I filed this year's return late under section 139(4). The Assessing Officer has now refused to carry forward a capital loss and unabsorbed depreciation that both came from the earlier year, whose return was on time. Can he do that?
No, on the Tribunal's reasoning. Section 80 read with s.139(3) attaches to the year in which the loss arises: if the return for the loss year was filed within the s.139(1) time, the loss has already become eligible for carry forward, and a belated return for a later year does not extinguish it. Unabsorbed depreciation stands on a stronger footing still — it is governed by s.32(2), and the s.80 restriction does not apply to it at all.
Decided by the ITAT (Shri Vikram Singh Yadav, Accountant Member, and Shri Siddhartha Nautiyal, Judicial Member) on 2026-08-27, reported as ITA No. 271/Mum/2026 (ITAT Mumbai, 'K' Bench); Assessment Year 2022-23. It bears on section 80, section 139(1), section 139(3), section 139(4), section 32(2), section 74, section 72, section 143(3) of the Income Tax Act 1961, in Assessment & Scrutiny, Capital Gains and How Tax Law Is Read matters.
This is the single distinction that decides a great many s.143(1) adjustments, and it has two halves that must be kept apart. The first half — s.80 with s.139(3) — is a real bar, and a loss of a year for which the return was late is gone; the Delhi Tribunal in Tanisha Chaudhary applied exactly that and dismissed the assessee's appeal. The second half is that s.80 does not name s.32(2) at all: it speaks of carry forward and set off under s.72(1), s.73(2), s.73A(2), s.74(1) and (3) and s.74A(3), and unabsorbed depreciation travels under a different vehicle, the deeming fiction in s.32(2) that makes brought-forward depreciation part of the succeeding year's depreciation allowance. The Central Processing Centre's software does not draw the distinction, so the point almost always has to be taken in appeal. The third and less obvious point this order supplies is the year to which s.80 attaches. A CPC adjustment that denies carry forward in year two because year two's return was belated, when the loss actually arose in year one and year one's return was timely, is reading a condition into s.80 that is not there. Note the limit: the Tribunal did not decide the quantum; it directed the Assessing Officer to verify that the AY 2021-22 return was filed within the s.139(1) time and to verify the quantum of the depreciation before allowing it.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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The assessee company appealed against the assessment order for Assessment Year 2022-23 dated 28 November 2025. Among the grounds (numbered 22 to 24) was the denial of carry forward of a long-term capital loss of Rs 58,938 and unabsorbed depreciation of Rs 5,90,18,372. Both amounts arose in Assessment Year 2021-22, for which, on the assessee's case, the return had been filed within the due date under s.139(1). The return for the year under appeal, Assessment Year 2022-23, was filed belatedly under s.139(4). The authorities had denied carry forward of both items on the footing that the return for the year under consideration was belated.
The Tribunal allowed Grounds 22 to 24 in the terms it set out (para 52), the appeal as a whole being partly allowed for statistical purposes (para 53). As regards the long-term capital loss, the Assessing Officer was directed to verify that the return for Assessment Year 2021-22, the year in which the loss was incurred, was filed within the s.139(1) time and that the loss was eligible for carry forward under s.74; if so, the loss is to be allowed to be carried forward notwithstanding that the return for Assessment Year 2022-23 was filed under s.139(4) (para 50). As regards unabsorbed depreciation, the Tribunal held that its carry forward is governed by s.32(2) and cannot be denied merely because the return for the year under consideration was belated, and directed the Assessing Officer to verify the quantum pertaining to Assessment Year 2021-22 and to allow its set-off or carry forward under s.32(2) (para 51).
