The return was filed late, so the officer has refused to carry forward everything — including unabsorbed depreciation. Is depreciation really caught by the late return bar?
No. The Delhi High Court held that s.80 and s.139(3) apply to business losses and not to unabsorbed depreciation, which is governed exclusively by s.32(2). There is accordingly no obligation to file the return within the prescribed time in order to carry forward depreciation.
Decided by the High Court (A.K. Sikri J and M.L. Mehta J) on 2011-03-25, reported as ITA No. 164/2008 (Delhi High Court), judgment reserved 24 February 2011; reported at (2011) 334 ITR 13 (Del.). It bears on section 80, section 139, section 32(2), section 72 of the Income Tax Act 1961, in Assessment & Scrutiny and How Tax Law Is Read matters.
This is the decision that separates what a belated return actually costs from what officers routinely say it costs. Section 80 is a closed list: it bars carry forward and set-off only under s.72(1), s.73(2), s.73A(2), s.74(1) and (3) and s.74A(3). Business loss, speculation loss, specified business loss under s.73A, capital loss and the race horse loss are inside the bar. Unabsorbed depreciation is not mentioned at all, and the Court's reason is structural rather than merely textual: s.32(2) makes the unabsorbed depreciation of earlier years part of the current year's depreciation allowance, so it is not being carried forward as a 'loss' under Chapter VI at all. The same textual argument is available, and is not answered by any decision found in this pass, for a loss under the head income from house property carried forward under s.71B — s.80 does not name s.71B either. That extension is an argument, not a holding, and should be presented as such. Note what the case does not touch: s.80 still bars the business loss itself, so on a belated return the client keeps the depreciation and loses the loss, and the order under s.157 for the loss year should be read to see which is which.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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The assessee company's appeal concerned assessment years 2000-01 and 2001-02, the argument turning on 2001-02. For that year the time allowed by s.139(1), and therefore by s.139(3), expired on 31 October 2001. The assessee filed its loss return on 31 March 2003, declaring a loss of Rs 6,75,38,576. Assessment was framed on 31 October 2003 at a loss of Rs 6,03,14,560, but the Assessing Officer declined to allow the carry forward of the unabsorbed depreciation on the ground that the return had not been filed within the time allowed by s.139(1) read with s.139(3), so that s.80 stood in the way. The Tribunal held for the assessee, and the Revenue appealed under s.260A on two questions: whether filing within the s.139(1) and s.139(3) time was unnecessary for carrying forward unabsorbed depreciation, and whether s.80 applies to unabsorbed depreciation covered by s.32(2).
The Revenue's appeal was dismissed with no order as to costs and both questions were answered in favour of the assessee. Sections 80 and 139(3) apply to business losses and not to unabsorbed depreciation, which is exclusively governed by s.32(2); the carry forward of unabsorbed depreciation therefore does not depend on the return having been filed within the time allowed by s.139(1).
The Court read s.32 and s.72 together and found it manifest that s.72 deals with the carry forward of unabsorbed losses other than losses on account of depreciation, and that this is so because the carry forward of depreciation is separately provided for by s.32(2). It then read s.80, which bars the carry forward and set-off of a loss not determined in pursuance of a return filed in accordance with s.139(3), and observed that the sub-sections it names are those dealing with business loss, speculation loss, capital loss and the loss from owning and maintaining race horses — depreciation is not among them. Because s.32(2) makes the unabsorbed depreciation of earlier previous years part of the current year's depreciation allowance, it is not a loss whose carry forward is conditioned by the machinery in Chapter VI; the section carries no requirement of a return filed in time such as attaches to business losses. The Court supported that reading with earlier authority to the effect that s.80 refers to loss and not to unabsorbed depreciation, so that in respect of the carry forward of depreciation there is no obligation to file the return within the time prescribed. It concluded that ss.80 and 139(3) apply to business losses and not to unabsorbed depreciation, which is exclusively governed by s.32(2).
Section 80 and 139(3) of the Act apply to business losses and not to unabsorbed depreciation which is exclusively governed by the provisions of Section 32(2) of the Act.
