THAT HAS ARISEN FROM THE ORDER OF THE TRIBUNAL IS WHETHER THE AMOUNT OF DEBT ITSELF SHOULD BE SHOWN A S INCOME BEFORE THE DEBT QUALIFIES FOR CLAIM AS A BAD DEBT. IT IS SEEN THAT THE CONTROVERSY BEFORE THE MADRAS HIGH COURT IN THE CASE OF PC. DHARMALING A (SUPRA) WAS WHETHER MONEY ADVANCED TO A TRANSPORT COMPANY FROM CLOTH AN D YARN BUSINESS BE TREATED AS MONEY ADVANCED IN THE ORDINARY COURSE OF CLOTH AND YARN BUSINESS. THE MADRAS HIGH COURTS EMPHASIS AS REQUIR ED BY THE SECOND PART WAS THAT IT MAY BE ADMITTEDLY IN RELATION TO M ONEY LENDING BUSINESS THAT DEBT IS ADVANCED IN ORDINARY COURSE OF BUSINESS AND IF THE DEBT IS NOT ADVANCED IN THE ORDINARY COURSE OF BUSINESS, IT WOU LD NOT QUALIFY FOR DEDUCTION AS A BAD DEBT. THUS, ACCORDING TO MADRAS HIGH COURT ITSELF MONEY LENT AS PART OF MONEY LENDING BUSINESS BEING STOCK-IN-TRADE AUTOMATICALLY COMES INTO REVENUE ACCOUNT. IN OTHER WORDS, IT NEED NOT BE TAKEN INTO ACCOUNT IN COMPUTING THE INCOME AS REQUI RED IN THE FIRST LIMB IN RELATION TO NON MONEY LENDING BUSINESS TO PROVE THA T IT IS ON REVENUE ITA NO.1376 /MDS/14 19 ACCOUNT. MADRAS HIGH COURT CORRECTLY EMPHASIZES AS REQUIRED AS PER SECOND LIMB THAT IT SHOULD BE FOUND OUT IN RELATION TO MONEY LENDING BUSINESS THAT DEBT IS ADVANCED IN THE ORDINARY COUR SE OF MONEY LENDING BUSINESS. IF THE DEBT IS NOT ADVANCED IN THE ORDIN ARY COURSE OF BUSINESS, IT WOULD NOT QUALIFY FOR DEDUCTION AS A BAD DEBT. 13. WE ARE OF THE VIEW THAT THE ONLY CONDITION LAID DOWN IN SECOND PART OF SUB-SECTION 2 OF SECTION 36 OF THE ACT IS THAT THE AMOUNT SHOULD BE ADVANCED IN THE ORDINARY COURSE OF BUSINESS WHICH B Y ITSELF PROVES ITS REVENUE NATURE AND NO FURTHER CONDITIONS ARE REQUIR ED TO BE SATISFIED WHICH ARE ONLY APPLICABLE WITH REGARD TO DEBT QUALIFYING AS BAD DEBT IN THE FIRST PART OF SUB-SECTION 2 IN THE MANNER AS INTERPRETED ABOVE . 14. FOR THE AFORESAID REASONS, WE ARE IN AGREEMENT WITH THE SUBMISSIONS OF LEARNED COUNSEL FOR THE APPELLANT/ASSESSEE AS REGAR DS THE INTERPRETATION OF SUB-SECTION 2(I) OF SECTION 36 AND THAT BEING SO, W E ARE OF THE VIEW THE AUTHORITIES BELOW ARE NOT JUSTIFIED IN HOLDING THAT THE AMOUNT OF RS.34,95,000I- WAS NOT ALLOWABLE AS BAD DEBT UNDER SECTION 36(1)(VII) READ WITH SECTION 36(2) OF THE ACT.. FROM THE ABOVE IT IS EVIDENT THAT THE ASSESSEE IS E NTITLED TO THE CLAIM OF DEDUCTION ON ACCOUNT OF BAD DEBTS EVEN FOR THE L OSS INCURRED DUE TO IRRECOVERABLE LOANS AND ADVANCES MADE DURING THE COURSE OF MONEY LENDING BUSINESS OF THE ASSESSEE. THEREFORE R ESPECTFULLY FOLLOWING THE DECISION OF THE HON. HIGH COURT CITED SUPRA WE HEREBY DIRECT THE LD. ASSESSING OFFICER TO ALLOW DEDUCTION TO THE ASSESSEE FOR ITA NO.1376 /MDS/14 20 ITS CLAIM OF BAD DEBTS ON ACCOUNT OF IRRECOVERABLE INTEREST INCOME WHICH WAS TREATED AS THE INCOME OF THE ASSESSEE DUR ING THE EARLIER YEARS AND LOSS INCURRED DUE TO IRRECOVERABLE LOANS AND ADVANCES MADE BY THE ASSESSEE DURING THE COURSE OF ITS MONEY LENDING BUSINESS SUBJECT TO VERIFICATION OF THE FACT THAT T HE INTEREST INCOME WERE ACTUALLY OFFERED TO THE INCOME OF THE ASSESSEE DURING THE EARLIER YEARS AND THE LOANS AND ADVANCES WERE MADE DURING T HE COURSE OF THE MONEY LENDING BUSINESS OF THE ASSESSEE. ACCORD INGLY, THIS ISSUE IS REMITTED BACK TO THE FILE OF THE LD. ASSESSING O FFICER. 