The Tribunal accepted the general rule first: s.139(3) read with s.80 requires a loss sought to be carried forward under s.74 to be computed pursuant to a return furnished in accordance with s.139(3) within the s.139(1) time, so the requirement of timely filing attaches to the assessment year in which the loss is incurred, and where the return for that year is belated the statutory restriction operates and the loss cannot be carried forward (para 40). It then held the case before it to be different, because the capital loss had arisen in Assessment Year 2021-22 and the return for that year was said to have been timely, so that the conditions of s.139(3) read with s.80 were satisfied in the year in which the loss actually arose and a later belated return does not by itself extinguish a loss already eligible for carry forward (para 41). Section 80 restricts the carry forward of a loss arising in a year for which the required return of loss was not filed within time; it does not say that a loss carried forward from an earlier year is lost because a subsequent year's return was belated, and reading it that way would add a condition the Legislature has not provided (para 42). On depreciation, the Tribunal reasoned from the fiction in s.32(2): where full effect cannot be given to depreciation in a year, the unabsorbed amount is carried forward and is deemed to form part of the depreciation allowance of the succeeding previous year, so brought-forward unabsorbed depreciation takes the character of current depreciation of the succeeding year (para 46), and the scheme of unabsorbed depreciation is therefore different from that of ordinary business loss or capital loss, the s.80 restriction not applying to it (para 47). It cited Addl. CIT v. Nortel Networks India Pvt. Ltd., ITA No. 504/Del/2017, order dated 23 July 2020 (Delhi Tribunal), for the same conclusion.
The restriction contained in section 80 read with section 139(3) does not apply to unabsorbed depreciation governed by section 32(2) of the Act.
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Handle my notice → Ask a CA on WhatsAppNo, on the Tribunal's reasoning. Section 80 read with s.139(3) attaches to the year in which the loss arises: if the return for the loss year was filed within the s.139(1) time, the loss has already become eligible for carry forward, and a belated return for a later year does not extinguish it. Unabsorbed depreciation stands on a stronger footing still — it is governed by s.32(2), and the s.80 restriction does not apply to it at all. This was decided by the ITAT (Shri Vikram Singh Yadav, Accountant Member, and Shri Siddhartha Nautiyal, Judicial Member) and bears on section 80, section 139(1), section 139(3), section 139(4), section 32(2), section 74, section 72, section 143(3) of the Income Tax Act 1961. It is reported as ITA No. 271/Mum/2026 (ITAT Mumbai, 'K' Bench); Assessment Year 2022-23. This is the single distinction that decides a great many s.143(1) adjustments, and it has two halves that must be kept apart. The first half — s.80 with s.139(3) — is a real bar, and a loss of a year for which the return was late is gone; the Delhi Tribunal in Tanisha Chaudhary applied exactly that and dismissed the assessee's appeal. The second half is that s.80 does not name s.32(2) at all: it speaks of carry forward and set off under s.72(1), s.73(2), s.73A(2), s.74(1) and (3) and s.74A(3), and unabsorbed depreciation travels under a different vehicle, the deeming fiction in s.32(2) that makes brought-forward depreciation part of the succeeding year's depreciation allowance. The Central Processing Centre's software does not draw the distinction, so the point almost always has to be taken in appeal. The third and less obvious point this order supplies is the year to which s.80 attaches. A CPC adjustment that denies carry forward in year two because year two's return was belated, when the loss actually arose in year one and year one's return was timely, is reading a condition into s.80 that is not there. Note the limit: the Tribunal did not decide the quantum; it directed the Assessing Officer to verify that the AY 2021-22 return was filed within the s.139(1) time and to verify the quantum of the depreciation before allowing it. If it applies to you, the first step is this: Separate the two claims on the face of the appeal — brought-forward loss under s.72, s.73, s.73A, s.74 or s.74A on one side, and unabsorbed depreciation under s.32(2) on the other. They are governed by different provisions and the answers differ.