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Handle my notice → Ask a CA on WhatsAppNo. The Delhi High Court held that s.80 and s.139(3) apply to business losses and not to unabsorbed depreciation, which is governed exclusively by s.32(2). There is accordingly no obligation to file the return within the prescribed time in order to carry forward depreciation. This was decided by the High Court (A.K. Sikri J and M.L. Mehta J) and bears on section 80, section 139, section 32(2), section 72 of the Income Tax Act 1961. It is reported as ITA No. 164/2008 (Delhi High Court), judgment reserved 24 February 2011; reported at (2011) 334 ITR 13 (Del.). This is the decision that separates what a belated return actually costs from what officers routinely say it costs. Section 80 is a closed list: it bars carry forward and set-off only under s.72(1), s.73(2), s.73A(2), s.74(1) and (3) and s.74A(3). Business loss, speculation loss, specified business loss under s.73A, capital loss and the race horse loss are inside the bar. Unabsorbed depreciation is not mentioned at all, and the Court's reason is structural rather than merely textual: s.32(2) makes the unabsorbed depreciation of earlier years part of the current year's depreciation allowance, so it is not being carried forward as a 'loss' under Chapter VI at all. The same textual argument is available, and is not answered by any decision found in this pass, for a loss under the head income from house property carried forward under s.71B — s.80 does not name s.71B either. That extension is an argument, not a holding, and should be presented as such. Note what the case does not touch: s.80 still bars the business loss itself, so on a belated return the client keeps the depreciation and loses the loss, and the order under s.157 for the loss year should be read to see which is which. If it applies to you, the first step is this: Split the carried-forward figure into unabsorbed depreciation under s.32(2) and business loss under s.72(1) before you argue anything. Only the second is hit by s.80.
The assessee company's appeal concerned assessment years 2000-01 and 2001-02, the argument turning on 2001-02. For that year the time allowed by s.139(1), and therefore by s.139(3), expired on 31 October 2001. The assessee filed its loss return on 31 March 2003, declaring a loss of Rs 6,75,38,576. Assessment was framed on 31 October 2003 at a loss of Rs 6,03,14,560, but the Assessing Officer declined to allow the carry forward of the unabsorbed depreciation on the ground that the return had not been filed within the time allowed by s.139(1) read with s.139(3), so that s.80 stood in the way. The Tribunal held for the assessee, and the Revenue appealed under s.260A on two questions: whether filing within the s.139(1) and s.139(3) time was unnecessary for carrying forward unabsorbed depreciation, and whether s.80 applies to unabsorbed depreciation covered by s.32(2). The matter was decided on 2011-03-25 by the High Court (A.K. Sikri J and M.L. Mehta J). On those facts the High Court held as follows. The Revenue's appeal was dismissed with no order as to costs and both questions were answered in favour of the assessee. Sections 80 and 139(3) apply to business losses and not to unabsorbed depreciation, which is exclusively governed by s.32(2); the carry forward of unabsorbed depreciation therefore does not depend on the return having been filed within the time allowed by s.139(1).
The Court read s.32 and s.72 together and found it manifest that s.72 deals with the carry forward of unabsorbed losses other than losses on account of depreciation, and that this is so because the carry forward of depreciation is separately provided for by s.32(2). It then read s.80, which bars the carry forward and set-off of a loss not determined in pursuance of a return filed in accordance with s.139(3), and observed that the sub-sections it names are those dealing with business loss, speculation loss, capital loss and the loss from owning and maintaining race horses — depreciation is not among them. Because s.32(2) makes the unabsorbed depreciation of earlier previous years part of the current year's depreciation allowance, it is not a loss whose carry forward is conditioned by the machinery in Chapter VI; the section carries no requirement of a return filed in time such as attaches to business losses. The Court supported that reading with earlier authority to the effect that s.80 refers to loss and not to unabsorbed depreciation, so that in respect of the carry forward of depreciation there is no obligation to file the return within the time prescribed. It concluded that ss.80 and 139(3) apply to business losses and not to unabsorbed depreciation, which is exclusively governed by s.32(2). In the words reproduced by the source cited on this page: "Section 80 and 139(3) of the Act apply to business losses and not to unabsorbed depreciation which is exclusively governed by the provisions of Section 32(2) of the Act."
