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Income Tax Appellate Tribunal, “H” BENCH, MUMBAI
Before: SHRI MAHAVIR SINGH, JM & SHRI MANOJ KUMAR AGGARWAL, AM
Per Manoj Kumar Aggarwal (Accountant Member)
The captioned appeal by revenue for Assessment Year [AY] 2012- 13 contest the order of Ld. Commissioner of Income-Tax (Appeals)-10 [CIT(A)], Mumbai, Appeal No.CIT(A)-10/ITO-5(1)(4)/242/2014-15 dated 23/11/2015 by raising the following Grounds of Appeal: - 1) Whether on the facts and in the circumstances of the case, and in law, the Ld. CIT(A) has erred in Holding that brought forwarded unabsorbed depreciation for A.Y. 98-99 to A.Y. 2001-02 amounting to Rs.22026458/- are ITA.No.966/Mum/2016 Hardcastle Restaurants Private Limited Assessment Year 2012-13 eligible for set off against income of the current year without appreciating the fact that as per provision of pre-amended Sec.32(2) (prior to 01.04.2001 the set-off of unabsorbed depreciation allowance (for the AY 1997-98 to 2001-02) shall be carried forward to the following assessment year not being more than eight assessment years immediately succeeding the assessment year for which the aforesaid allowance was first computed. 2) Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in relying on the judgment of Hon. Gujrat High Court in the case of M/s General Motors P. Ltd. Vs DCIT 354 ITR 244 without appreciating the fact that in the SLP against the said order the Hon. SC has kept the question of law open.
The assessment for impugned AY was framed by Ld. Income Tax Officer 5(1)(4), Mumbai [AO] u/s 143(3) of the Income Tax Act,1961 on 13/11/2014. The solitary issue involved in the appeal is set-off of brought forwarded unabsorbed depreciation pertaining to Assessment Years [A.Y] 1998-99 to 2001-02.
Briefly stated the assesse being resident corporate assesse engaged in the business of running McDonalds Quick Service Restaurant had brought forward unabsorbed depreciation aggregating to Rs.2,20,26,458/- pertaining to AYs 1998-99 to 2001-02, the set-off of which, in the opinion of Ld. AO, was not available to the assessee in impugned AY in terms of un-amended provisions of Section 32(2) since eight years had already elapsed. The Ld. AO opined that the benefit of amended Section 32(2) was applicable only from AY 2002-03 and not with respect to earlier years. Finally, relying on the judgment of this Tribunal rendered in DCIT Vs. Times Guarantee Ltd., the set-off of the stated unabsorbed depreciation was denied to the assessee.
Aggrieved, the assessee contested the same with success before Ld. CIT(A) vide impugned order dated 23/11/2015 where Ld. CIT(A) allowed the claim of the assessee by making following observations:-
ITA.No.966/Mum/2016 Hardcastle Restaurants Private Limited Assessment Year 2012-13 4.2.1 After careful examination of the case I hold that the unabsorbed depreciation losses for A.Ys.1998-99 to 2001-02 need to be allowed to be set off from the profits declared for the present assessment year. The decision of the honorable Gujrat High Court in the case of General Motors India (P) Ltd (Supra) made this point very clear. The Honorable Bombay High Court in the case of Godavari devi Saraf 113 ITR 589 and the Honorable ITAT Mumbai in the case of Piyush C Mehata 52 SOT 27 have made it clear that the decision of a higher judicial body needs to be followed even if it’s non- jurisdictional one. It is also to be noted that the ITAT Mumbai in the case of Bisleri Sales Ltd 58 SOT 73 has allowed such relief by following the decision of the Gujrat High Court in the case of General Motors India (P) Ltd. Further in appellant’s own case my learned predecessor has allowed similar relief for AY 2011-12. Since the facts and circumstances for the present assessment year are same, by respectfully following the above decisions claim of the appellant is allowable. Accordingly, the ground is allowed. Aggrieved, the revenue is in further appeal before us.
The Ld. Departmental Representative [DR] placed reliance on the stand of Ld. AO whereas Ld. Authorized Representative for Assessee [AR] submitted that the issue stood covered in assessee’s favor by catena of judgments of higher judicial authorities.
