2025 (11) TMI 908 - AT - Income Tax

Assessee LLP allowed to carry forward and set off losses under s.71 and s.72 as return valid per s.132(9)/s.139(2)

ITAT KOLKATA - AT allowed the appeal, holding the assessee LLP entitled to carry forward and set off losses under s.71 and s.72. The tribunal found the ... Carry forward and set off against the future profits in accordance with the provisions of section 71 & 72 - only grievance of the assessee is that the revenue authorities have not considered the due date for LLP according to Section 132(9) i.e. 30th September, but both the revenue authorities were under the impression that the due date of filing of the return of income was 31st July, 2023. HELD THAT:- It is an admitted fact that the assessee is a Limited Liability Partnership. As per the LLP Act, 2008, the appellant has to maintain regular books of account and it should be audited with the aggregated turnover of more than 10 crores. It is an admitted fact that the assessee’s turnover aggregated to Rs. 9,52,66,229/-. However, the appellant being LLP was governed by the LLP Act, had to get its books of account audited. Only grievance of the assessee is that the revenue authorities have not considered the due date for LLP according to Section 132(9) i.e. 30th September, but both the revenue authorities were under the impression that the due date of filing of the return of income was 31st July, 2023. Therefore, they said that the assessee-LLP is not entitled to carry forward and set off against future profits in accordance with the provisions of sections 71 & 72 of the Income Tax Act, 1961. Assessee-LLP filed the return of income much prior to the due date of filing of the return, i.e. 30th September. Therefore, assessee has filed the return of income much prior to the date of filing of the return of income u/s 139(2). Therefore, the assessee is entitled to carry forward and set off against the future profits in accordance with the provisions of section 71 & 72. Accordingly, the grounds raised by the assessee are allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether an LLP which is required to get its accounts audited under the LLP Act, 2008 is governed by the extended return filing due date (30th September) for the purpose of claiming carry forward and set-off of current year business loss under sections 71 and 72 of the Income Tax Act, 1961. 2. Whether a return of income filed after 31st July but before 30th September (the LLP-audited accounts due date) entitles the assessee-LLP to carry forward current year business loss under sections 71 and 72 when the CPC has disallowed the claim on the ground of delay beyond 31st July. 3. Whether the Revenue's reliance on the general due date (31st July) rather than the LLP-specific due date under the LLP Act/Income Tax provisions is legally tenable for denial of carry forward of business losses. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Legal framework applicable to due date for filing by an LLP and entitlement to carry forward losses Legal framework: Sections 71 and 72 of the Income Tax Act, 1961 govern carry forward and set-off of current year business losses. Return filing timelines are governed by section 139(2) read with the special proviso applicable to entities required to have accounts audited under the LLP Act, 2008 (referred to in the judgment as section 132(9) for the LLP due date), which prescribes an extended due date (30th September) for filing where audit is mandatory. Precedent treatment: The Tribunal's determination proceeded without reliance on any binding judicial precedents; no earlier decisions were invoked, followed, distinguished, or overruled in the reasoning. Interpretation and reasoning: The Tribunal accepted as undisputed that the assessee was an LLP required to have its accounts audited under the LLP Act, 2008 and that its turnover (Rs. 9.52 Crore) fell below the general tax audit threshold but nonetheless triggered an LLP audit requirement under the LLP Act. The Tribunal found that because the LLP was governed by the LLP Act audit requirement, the due date for filing the return under section 139(2) (as applied to audited entities) was 30th September (section referenced in the judgment as 132(9)). The Tribunal contrasted this statutory LLP due date with the CPC's and revenue authorities' view that the due date was 31st July. The assessee had filed the return prior to 30th September; therefore, the return was within the LLP-specific statutory due date and the assessee satisfied the temporal condition for claiming carry forward under sections 71 and 72. Ratio vs. Obiter: Ratio - An LLP required to have its accounts audited under the LLP Act is entitled to rely on the LLP-specific return filing due date (30th September) for the purpose of meeting the time-bar condition for carry forward and set-off of current year business losses under sections 71 and 72. Obiter - Observations about the CPC's processing error and the assessing authorities' misconception as to the applicable due date (while determinative here) are ancillary to the statutory interpretation. Conclusions: The Tribunal concluded that the assessee filed the return within the due date applicable to an LLP under the LLP Act and section 139(2), and therefore is entitled to carry forward and set off the business loss under sections 71 and 72. Issue 2 - Effect of CPC/Assessing Authorities treating 31st July as the applicable due date and denial of carry forward Legal framework: The entitlement to carry forward losses under sections 71 and 72 is contingent on filing a return within the statutory due date applicable to the taxpayer; procedural or processing positions adopted by CPC/assessing authorities cannot expand or curtail the statutory timeline. Precedent treatment: No judicial authorities were cited to validate the CPC's position; the Tribunal did not find any precedent justifying application of the general due date where a specific LLP due date applied. Interpretation and reasoning: The Tribunal held that the CPC and the lower appellate authority erred in treating the general due date (31st July) as applicable to an LLP obliged to have accounts audited under the LLP Act. That incorrect position led to denial of the carry forward claim despite a return filed before the LLP-specific due date. The Tribunal treated the revenue's action as a consequence of misapplication of the statutory due date rather than a merits denial under sections 71/72. Ratio vs. Obiter: Ratio - Procedural or administrative positions (CPC/Assessing Officer) that ignore a taxpayer's specific statutory due date (here the LLP audit-linked date) cannot be a basis to deny substantive tax relief such as carry forward of losses. Obiter - Commentary pointing to the undisputed factual matrix (turnover figures, audit requirement) serves explanatory purposes. Conclusions: The Tribunal reversed the revenue position, holding that the loss carry forward could not be denied on the ground that the return was filed after 31st July when the statute provided an extended LLP due date; accordingly, the carry forward claim must be allowed. Cross-references and final disposition Cross-reference: The resolution of Issue 1 determines Issue 2 - because the LLP-specific due date applies, the CPC's contrary treatment was incorrect and the denial of carry forward under sections 71 and 72 could not be sustained. Disposition: The Tribunal allowed the appeal, directing that the assessee be permitted to carry forward and set off the current year business loss in accordance with sections 71 and 72, on the ground that the return was filed within the LLP-applicable statutory due date.