It was decided by the High Court on 2011-03-25 and is reported as ITA No. 164/2008 (Delhi High Court), judgment reserved 24 February 2011; reported at (2011) 334 ITR 13 (Del.). Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 80, section 139, section 32(2), section 72, 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 Revenue's appeal was dismissed with no order as to costs and both questions were answered in favour of the assessee. Sections 80 and 139(3) apply to business losses and not to unabsorbed depreciation, which is exclusively governed by s.32(2); the carry forward of unabsorbed depreciation therefore does not depend on the return having been filed within the time allowed by s.139(1). It arises in Assessment & Scrutiny and How Tax Law Is Read matters, on section 80, section 139, section 32(2), section 72 of the Income Tax Act 1961, and was decided by A.K. Sikri J and M.L. Mehta J. 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. Put s.80 in front of the officer and read out the sub-sections it names. It names s.72(1), s.73(2), s.73A(2), s.74(1) and (3) and s.74A(3), and it does not name s.32(2) or s.71B. Where the same client also has a house property loss to carry forward on a belated return, take the s.71B point on the same textual footing, but flag to the client that no decision on s.71B was located and the point is untested. Check that the loss year assessment order and the s.157 intimation record the depreciation separately; a set-off year officer who sees one composite figure will refuse the lot. Do not extend the reasoning to the loss itself. On the authority of s.80 as it stands, a belated return does defeat carry forward of business loss, speculation loss, specified business loss, capital loss and the race horse loss.
Validity check could not be completed. Later treatment was checked only through exact-phrase retrieval, which showed the operative words reproduced in Thermo Fisher Scientific India P. Ltd. v. DCIT (ITAT Mumbai, 16 July 2025), M/s Splendor Landbase Ltd. v. ACIT (ITAT Delhi, 6 June 2018) and Mahabaleshwar Gas & Chemicals Pvt. Ltd. (ITAT Delhi, 16 December 2008), so the proposition continues to be applied at Tribunal level. No systematic citator check was run, no search was made for a contrary High Court decision, and whether the Revenue took the matter to the Supreme Court was not established. One statutory change since the judgment matters and was verified separately from the current text of s.80 as reproduced in later orders: s.80 now also names sub-section (2) of s.73A, inserted when s.73A was brought in for specified businesses, so the list of barred carry forwards is longer than the list the Court was reading. That addition does not disturb the holding, since s.32(2) and s.71B are still not named. 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.
Read through indiankanoon's print view, which passes the text through a summarising layer. That layer produced two different renderings of the same sentence about s.72 on two attempts, one with the word 'business' and one without, so no sentence has been quoted here unless it survived exact-phrase retrieval on indiankanoon. The quote used below was verified in that way: a phrase search returned this judgment together with three later decisions reproducing the identical words. The concluding sentence was obtained in full on a second pass and is quoted whole; the earlier inability to reproduce its opening words was an artefact of the retrieval layer, not of the report. A second phrase from the same passage, 'Section 80 refers to the loss and not for unabsorbed depreciation', was likewise confirmed to be present in this judgment, but it appears in the Court's account of earlier authority rather than plainly in its own voice, so it has not been used as the key quote. The paragraph numbering of the reasoning could not be established reliably; the operative sentence 'The appeal is accordingly dismissed with no orders as to costs' was rendered as paragraph 19. The reported citation 334 ITR 13 (Del.) is taken from a Bombay Chartered Accountants' Society journal note on this decision and was not verified against the report itself. Both the questions of law as framed and the figures below were read in abridged form. 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 Revenue's appeal was dismissed with no order as to costs and both questions were answered in favour of the assessee. Sections 80 and 139(3) apply to business losses and not to unabsorbed depreciation, which is exclusively governed by s.32(2); the carry forward of unabsorbed depreciation therefore does not depend on the return having been filed within the time allowed by s.139(1).
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