(Appeals from the judgments and orders, dated July 2, 1996, and July 24, 1996, of the Kerala High Court in O.P. No. 18061 of 1995 and O. P.No.19206 of 1995 respectively)

Income-tax---

----Reference---Loss---Carry forward of loss---Law applicable---Provisions relating to assessment years 1986-87 and 1987-88 would be different-- Question relating to carry forward of loss for two years is a question of law---Indian Income Tax Act, 1961, Ss. 139 & 256---[CIT v. Pigments India Ltd. (1997) 228 ITR 797 and (1998) 230 ITR 518 reversed].

Held, that the provision of law to be applied is different for the two assessment years 1986-87 and 1987-88:-Hence, whether the loss returns filed on October 10, 1986, and September 30, 1987, for the assessment years 1986-87 and 1987-88, respectively, could be taken into consideration for carry forward of loss were questions of law which had to be referred to the High Court.

CIT v. Pigments India Ltd. (1997) 228 ITR 797 and (1998) 230 ITR 518 reversed.

J. Ramamurthi, Senior Advocate (B.K. Prasad and S. Rajappa, Advocates with him) for Appellant

JUDGMENT

The notice upon the Special Leave Petition stated that the matter might be disposed of at the Special Leave Petition stage. The respondent has been served but has, not chosen to appear.

By the judgment and order under appeal the High Court of Kerala rejected the reference made by the appellant under section 256(2) of the Income Tax Act, 1961. The questions raised related to the assessment years 1986-87 and 1987-88. They read, thus, (see (1997) 228 ITR 797, 798 and (1998) 230 ITR 518 & 519):

"(1)Whether, on the facts and in the circumstances of the case and also in the light of the relevant provisions, the assessee is entitled to carry forward any loss?

(2)Whether, on the facts and in the circumstances of the case and also considering the relevant provisions and the provision contained in subsection (10) of section 139 which retrospectively came into force from April 1, 1986, the Tribunal is right in law in holding that the assessee is entitled to have the loss carried forward

(3)Whether, on the facts and in the circumstances of the case and since the Assessing Officer had extended time only up to September 30, 1986, and return filed on October 10, 1986, being one within the further extension of time applied for by the assessee (and on which no order was passed by the officer), the Tribunal is right in law in holding that, therefore, in view of the proviso to section 139(1) as it stood then the assessee is entitled to have loss carried forward

(1)Whether, on the facts and in- the circumstances of the case and also in the light of the relevant provisions, the assessee is entitled to carry forward any loss?

(2)Whether, on the facts and in the circumstances of the case and in view of the amendment to section 139(1) with effect from April 1, 1987 the Tribunal is right in law:

(i)in taking into consideration the loss return filed on September 30,1987?

(ii)in setting aside the order of the assessing authority and in giving a direction to the assessing authority to pass fresh order in accordance with the law.

(3)Whether, on the facts and in the circumstances of the case, does the decision of the Supreme Court in CIT v. Manmohan Das (1966) 59 ITR 699, relied on by the Tribunal have application to the facts of the case?"

By the order under appeal, the High Court rejected the reference.

We are inclined to agree with learned counsel for the appellant that the provision of law to be applied is different for the two assessment years and that the facts need to be considered in this light. We are not satisfied that this has been done. The questions raise issues of law and deserve to be referred to the High Court for fuller consideration.

The appeal are allowed. The order under appeal is set aside and the Tribunal is directed to refer to the High Court for decision the aforestated questions of law.

No order as to costs.

M.B.A./1823/FCAppeal allowed.