We have carefully heard the rival contentions and perused relevant material on record. After considering the same, we find that the issue, at present stood squarely covered in assessee’s favor by catena of judgments of the higher authority and CBDT circular No. 14 of 2001 and in particular, by the judgment of Hon’ble Gujarat High Court rendered in the case of General Motors India P. Ltd. Vs DCIT [354 ITR 244 23/08/2012] where the Hon’ble Court after considering the relevant statutory provisions of Section 32 as amended by the Finance Act, 2001 and CBDT Circular No. 14 of 2001 held that set-off of unabsorbed depreciation of earlier years was available to the assessee. Further, Special Leave Petition [SLP] filed by the revenue against the said judgment has been dismissed by the Apex court. The revenue could neither controvert the same nor was able to bring any contrary judgment
ITA.No.966/Mum/2016 Hardcastle Restaurants Private Limited Assessment Year 2012-13 on record. For ease of reference, the relevant portion from the said judgment is extracted below:- 38. Therefore, it can be said that, current depreciation is deductible in the first place from the income of the business to which it relates. If such depreciation amount is larger than the amount of the profits of that business, then such excess comes for absorption from the profits and gains from any other business or business, if any, carried on by the assessee. If a balance is left even thereafter, that becomes deductible from out of income from any source under any of the other heads of income during that year. In case there is a still balance left over, it is to be treated as unabsorbed depreciation and it is taken to the next succeeding year. Where there is current depreciation for such succeeding year the unabsorbed depreciation is added to the current depreciation for such succeeding year and is deemed as part thereof. If, however, there is no current depreciation for such succeeding year, the unabsorbed depreciation becomes the depreciation allowance for such succeeding year. We are of the considered opinion that any unabsorbed depreciation available to an assessee on 1st day of April 2002 (A.Y. 2002-03) will be dealt with in accordance with the provisions of section 32(2) as amended by Finance Act, 2001. And once the Circular No.14 of 2001 clarified that the restriction of 8 years for carry forward and set off of unabsorbed depreciation had been dispensed with, the unabsorbed depreciation from A.Y.1997-98 upto the A.Y.2001-02 got carried forward to the assessment year 2002-03 and became part thereof, it came to be governed by the provisions of section 32(2) as amended by Finance Act, 2001 and were available for carry forward and set off against the profits and gains of subsequent years, without any limit whatsoever.
Further, we find that the revenue contested the stand of Ld. CIT(A), in similar manner, for AY 2011-12 before this Tribunal vide order dated 15/06/2017 where the revenue’s appeal has been dismissed by following the ratio of above cited judgment of Hon’ble Gujarat High Court. Further, our jurisdictional Bombay High Court in CIT Vs. Hindustan Unilever Ltd. [72 Taxmann.com 325 26/07/2016] has confirmed the similar stand of Tribunal by not admitting the substantial question of law. The ratio of the decision of Hindustan Lever Ltd. has further been followed by Hon’ble Bombay High Court in CIT Vs Hickson & Dadajee Pvt. Ltd. [ITA No. 1493 of 2014 dated 28/02/2017].
ITA.No.966/Mum/2016 Hardcastle Restaurants Private Limited Assessment Year 2012-13 6. Therefore, respectfully following the ratio of catena of judgments in assessee’s favor, we confirm the stand of Ld. first appellate authority and dismiss revenue’s appeal. 7. Resultantly, the revenue’s appeal stands dismissed.
Order pronounced in the open court on 28th February, 2018 Sd/- Sd/- (Mahavir Singh) (Manoj Kumar Aggarwal) �ाियक सद� / Judicial Member लेखा सद� / Accountant Member मुंबई Mumbai; िदनांक Dated : 28. 02.2018 Sr.PS:- Thirumalesh आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : अपीलाथ� / The Appellant 1. ��थ� / The Respondent 2. आयकर आयु�(अपील) / The CIT(A) 3. आयकर आयु� / CIT – concerned 4. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, मुंबई / DR, ITAT, Mumbai 5. गाड� फाईल / Guard File 6.