The assessee company appealed against the assessment order for Assessment Year 2022-23 dated 28 November 2025. Among the grounds (numbered 22 to 24) was the denial of carry forward of a long-term capital loss of Rs 58,938 and unabsorbed depreciation of Rs 5,90,18,372. Both amounts arose in Assessment Year 2021-22, for which, on the assessee's case, the return had been filed within the due date under s.139(1). The return for the year under appeal, Assessment Year 2022-23, was filed belatedly under s.139(4). The authorities had denied carry forward of both items on the footing that the return for the year under consideration was belated. The matter was decided on 2026-08-27 by the ITAT (Shri Vikram Singh Yadav, Accountant Member, and Shri Siddhartha Nautiyal, Judicial Member). On those facts the ITAT held as follows. The Tribunal allowed Grounds 22 to 24 in the terms it set out (para 52), the appeal as a whole being partly allowed for statistical purposes (para 53). As regards the long-term capital loss, the Assessing Officer was directed to verify that the return for Assessment Year 2021-22, the year in which the loss was incurred, was filed within the s.139(1) time and that the loss was eligible for carry forward under s.74; if so, the loss is to be allowed to be carried forward notwithstanding that the return for Assessment Year 2022-23 was filed under s.139(4) (para 50). As regards unabsorbed depreciation, the Tribunal held that its carry forward is governed by s.32(2) and cannot be denied merely because the return for the year under consideration was belated, and directed the Assessing Officer to verify the quantum pertaining to Assessment Year 2021-22 and to allow its set-off or carry forward under s.32(2) (para 51).
The Tribunal accepted the general rule first: s.139(3) read with s.80 requires a loss sought to be carried forward under s.74 to be computed pursuant to a return furnished in accordance with s.139(3) within the s.139(1) time, so the requirement of timely filing attaches to the assessment year in which the loss is incurred, and where the return for that year is belated the statutory restriction operates and the loss cannot be carried forward (para 40). It then held the case before it to be different, because the capital loss had arisen in Assessment Year 2021-22 and the return for that year was said to have been timely, so that the conditions of s.139(3) read with s.80 were satisfied in the year in which the loss actually arose and a later belated return does not by itself extinguish a loss already eligible for carry forward (para 41). Section 80 restricts the carry forward of a loss arising in a year for which the required return of loss was not filed within time; it does not say that a loss carried forward from an earlier year is lost because a subsequent year's return was belated, and reading it that way would add a condition the Legislature has not provided (para 42). On depreciation, the Tribunal reasoned from the fiction in s.32(2): where full effect cannot be given to depreciation in a year, the unabsorbed amount is carried forward and is deemed to form part of the depreciation allowance of the succeeding previous year, so brought-forward unabsorbed depreciation takes the character of current depreciation of the succeeding year (para 46), and the scheme of unabsorbed depreciation is therefore different from that of ordinary business loss or capital loss, the s.80 restriction not applying to it (para 47). It cited Addl. CIT v. Nortel Networks India Pvt. Ltd., ITA No. 504/Del/2017, order dated 23 July 2020 (Delhi Tribunal), for the same conclusion. In the words reproduced by the source cited on this page: "The restriction contained in section 80 read with section 139(3) does not apply to unabsorbed depreciation governed by section 32(2) of the Act." The decision followed or applied Addl. CIT v. Nortel Networks India Pvt. Ltd., ITA No. 504/Del/2017, order dated 23 July 2020 (ITAT Delhi) — relied on.
