Divyarath Developers P.Ltd, Mumbai vs Assessee

M/s. Divyarath Developers P. Ltd. Income Tax Officer-5(1)(3) Tejura Chambers Room No. 569 & 525 Vs. 365-367 V.P. Road Aayakar Bhavan, M.K. Road Mumbai 400004 Mumbai 400020 PAN - AABCD2154J Appellant Respondent

Appellant by: Shri K. Shivaram, Shri Rahul K. Hakani & Ms. Neelam Jadhav Respondent by: Shri Akhilenda Yadav

Date of Hearing: 24.02.2015 Date of Pronouncement: 11.03.2015

ORDER

Per D. Manmohan, V.P.

This appeal by the assessee-company is directed against the order passed by the CIT(A)9, Mumbai and it pertains to A.Y. 2009-10.

2. Assessee is engaged in the business of dealing in textile, etc. In respect of A.Y. 2009-10 it declared Nil income after setting off brought forward losses/depreciation of earlier years to the tune of `43,06,630/- However, income under section 115JB of `39,46,877/- has been declared. The case having been selected for scrutiny the AO noticed that income has to be computed under section 115JB of the Act but the unabsorbed depreciation of assessment years 1998-99, 1999-2000 and 2000-01 cannot be allowed to be set off against current year's income since the unutilised depreciation losses of this year would automatically lapse after the expiry of eight years.

3. Aggrieved, assessee contended before the CIT(A) that following unabsorbed depreciation losses are allowed to be added to current year's depreciation, as per the amended provisions of section 32(2) of the Act and 2 ITA No. 5231/Mum/2012 M/s. Divyarath Developers P. Ltd.

accordingly the same are eligible for set off in the subsequent years, i.e. in A.Y. 2009-10 and thereafter without any time limit: -

Assessment Year Unabsorbed Depreciation Loss 1998-99 `20,04,885/-

1999-2000 `18,03,890/- 2000-01 `10,39,419

4. Section 32(2) was amended w.e.f. 2002-03 whereby the position in law relating to carry forward and set off of unabsorbed depreciation losses without any time limit, as prevailing upto A.Y. 1996-97, was restored w.e.f.

2002-03; unabsorbed depreciation losses of assessment years 1998-99 to 2000-01 were eligible for set off for eight years and before completion of 8 years, section 32(2) having been amended w.e.f. 2002-03, the same would automatically become current year's depreciation without any time limit/expiry limit and the same can be allowed even in A.Y. 2009-10. Learned CIT(A) followed the decision of the Hon'ble Special Bench of the ITAT, Mumbai, in the case of DCIT vs. Times Guaranty Ltd. 40 SOT 14, and dismissed the appeal filed by the assessee.

5. Further aggrieved, assessee is in appeal before the Tribunal. The learned counsel for the assessee contended before us that in the light of the subsequent view taken by the Hon'ble Gujarat High Court in the case of General Motors India (P) Ltd. 354 ITR 244 the decision of the ITAT Special Bench no longer holds the field. He also relied upon the following decisions of the ITAT, Mumbai Benches wherein the decision of the Hon'ble Gujarat High Court was taken into consideration to hold that in the absence of any contrary decision of any High Court, the decision of the lone High Court prevails over the order passed by the ITAT Special Bench and accordingly held that depreciation can be carried forward beyond the period of eight years so long as it was available for carry forward by the time the amended section 32(2) has come into effect: -

i. CIT vs. Bajaj Hindustan Ltd. 149 ITD 709 (Mum) ii. Minda Sai Ltd. vs. ITO - ITA No. 2974/Del/2013 iii. Miltons Pvt. Ltd. vs. CIT - ITA No. 3019/Mum/2012 3 ITA No. 5231/Mum/2012 M/s. Divyarath Developers P. Ltd.

6. On the other hand, the learned D.R. strongly relied upon the order passed by the learned CIT(A) and also the decision of the ITAT Special bench in the case of Times Guaranty Ltd..

7. We have considered the rival submissions and carefully perused the record. The Hon'ble Gujarat High Court in the case of General Motors had an occasion to consider the question as to whether the unabsorbed depreciation pertaining to A.Y. 1997-98 could be allowed to be carried forward and set off after a period of eight years and it would be governed by section 32(2) as amended by Finance Act, 2001. The Hon'ble Court observed that any unabsorbed depreciation available to an assessee on the first day of April, 2002 will be dealt with in accordance with the provisions of section 32(2) as amended by Finance Act, 2001. This view was contrary to the view taken by the ITAT Special Bench in the case of Times Guaranty Ltd. No other High Court has taken a contrary view on this matter. Various Benches of ITAT, having exhaustively referred to the decision of the Hon'ble Gujarat High Court, observed that in the hierarchy of judicial system a view taken by a High Court is to be preferred over the view taken by the Special Bench if there is no contrary view of any High Court on the said issue. Consistent with the view taken by the ITAT Mumbai Bench as well as Delhi Bench (supra) wherein the decision of the Hon'ble Gujarat High Court was followed, we are of the view that the assessee is entitled to carry forward the unabsorbed depreciation and set off can be claimed in A.Y. 2009-10. We hold accordingly.

8. In the result, the appeal filed by the assessee is allowed.

Order pronounced in the open court on 11th March, 2015.

Sd/- Sd/- (D. Karunakara Rao) (D. Manmohan) Accountant Member Vice President

Mumbai, Dated: 11th March, 2015 4 ITA No. 5231/Mum/2012 M/s. Divyarath Developers P. Ltd.

Copy to:

1. The Appellant 2. The Respondent 3. The CIT(A) - 9, Mumbai 4. The CIT- 5, Mumbai City 5. The DR, "D" Bench, ITAT, Mumbai

By Order

//True Copy// Assistant Registrar ITAT, Mumbai Benches, Mumbai n.p.