Kailash Vahan Udyog Ltd, Pune V. Deputy Commissioner of Income-tax, Circle - 9, Pune

ITA 647/PUN/2018

• Counselvise Citation: [2022] 103 COUNSELVISE.COM (IT) 9084 (ITAT-PUNE)
• Duration Of Justice: 4 year(s) 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-11-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: A
• Next Hearing Date: 09-08-2022
• Assessment Year: 2010-2011
• Appeal Filed On: 09-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S P WALIMBE
• Keywords: Business income; Depreciation; Question of law; Unabsorbed depreciation
• Section: 14A; 250; 72

Judgement Text

आयकर अपीलीय अिधकरण “ए” Ɋायपीठ पुणेमŐ। IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, PUNE BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER आयकर अपीलसं. / ITA No.647/PUN/2018 िनधाᭅरण वषᭅ / Assessment Year : 2010-11 Kailash Vahan Udyog Ltd., Shah Khandelwal Jain & Associates, Level 3, Business Bay, Plot No:84, Wellesley Road, Near RTO, Pune – 411001. PAN: AAACK 7302 G Vs The DCIT, Circle-9, Pune. Appellant/ Assessee Respondent / Revenue Assessee by Shri Neelesh Khandelwal – AR Revenue by Shri S P Walimbe – DR Date of hearing 10/08/2022 Date of pronouncement 02/11/2022 आदेश/ ORDER PER DR. DIPAK P. RIPOTE, AM: This appeal filed by the Assessee is directed against the order of ld.Commissioner of Income Tax(Appeals)-6, Pune, dated 05.10.2016 for the A.Y. 2010-11 under section 250 of the Income Tax Act, 1961(in short “the Act”). The Assessee has raised the following grounds of appeal: “1. On the facts and in the circumstances prevailing in the case and as per provisions and scheme of the Act it be held that, the disallowance of Rs.44,070/- under section 14A made by the AO and that confirmed by the 1 st appellate authority is unwarranted, unjustified, contrary to the provisions of the act and facts prevailing in the case. It may further be held that no disallowance / addition is warranted in the case of the appellant. The ITA No.647/PUN/2018 for A.Y. 2010-11 Kailash Vahan Udyog Ltd., (A) 2 addition/disallowance so made and confirmed by the Ld. Appellate Authority below be deleted. The appellant be granted just and proper relief in this respect. 2. On facts and circumstances prevailing in the case and as per provisions and scheme of the Act it be held that, the addition of Rs,.75,43,846/- on account of incorrect carry forward of unabsorbed depreciation made by the AO and confirmed by the 1 st appellate authority is unwarranted, unjustified, contrary to the provisions of the act and fact prevailing in the case. It may further be held that no disallowance / addition is warranted in the case of the appellant. The addition / disallowance so made and confirmed by the Ld. Appellate Authority below be deleted. The appellant be granted just and proper relief in this respect. 3. On facts and circumstances prevailing in the case and as per provisions & scheme of the Act it be held that, claim of the unabsorbed depreciation made by the appellant pertaining to the AY 2000-01 & 2001-02 is allowable in the case of the appellant. The claim amounting to Rs.5,51,64,748/- pertaining to AY 2000-01 & 2001-02 rejected by the AO and confirmed by 1 st appellate authority pertaining to unabsorbed depreciation is improper, unjustified contrary to the facts & provisions of law prevailing in the case of the appellant. It may further be held that no disallowance / addition is warranted in the case of the appellant. The addition / so made and confirmed by the Ld. Appellate Authority below be deleted. The appellant be granted just and proper relief in this respect. 4. The appellant prays that the appeal be allowed condoning the delay in filing the appeal. The appeal be granted just and proper relief in this respect. ITA No.647/PUN/2018 for A.Y. 2010-11 Kailash Vahan Udyog Ltd., (A) 3 5. The appellant prays to be allowed to add, amend, modify, rectify, delete, raise any grounds of appeal at the time of hearing.” 2. Brief facts of the case as emanating from the assessment order are stated herewith. There was unabsorbed depreciation which has been tabulated as under: A.Y. Depreciation Capital Loss (Long Term) 2000-01 22378322 0 2001-02 32786425 0 2002-03 27842312 0 2003-04 22803680 125690 2004-05 4491176 749225 2005-06 1540236 0 2006-07 0 9339507 2007-08 966796 0 Total 112808948 10214422 2.1 The Assessing Officer(AO) did not allow unabsorbed depreciation which was prior to A.Y. 2002-03. The findings of the AO are as under: “Unabsorbed depreciation of A.Y. 2002-03 and subsequent years shall only be available for set off against business income of A.Y. 2010-11. As the aggregate of such brought forward depreciation comes to Rs.5,76,42,200/-, this is the amount that shall be adjusted against the business income of Rs.6,51,86,046/-.” 3. Aggrieved by the order of the AO, the assessee filed appeal before the ld.CIT(A). The ld.CIT(A) held it as under: “The various judgments relied upon by the appellant and the AO and the binding principles of precedents have been taken into consideration. The Gujarat High Court has decided the matter on purposive and harmonious interpretation of the Act while the ITAT ITA No.647/PUN/2018 for A.Y. 2010-11 Kailash Vahan Udyog Ltd., (A) 4 Special Bench has decided matter on the strict interpretation of the law. The strict interpretation appears to be the most logical way of interpreting the fiction created in the sec.32(2). I am therefore inclined to rely upon the decision of the Special Bench of Mumbai ITAT in Times Guaranty Ltd. Therefore the action of the AO is sustained.” 4. The ld.Authorised Representative(ld.AR) of the assessee brought to our notice that this is a covered issue by the decision of Hon’ble Jurisdictional High Court in the case of CIT Vs. Hindustan Unilever Ltd., [2017] 72 taxmann.com 325 (Bom). The ld.Departmental Representative(ld.DR) of the Revenue was unable to quote any distinguishing factors or any subsequent decision of Hon’ble Jurisdictional High Court. 5. We have heard both the parties and perused the records. The issue is about unabsorbed depreciation of AY 2000-01 and 2001-02. The Assessing Officer held that the unabsorbed depreciation pertaining to AY 2000-01 & 2001-02 will not be allowed to be set off against the income of A.Y. 2010-11 as it does not fall within the ambit of amended section 32(2) of the Act. Ld.CIT (A) has referred the decision of Hon’ble Gujarat High Court and then merely stated that he was inclined to rely upon special bench decision of Mumbai ITAT and confirmed the AO’s order on this issue. The ld.CIT(A) has erred in doing so. As per the rule of binding precedence, the ld.CIT(A) was duty bound to follow the Hon’ble High Court’s ITA No.647/PUN/2018 for A.Y. 2010-11 Kailash Vahan Udyog Ltd., (A) 5 decision, when the facts were identical. Without distinguishing on facts, the ld.CIT(A) cannot ignore the decision of Hon’ble High Court. Hon’ble Bombay High Court has held in the case of K. Subramanian, Ito vs Siemens India Ltd. 156 ITR 11 (Bom) as under on the issue of binding nature of precedence, Quote, “ So far as the legal position is concerned, the ITO would be bound by a decision of the Supreme Court as also by a decision of the High Court of the State within whose jurisdiction he is(functioning), irrespective of the pendency of any appeal or special leave application against that judgment. He would be bound by a decision of another High Court on the point, because not to follow that decision would be to cause grave prejudice to the assessee.” Unquote. 6. Thus, the ld.CIT(A) has erred grossly in not following the decision of the Hon’ble Gujarat High Court. 