DUJODWALA PRODUCTS LTD,MUMBAI vs. ADDL CIT RG 3(1), MUMBAI

2. The appellant prays that, the AO should be directed to allow the setoff of unabsorbed depreciation of Rs. 22,57,397/- against the income of AY 2009-10”.

Brief facts qua the issue involved is that, the assessee has claimed unabsorbed depreciation of Rs. 22,57,397/- for the AY 2000-01. The same has been denied by the AO on the ground that, in view of the Special Bench decision in the case of DCIT vs Times Guarantee Ltd, reported in [2010] 40 SOT 14 (Mum), the unabsorbed depreciation claimed for AY 2000-01 cannot be allowed as 8 years has already elapsed in the assessment year 2008-09. After incorporating the relevant observation of the Special Bench decision, the Ld. AO disallowed the claim.

Before the Ld. CIT(A) reliance was placed on the decision of Hon’ble Gujarat High Court in the case of General Motors India P Ltd. vs DCIT, reported in [2013] 354 ITR 244. However, the Ld. CIT(A) held that the decision of Gujarat High Court is not applicable and in the jurisdiction of State of Maharashtra the said decision does not have any persuasive value, accordingly, he upheld the order of the AO relying upon the Special Bench decision.

The Ld. DR strongly relied upon the order of the CIT(A).

We have considered the finding given in the impugned order. Here in this case Ld. CIT(A) has preferred to follow a Special Bench decision of ITAT, as against the direct decision of Hon’ble Gujarat High Court. We find it difficult to subscribe this view of the Ld. CIT(A). A decision of one High Court may not have a finding effect on another High Court, but a decision of a non-jurisdictional High Court does not have a persuasive effect on a subordinate Court, if there is no contrary jurisdictional High Court decision. If there are divergent views of the two different High Courts, then one favorable to the assessee should be given precedence. If there is a decision of subordinate Court or quasi judicial authority, then

Now coming to the judgment of the Hon’ble Gujarat High Court in the case of General Motors India P. Ltd. (supra), we find that the Hon’ble Court has analysed the relevant provisions of section 32(2), CBDT Circulars and the entire Legislative History on this point and held that “unabsorbed depreciation available to the assessee on 1st Day of April, 2002 have to be dealt in accordance with the provisions of section 32(2) as amended by Finance Act, 2001 and now the amended provisions of section 32(2) would apply and the claim of depreciation of earlier year would be available for carry forward and set off of profit /gains of subsequent years without any limit whatsoever. The relevant observation of Hon’ble High Court reads as under:- 37. The CBDT clarifies the intent of the amendment that it is for enabling the industry to conserve sufficient funds to replace plant and machinery and accordingly the amendment dispenses with the restriction of 8 years for carry forward and set off of unabsorbed depreciation. The amendment is applicable from assessment year 2002-03 and subsequent years. This means 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 not by the provisions of section 32(2) as it stood before the said amendment. Had the intention of the Legislature been to allow the unabsorbed depreciation allowance worked out in A.Y. 1997-98 only for eight subsequent assessment years even after the amendment of section 32(2) by Finance Act, 2001 it would have incorporated a provision to that effect. However, it does not contain any such provision. Hence keeping in view the purpose of amendment of section 32(2) of the Act, a purposive and harmonious

In the result, appeal filed by the assessee is allowed. Order pronounced in the open court on 12th February, 2016.