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Issues: (i) Whether unabsorbed losses not claimed in the immediately succeeding assessment years could be claimed in a later assessment year; (ii) Whether the time limit for claiming the set off had expired.
Issue (i): Whether unabsorbed losses not claimed in the immediately succeeding assessment years could be claimed in a later assessment year.
Analysis: The settled rule applied was that losses sustained must be set off against the profits of the immediately succeeding year or years, and if they are not so adjusted, they cannot be carried forward for set off at a later date. Since the assessee had not sought set off in the succeeding assessment years after the loss year, the later claim in the assessment year 1976-77 was impermissible.
Conclusion: The issue was answered in the affirmative, in favour of the Revenue and against the assessee.
Issue (ii): Whether the time limit for claiming the set off had expired.
Analysis: The time limit applied for this purpose was eight years, not four years. The Tribunal erred in accepting the shorter period.
Conclusion: The issue was answered in the negative, in favour of the assessee and against the Revenue.
Final Conclusion: The reference was disposed of by holding that the assessee's claim for set off failed on the first issue, while the second issue was decided in the assessee's favour.
Ratio Decidendi: Unabsorbed losses must be set off in the immediately succeeding assessment years, and a later claim is not maintainable if that opportunity is not availed, though the applicable time limit for such set off is eight years.
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