8.3 GROUND NO.3 - DISALLOWANCE OF THE CLAIM OF SET-OFF OF UNABSORBE D BUSINESS LOSSES OF THE EARLIER YEAR:- FROM THE PROVISIONS OF SECTION 80, SECTION 32(2) AND SECTION 72(2) OF THE ACT, IT IS EVIDENT THAT LOSS OF THE EA RLIER YEARS OTHER THAN THE UNABSORBED DEPRECIATION SHALL NOT BE ALLOWED TO BE CARRY FORWARD UNLESS THE RETURN OF INCOME IS FILED WITHIN THE DUE DATE SPECIFIED U/S.139(3) OF THE ACT. THE RELEVANT PROVISIONS OF T HE ACT ARE REPRODUCED HEREIN BELOW FOR REFERENCE. ITA NO.1376 /MDS/14 21 SEC.80 : NOTWITHSTANDING ANYTHING CONTAINED IN THIS CHAPTER, NO LOSS WHICH HAS NOT BEEN DETERMINED IN PURSUANCE OF A RETURN FILED IN ACCORD ANCE WITH THE PROVISIONS OF SUB-SECTION(3) OF SECTION 139, SHALL BE CARRIED FOR WARD AND SET OFF UNDER SUB- SECTION(1) OF SECTION 72 OR SUB-SECTION(2) OF SECTI ON 73 OR SUB-SECTION(1) OR SUB- SECTION(3) OF SECTION 74 OR SUB-SECTION(3) OF SECTI ON 74A. SEC.32(2): WHERE, IN THE ASSESSMENT OF THE ASSESSEE, FULL EFFE CT CANNOT BE GIVEN TO ANY ALLOWANCE UNDER SUB-SECTION (1) IN ANY PREVIOUS YEA R, OWING TO THERE BEING NO PROFITS OR GAINS CHARGEABLE FOR THAT PREVIOUS YEAR, OR OWING TO THE PROFITS OR GAINS CHARGEABLE BEING LESS THAN THE ALLOWANCE, THEN, SUB JECT TO THE PROVISIONS OF SUB- SECTION (2) OF SECTION 72 AND SUB-SECTION (3) OF SE CTION 73, THE ALLOWANCE OR THE PART OF THE ALLOWANCE TO WHICH EFFECT HAS NOT BEEN GIVEN, AS THE CASE MAY BE, SHALL BE ADDED TO THE AMOUNT OF THE ALLOWANCE FOR D EPRECIATION FOR THE FOLLOWING PREVIOUS YEAR AND DEEMED TO BE PART OF THAT ALLOWAN CE, OR IF THERE IS NO SUCH ALLOWANCE FOR THAT PREVIOUS YEAR, BE DEEMED TO BE T HE ALLOWANCE FOR THAT PREVIOUS YEAR, AND SO ON FOR THE SUCCEEDING PREVIOU S YEARS. SEC.72(2): WHERE ANY ALLOWANCE OR PART THEREOF IS, UNDER SUB-S ECTION (2) OF SECTION 32 OR SUB-SECTION (4) OF SECTION 35, TO BE CARRIED FORWAR D, EFFECT SHALL FIRST BE GIVEN TO THE PROVISIONS OF THIS SECTION. ITA NO.1376 /MDS/14 22 SECTION-80 OF THE ACT SPECIFICALLY RESTRICTS THE LO SS TO BE CARRY FORWARD AND SETOFF UNLESS THE RETURN OF INCOME IS FILED WIT HIN THE DUE DATE SPECIFIED U/S.139(3) OF THE ACT. HOWEVER, SECTION- 32(2) OF THE ACT CATEGORICALLY ALLOWS THE UNABSORBED DEPRECIATION TO BE TREATED AS THE DEPRECIATION OF THE SUBSEQUENT YEAR AND ALLOWED AS DEDUCTION. FURTHER THE PROVISIONS OF SECTION 80 DO NOT OVERRID E THE PROVISIONS OF SECTION 32(2) OF THE ACT AND THERE IS NO SCOPE IN T HE ACT FOR RELAXING THESE PROVISIONS EVEN WHILE CONSIDERING THE PECULIA R CIRCUMSTANCE OF THE CASE OF THE ASSESSEE. THEREFORE WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT (A). ACCORDINGLY, THE SAME IS CONFIRMED. 9. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 3 RD SEPTEMBER, 2015 AT CHENNAI. SD/- SD/- ( . ! '# ) (V. DURGA RAO) ( . ) (A.MOHAN ALANKAMONY) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 3 RD SEPTEMBER, 2015. K S SUNDARAM. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE