If a person has sustained a loss in any previous year under the head “Profits and gains of business or profession” or under the head “Capital Gains” and claims that such loss or any part thereof should be carried forward under section 72(1) or section 73(2) or 73A(2) or section 74(1) and (3) or section 74A(3) then he may furnish a return of loss within the time prescribed under section 139(1) and all the provisions of this Act shall apply as if ii were a return under section 139(1).
It is not mandatory to file a return of loss (except in case of a company or a firm) as there is no taxable income.
However, as already discussed under section 80 in the chapter on ‘Set off and carry forward of losses’, losses under the head business or profession and capital gain cannot be carried forward unless the return of loss is submitted on or before the due date’ mentioned under section 139(1) and it is duly assessed. If the return of loss is not submitted or is submitted after the due date, such losses cannot be carried forward.
1. As already discussed, all losses are not allowed to be carried forward. Therefore return of loss should be submitted on or before due date only in case of business loss, speculation loss, capital loss or loss on account of owning and maintaining the horses for running in horse races.
2. It may be noted that filing a return of loss within the due date is necessary for carry forward of losses under sections 72(1), 73(2), 73A(2), 74(1), 74(3) and 74A(3). It does not cover section 71B i.e. carry forward and set off loss of house property. Therefore, loss on account of house property can be carried forward even if the return is submitted late.
3. Unabsorbed depreciation can also be carried forward even if the return of loss is submitted after the due date, as it is not covered under Chapter VI of set off or carry forward of losses but covered under section 32(2).
4. Section 139(3) read with section 80. Does not prohibit the set off of losses of the current year while computing the Total Income even if the return is filed after the due date. It only prohibits the carry forward of such losses.
5. If an assessee has submitted a return of loss in response to a notice under section 142(1), such loss cannot be carried forward unless it is a loss under the head income from house property. However. Unabsorbed depreciation can be carried forward in this case.
6. Although the loss of the current year cannot be carried forward unless the return of loss is submitted before the due date but the loss of earlier years can be carried forward if the return of loss of that year(s) was submitted within the due date and such loss has been assessed.
Power to Condone Delay in Filing a Return of Loss [Circular No. 9/2015, Dated 9.6.2015]
1 Principal Commissioner or Commissioner vested with the power of acceptance / rejection of delayed application for claim of loss provided claim is not more than Rs. 10 Lakh for any assessment year:
2. Principal Chief Commissioner or Chief Commissioner vested with the power of acceptance / rejection of delayed application of claim of loss provided claim is more than Rs. 10 lakh but does not exceed Rs. 50 lakh for any assessment year.
3. Where the claim of loss is more than Rs. 50 Lakhs:
The applications / claims for amount exceeding RS. 50 lakhs shall be considered by the Board.
4. Application for condonation of delay in making claim of loss cannot be entertained beyond a period of 6 years:
No condonation application for claim of loss shall be entertained beyond 6 years from the end of the assessment year for which such application is made. This limit of 6 years shall be applicable to all authorities having powers to condone the delay as per the above prescribed monetary limits, including the Board.
5. Time limit for disposal of condonation application of claim of loss
A condonation application should be disposed of within 6 months from the end of the month in which the application is received by the competent authority, as far as possible.
6. Conditions for acceptance / Rejection of the application
The powers of acceptance/rejection of the application within the monetary limits delegated to the Pr.CcsIT/CcsIT/Pr.CsIT/CsIT in case of such claims will be subject to following conditions:
(i) At the time of considering the case under section 11 9(2Xb), it shall be ensured that the loss declared is correct and genuine and also that the case is of genuine hardship on merits.
(ii) The Pr.CCIT/CCIT/Pr.CIT/CIT dealing with the case shall be empowered to direct the jurisdictional assessing officer to make necessary inquiries or scrutinize the case in accordance with the provisions of the Act to ascertain the correctness of the claim.
7. This circular will cover all such applications for condonation of delay under section 119(2xb) which are pending as on the date of issue of the Circular.
8. The Board reserves the power to examine any grievance arising out of an order passed or not passed by the authorities and issue suitable directions to them for proper implementation of this Circular.
However, no review of or appeal against the orders of such authorities would be entertained by the Board.