6.1. However, the issue of the set off of carry forward unabsorbed depreciation has been held in favour of the assessee by even jurisdictional Hon’ble Bombay High Court in the case of CIT v/s Hindusthan Unilever Ltd [2016] 72 taxmann.com 325 (Bombay) vide order dated 26 July 2016 in which Hon’ble Bombay High Court has followed Hon’ble Gujarat High Court . The relevant part is quoted as under : Quote , “ Regarding question No. 7 : (a) The impugned order of the Tribunal has allowed the respondent - assessee's appeal on the issue of allowing unabsorbed ITA No.647/PUN/2018 for A.Y. 2010-11 Kailash Vahan Udyog Ltd., (A) 6 depreciation pertaining to Assessment Year 1996-97 and 1997-98 which was carried forward to be set off in the subject Assessment Year. (b) The grievance of the Appellant is that in view of the fetter (of eight years) in carrying forward depreciation for Assessment Year 1997-98 upto Assessment Year 2002-03, the set off of the same cannot be allowed in this Assessment year. (c) We find that the impugned order of the Tribunal while allowing the Assessee - respondents' claim follows the decision of the Gujarat High Court in General Motors India (P.) Ltd. v. Dy. CIT [2013] 354 ITR 244/[2012] 210 Taxman 20/25 taxmann.com 364 wherein on identical facts it was held that the unabsorbed depreciation for the Assessment Year 1997-98 upto Assessment Year 2001-02 could be allowed to be set off, if it was still unabsorbed on 1st April, 2001. The above decision also placed upon the CBDT circular No. 14 of 2001 dated 22nd November, 2001 to hold that any unabsorbed depreciation which is available on 1st day of April, 2001 would be dealt with in accordance with the provisions of Section 32(2) of the Act as amended by the Finance Act of 2001. Moreover, the Circular No. 14 of 2001 issued by the CBDT clarifies that restriction of eight years to carry forward and set off the unabsorbed depreciation has been dispensed with. Consequently, unabsorbed depreciation for the intervening periods between assessment 1997-98 upto 2001-02, if available in the assessment year 2002-03 would be allowable as part of carried forward depreciation from Assessment Year 2002- 03 onwards. No decision contrary to the decision of the Gujarat High Court has been shown to us. It is clarified that although the decision of the Gujarat High Court was rendered in context of re- opening notice it has also examined the issue on merits and drew support from the CBDT circular which is beneficial to the assessee to conclude as aforesaid. Nothing has been shown to us to indicate ITA No.647/PUN/2018 for A.Y. 2010-11 Kailash Vahan Udyog Ltd., (A) 7 why the decision of the Gujarat High Court in General Motors (India) Ltd. should not be followed in the present facts. (d) In the above view question no. 7 as raised does not give rise to any substantial question of law. Thus not entertained. ” Unquote. 7. Therefore, respectfully following the Hon’ble Jurisdictional High Court (supra), it is held that assessee is eligible to set off unabsorbed depreciation of A.Y. 2000-01, 2001-02. Therefore, the Ground No.2 & 3 raised by the appellant assessee are allowed. 8. The Ld.AR submitted that he will not like to press the Ground No.1 related to 14A issue. Accordingly, the Ground No.1 is dismissed as not pressed. 9. The Ground No’s.4 & 5 are general in nature and hence needs no adjudication. Accordingly, Ground Numbers 4 & 5 are dismissed as not adjudicated. Accordingly appeal of the assessee is partly allowed. 10. In the result, appeal of the Assessee is Partly Allowed. Order pronounced in the open Court on 2 nd November, 2022. Sd/- Sd/- (S.S.GODARA) (DR. DIPAK P. RIPOTE) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 2 nd Nov, 2022/ SGR* ITA No.647/PUN/2018 for A.Y. 2010-11 Kailash Vahan Udyog Ltd., (A) 8 आदेशकᳱᮧितिलिपअᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The CIT(A), concerned. 4. The Pr. CIT, concerned. 5. िवभागीयᮧितिनिध, आयकर अपीलीय अिधकरण, “ए” बᱶच, पुणे / DR, ITAT, “A” Bench, Pune. 6. गाडᭅफ़ाइल / Guard File. आदेशानुसार / BY ORDER, // TRUE COPY // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे/ITAT, Pune.