1. The question that has been referred to us for determination is concluded by the decision of the High Court as well as the Supreme Court and the matter can be disposed of by a short order. Telster Advertising Pvt. Ltd., the assessee-company, was incorporated on October 31, 1963. For the first year it closed its account on March 31, 1964. For the assessment year 1964-65, it filed its income-tax return on October 9, 1964, disclosing loss of Rs. 11,600. The ITO assessed the loss at Rs. 5,010, but refused to carry forward the loss on the ground that the return had not been filed within the time prescribed by s. 139(3) of the I.T. Act, 1961.
In an appeal preferred by the assessee, the AAC upheld the order of the ITO refusing to carry forward the loss on the ground that the return had not been filed within the time permitted by s. 139(3) of the Act.
2. In further appeal before the Tribunal, the view taken by the taxing authorities was affirmed relying upon the decision of the Mysore High Court in B. B. Danganavar v. ITO : 65ITR370(KAR) , on the ground that the assessee-company was not entitled to carry forward the loss to the next year as it has not filed the return within the time prescribed under sub-s. (3) of s. 139. From this order of the Tribunal, the following question has been referred to us for our determination.
'Whether the assessee-company was entitled to carry forward to the following year the loss incurred by it in the assessment year 1964-65, to be set off against the profits of the subsequent year, when it had filed its return for the assessment year 1964-65 after the time prescribed by s. 139(3) of the I.T. Act, 1961 ?'
3. It is urged by Mr. Mehta on behalf of the assessee that the view that has been taken by the taxing authorities and the Tribunal disallowing to carry forward the loss is contrary to the decision of the Calcutta High Court where the High Court has followed the decision of the Supreme Court in the case of CIT v. Kulu Valley Transport Co. P. Ltd. : 77ITR518(SC) . In view of the decision of the Supreme Court, the position is not challenged by Mr. Joshi on behalf of the revenue.
4. In the case before the Supreme Court in the case of the CIT v. Kulu Valley Transport Co. P. Ltd. : 77ITR518(SC) , the assessee filed voluntarily returns in January, 1956, disclosing loss for the assessment loss for the assessment years 1953-54 and 1954-55. The question was whether the loss had to be determined and carried forward under s. 24(2) of the Indian I.T. Act, 1922, though the returns were not filed within the time specified in the general notice under s. 22(1) and the time had not been extended by the ITO. No notice had been served on it under s. 22(2). By majority view, the Supreme Court held that the losses had to be determined and carried forward. By majority view it was also held that s. 24(2) confers the benefit of losses being set off and carried forward and there is no provision in s. 22 under which losses have to be determined for the purpose of s. 24(2). Section 22(2A) simply says that in order to get the benefit of s. 24(2) the assessee must submit his loss return within the time specified by s. 22(1). That provision must be read with s. 22(3) for the purpose of determining the time within which a return has to be submitted. It can well be said that s. 22(3) is merely a proviso to s. 22(1). Thus, a return submitted at any time before assessment is made is a valid return. In considering whether a return made is within time, sub-s. (1) of s. 22 must be read along with sub-s. (3) of that section. A return whether it is a return of income, profits or gains or of loss must be considered as having been made within the time prescribed if it is made within the time specified in s. 22(3). In other words, if s. 22(3) is complied with, s. 22(1) must also be held to have been complied with. If compliance has been made with the latter provision, the requirement of s. 22(2A) would stand satisfied.
5. When the I.T. Act, 1961, was enacted, sub-s. (4) of s. 139 contained the following provisions :
'139. (4) Any person who has not furnished a return within the time allowed to him under sub-section (1) or sub-section (2) may, before the assessment is made, furnish the return for any previous year at any time before the end of four assessment years from the end of the assessment year to which the return relates, and the provisions of sub-clause (iii) of the proviso to sub-section (1) shall apply in every such case.'
6. The effect of these provisions was considered by the Calcutta High Court in the case of Presidency Medical Centre (P.) ltd. v. CIT : 108ITR838(Cal) . The Calcutta High Court held that if a return is filed within the time specified by sub-s. (4) of s. 139 of the I.T. Act, 1961, it would be deemed to be in accordance with law and the loss has to be determined and carried forward as a matter of course under s. 72(1) read with s. 80 of the Act, even though the return was not filed within the time provided by s. 139(1). This view was taken by the Calcutta High Court after applying the principles laid down by the Supreme Court in Kulu Valley Transport Co. P. Ltd.'s case : 77ITR518(SC) . This decision, therefore, in our opinion concludes the matter and both the taxing authorities and the Tribunal were in error in rejecting the contention of the assessee.
7. In the result, the question referred to us is answered in the affirmative and in favour of the assessee. The revenue shall pay the costs of the assessee.