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Income Tax Appellate Tribunal, MUMBAI BENCH “D”, MUMBAI
Before: SHRI AMIT SHUKLA & SHRI RAMIT KOCHAR
ORDER �ी अिमत शु�ला, �या. स.:- PER AMIT SHUKLA, J. M.: The aforesaid appeal has been filed by the assessee against impugned order dated 19.01.2013 passed by CIT(A)-6, Mumbai for the quantum of assessment passed under section 143(3) for the assessment year 2009-10, on following grounds of appeal:- “1. Commissioner of Income Tax (Appeals) erred in law and fact in not adjusting brought forward unabsorbed depreciation of Rs. 22,57,397/- of AY 2000-01 against the income of AY 2009-10 because the eight years has already elapsed in AY 2008-09.
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”.
In this case, despite service of notice through RPAD on two 2. occasions, none appeared on behalf of the assessee nor any adjournment application has been filed on behalf of the assessee,
2 M/s Dujodwala Products Ltd DR.
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
3 M/s Dujodwala Products Ltd High Court has to be given precedence, especially when such a High Court has interpreted a Central Act. Here in this case, it is not the case that there are divergent views expressed by different High Court, but there is sole decision of a High Court, which has expressly taken a view after detail analysis of the provisions of the Income Tax. In such a case such a decision is likely to be followed and should be given precedence.
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
4 M/s Dujodwala Products Ltd interpretation has to be taken. While construing taxing statutes, rule of strict interpretation has to be applied, giving fair and reasonable construction to the language of the section without leaning to the side of assessee or the revenue. But if the legislature fails to express clearly and the assessee becomes entitled for a benefit within the ambit of the section by the clear words used in the section, the benefit accruing to the assessee cannot be denied. However, Circular No.14 of 2001 had clarified that under Section 32(2), in computing the profits and gains of business or profession for any previous year, deduction of depreciation under Section 32 shall be mandatory. Therefore, the provisions of section 32(2) as amended by Finance Act, 2001 would allow the unabsorbed depreciation allowance available in the A.Y. 1997-98, 1999-2000, 2000-01 and 2001-02 to be carried forward to the succeeding years, and if any unabsorbed depreciation or part thereof could not be set off till the A.Y. 2002-03 then it would be carried forward till the time it is set off against the profits and gains of subsequent years.
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
5 M/s Dujodwala Products Ltd for carry forward and set off against the profits and gains of subsequent years, without any limit whatsoever Thus, respectfully following the decision of Hon’ble High Court, we allow this issue in favour of the assessee and reverse the finding of the Ld. CIT(A).
In the result, appeal filed by the assessee is allowed. Order pronounced in the open court on 12th February, 2016.
Sd/- Sd/- (रिमत कोचर) (अिमत शु�ला) लेखा सद�य �याईक सद�य (RAMIT KOCHAR) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Date: 12th February, 2016 ��त/Copy to:- 1) अपीलाथ� /The Appellant. 2) ��यथ� /The Respondent. 3) The CIT(A) -6, Mumbai. 4) The Commissioner of Income Tax-3, Mumbai. 5) िवभागीय �ितिनिध “डी” ”, आयकर अपीलीय अिधकरण, मुंबई/ The D.R. “D” Bench, Mumbai. 6) गाड� फाईल \ Copy to Guard File. आदेशानुसार/By Order / / True Copy / /