It was decided by the ITAT on 2026-08-27 and is reported as ITA No. 271/Mum/2026 (ITAT Mumbai, 'K' Bench); Assessment Year 2022-23. Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 80, section 139(1), section 139(3), section 139(4), section 32(2), section 74, section 72, section 143(3), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The Tribunal allowed Grounds 22 to 24 in the terms it set out (para 52), the appeal as a whole being partly allowed for statistical purposes (para 53). As regards the long-term capital loss, the Assessing Officer was directed to verify that the return for Assessment Year 2021-22, the year in which the loss was incurred, was filed within the s.139(1) time and that the loss was eligible for carry forward under s.74; if so, the loss is to be allowed to be carried forward notwithstanding that the return for Assessment Year 2022-23 was filed under s.139(4) (para 50). As regards unabsorbed depreciation, the Tribunal held that its carry forward is governed by s.32(2) and cannot be denied merely because the return for the year under consideration was belated, and directed the Assessing Officer to verify the quantum pertaining to Assessment Year 2021-22 and to allow its set-off or carry forward under s.32(2) (para 51). It arises in Assessment & Scrutiny, Capital Gains and How Tax Law Is Read matters, on section 80, section 139(1), section 139(3), section 139(4), section 32(2), section 74, section 72, section 143(3) of the Income Tax Act 1961, and was decided by Shri Vikram Singh Yadav, Accountant Member, and Shri Siddhartha Nautiyal, Judicial Member. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Identify the year in which each loss arose and produce the acknowledgement showing the return for THAT year was filed within the s.139(1) due date. That is the fact s.80 turns on. Where the current year's return is belated but the brought-forward loss came from a timely-filed earlier year, take the point that s.80 restricts the carry forward of a loss arising in the year for which the return of loss was not filed in time, and no more. For unabsorbed depreciation, plead s.32(2) squarely — that brought-forward unabsorbed depreciation takes the character of the succeeding year's current depreciation — and say in terms that s.80 does not list s.32(2). Expect the relief to be a direction to verify rather than an allowance on the spot; keep the year-one computation, return and intimation ready for that verification. Read this order alongside Tanisha Chaudhary v ITO (ITAT Delhi, 15 June 2026), which is the other side of the same line: where the LOSS year's own return was late, the carry forward is lost and the remedy does not lie in the later year's appeal.
Searched for later treatment; none was found. That is not the same as a source affirming it. A `citedby:` citator search on this order's Indian Kanoon id returns no later decision citing it. A second, differently worded probe - the assessee's name restricted to documents from 27 August 2026 onward, across all courts including the High Courts and the Supreme Court - turned up no judicial treatment either. In particular no appeal under section 260A, and so no High Court reversal, could be traced, and no later Bench was found taking the opposite view. This is a August 2026 order, so the silence reflects its age rather than any doubt about it: a practitioner may cite it as the only direct authority on the point but should not expect it to be treated as settled. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The order is a long one dealing with transfer pricing and several other grounds; the loss and depreciation issue is Grounds 22 to 24 and occupies paragraphs 38 to 52 of an order whose last numbered paragraph is 53 ('In the combined result appeal of the assessee is partly allowed for statistical purposes'). Paragraphs 40, 41, 42, 46, 47, 48, 50, 51 and 52 were transcribed; paragraphs 43, 44, 45 and 49 were not returned by the fetch and this entry says nothing about them. One sentence inside paragraph 47 — the Tribunal's report of what was 'observed' in Nortel Networks India Pvt. Ltd. — came back differently worded on two passes and is therefore NOT treated as a quotation here; the surrounding sentences of para 47 came back identically on both passes and one of them is used as the key quote. Paragraph 42 was separately confirmed word for word on a docfragment pass. The order is dated 27 August 2026 and the appeal number, ITA 271/MUM/2026, is consistent with that. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The Tribunal allowed Grounds 22 to 24 in the terms it set out (para 52), the appeal as a whole being partly allowed for statistical purposes (para 53). As regards the long-term capital loss, the Assessing Officer was directed to verify that the return for Assessment Year 2021-22, the year in which the loss was incurred, was filed within the s.139(1) time and that the loss was eligible for carry forward under s.74; if so, the loss is to be allowed to be carried forward notwithstanding that the return for Assessment Year 2022-23 was filed under s.139(4) (para 50). As regards unabsorbed depreciation, the Tribunal held that its carry forward is governed by s.32(2) and cannot be denied merely because the return for the year under consideration was belated, and directed the Assessing Officer to verify the quantum pertaining to Assessment Year 2021-22 and to allow its set-off or carry forward under s.32(2) (para 51).
TaxSphere, “Gluhend India Private Limited v DCIT”, https://taxnotice.vittsphere.com/caselaw/case/gluhend-india-80-bites-in-the-loss-year-and-32-2-survives-a-belated-return/ (validity last checked 2026-09-08)
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