Section-139(3) : Return of Loss

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 it were a return under section 139(1).

The following Losses cannot be carried forward if the Return Of Loss is not submitted in time—

1. business loss (speculative or otherwise);

2. capital loss; and

3. loss from the activity of owning and maintaining race horses.

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.

Some Points in respect of Return of Loss [Section 139(3)]

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.

Related Topics... Return of Income and Procedure of Assessment

• 1. Submission of Compulsory Filing of 'Return of Income' as a Statutory Obligation (Section 139)
• 2. Return Form and Manner of Furnishing Return of Income (Rule 12)
• 3. Filing Return of Loss [Section 139(3) read with Section 80]
• 4. Belated IT Return which is Filed beyond Time [Section 139(4)]
• 5. Revised IT Return [Section 139(5)]
• 6. Defective or Incomplete IT Return [Section 139(9)]
• 7. Submission of IT Returns through Tax Return Preparers (Section 139B)
• 8. Income Tax Return by Whom to be Verified (Section-140)
• 9. Self-Assessment of Income (Section-140A)
• 10. Inquiry before Assessment of Tax (Section-142 or 142A)
• 11. Processing of Income Tax Return [Section 143(1)]
• 12.Regular / Scrutiny Assessment - of Return of Income [Section 143(3)]
• 13. Income Escaping Assessment (Section 147)
• 14. Time Limit for Completion of all Assessment and Re-Assessment of Return of Income (Section 153)
• 15. Rectification of Mistakes in any Order passed by the Accessing Officer (Section 154)