TMI Blog2015 (1) TMI 555X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 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. Thus we disapprove the conclusions arrived at by the authorities below and direct the Assessing Officer to grant the set off of the unabsorbed depreciation in the light of the legal position set out. - Decided in favour of assessee. Increasing the book profit under Section 115JB - Prior period expenses - Held that:- As regards the adjustment of ₹ 4,12,896 in respect of the prior period expenses, learned representatives fai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m business and profession during the current assessment year. 4. The relevant material facts are like this. During the course of the assessment proceedings, the Assessing Officer noticed that in its computation of income, the assessee has claimed set off, against income under the head profits and gains from business and profession , of, inter alia, unabsorbed depreciation brought from the assessment year 1999-2000, amounting to ₹ 1,76,41,753, and brought from the assessment year 2000-01, amounting to ₹ 2,63,05,110. The Assessing Officer was of the view that this set off was inadmissible in view of the legal position that the unabsorbed depreciation pertaining to the assessment years prior to the assessment year 2002-03 could only be carried forward for eight subsequent assessment years. The Assessing Officer was of the view that, in view of the above legal position, the unabsorbed depreciation could not have been carried forward beyond the assessment year 2008-09, i.e. beyond the immediately preceding assessment year. In support of this legal position, the Assessing Officer relied upon a Special Bench decision of this Tribunal in the case of DCIT Vs Times Guaranty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 2001 is not from retrospective effect, the controversy raised by the appellant is settled. I am relying on the Special Bench judgement in the case of DCIT vs. Times Guaranty Ltd., which is the jurisdictional ITAT Special Bench order and disallowance made by the A.O. is hereby confirmed. Thus, this ground of appeal is dismissed. 5. The assessee is aggrieved and is in appeal before us. 6. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. 7. We find that Section 32(2) of the Act, which deals with the set off of unabsorbed depreciation, was subjected to several amendments in the recent past. As it stood in the relevant previous year and as it was in force with effect from 2002-03, the said provision was as follows: Where, in the assessment of the assessee, full effect cannot be given to any allowance under sub-section (1) in any previous year, owing to there being no profits or gains chargeable for that previous year, or owing to the profits or gains chargeable for that previous year, owing to the profits or gains chargeable being less than the allowance, then, subjec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e carried on by him in the previous year relevant for that assessment year: Provided further that the time-limit of eight assessment years specified in sub-cl. (b) shall not apply in the case of a company for the assessment year beginning with the assessment year relevant to the previous year in which the said company has become a sick industrial company under sub-s. (1) of s. 17 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) and ending with the assessment year relevant to the previous year in which the entire net worth of such company becomes equal to or exceeds the accumulated losses. Explanation. For the purposes of this clause, 'net worth' shall have the meaning assigned to it in cl. (ga) of sub-s. (1) of s. 3 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986). 9. The question then arises as to how should the provisions regarding set off of unabsorbed depreciation be applied so far as set off of the unabsorbed depreciation which pertains to the point of time when the pre-amendment law was in force but which was claimed to be set off at the point of time when post amendment law was force. When coordinate divi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otors India Pvt Ltd (supra), had an occasion to consider the question whether the unabsorbed depreciation pertaining to the assessment year 1997-98 could be allowed to be carried forward and set off after a period of eight years or would it be governed by the section 32, as amended by the Finance Act, 2001 . 12. Dealing with this specific question, which was precisely the question answered in favour of the revenue by the special bench, Their Lordships decided the issue in favour of the assessee, and, inter alia, observed as follows: . 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. 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 pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal High Court decision. We have also noted that the learned CIT(A) has also followed a somewhat similar line of reasoning by emphasizing upon the Special Bench decision even as simply brushing aside the esteemed views of Hon ble Gujarat High Court. 15. In the hierarchical judicial system that we have in our country, any bench of this Tribunal, whatever be its numerical strength a single member bench, a division bench, an even larger or even largest bench, is placed a tier well below Hon ble High Courts. It is only elementary that, in the hierarchical judicial system, each judicial forums in a lower tier has to loyally accept the decisions of the authorities in the tiers above. Learned CIT(A) s observations that by explaining clearly that the amendment made by Finance Act, 2001 the special bench has settled the controversy are thus irrelevant because the binding nature of a judicial decision cannot be attributed to, what is perceived, as detailed analysis, inimitable articulation or even expertise reflected in the order, as the binding effect of a judicial order is wholly dependent on the forum at which it is delivered, and such a judicial view only binds lower tiers of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was non-existent, the order of penalty under that section cannot be imposed by any authority under the Act. Until a contrary decision is given by any other competent High Court, which is binding on the Tribunal in the State of Bombay (as it then was), it has to proceed on the footing that the law declared by the High Court, though of another State, is the final law of the land ..an authority like Tribunal has to respect the law laid down by the High Court, though of a different State, so long as there is no contrary decision on that issue by any other High Court 17. What is set out above is also the legal position reiterated by various coordinate benches, including in the cases of Tej International Pvt Ltd Vs DCIT [(2000) 69 TTJ 650] and ACIT Vs Aurangabad Holiday Resorts Pvt Ltd [(2007) 118 ITD 1]. In this view of the matter, and having noted that Hon ble Gujarat High Court has decided this issue in favour of the assessee in the case of General Motors Pvt Ltd (supra), we uphold the plea of the assess ee. 18. In view of the reasons set out above, we disapprove the conclusions arrived at by the authorities below and direct the Assessing Officer to grant the set off of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l since the provisions of Section 115 JB cannot be applied contrary to the law laid down by Hon ble jurisdictional High Court. Learned Departmental Representative, on the other hand, relies upon the orders of the authorities below which rely on clause (f) of Explanation to Section 115JB(2) which refers to the adjustment in respect of the amount or amounts of expenditure relatable to any income to which section 10 (other than provisions contained in clause 38 thereof) or section 11 or section 12 apply . His contention is that once the assessee has on his own accepted this disallowance, the adjustment under section 115JB in respect thereof is only a natural corollary thereto. 24. In our considered view, the plea of the learned counsel is indeed well taken. The assessee may have accepted the disallowance under section 14 A but once it is a settled legal position, in the light of the law laid down by Hon ble jurisdictional High Court, that there cannot be any disallowance under section 14A unless there is corresponding exempt income and the assessee has no such exempt income, adjustment under clause (f) of Explanation to Section 115JB (2) cannot indeed be made. The adjustment has t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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