|CORAM:||A. T. Varkey (JM), Pramod Kumar (AM)|
|SECTION(S):||115JB, 14A, 32|
|CATCH WORDS:||Depreciation, exempt income|
|DATE:||January 9, 2015 (Date of pronouncement)|
|DATE:||January 12, 2015 (Date of publication)|
|FILE:||Click here to download the file in pdf format|
|(i) Unabsorbed depreciation of AYs 1997-98 to 2001-02 is eligible for relief granted by amended s. 32(2) in AY 2002-03 (ii) Judgement of a non-jurisdictional High Court has to be preferred over the judgement of a Special Bench of the ITAT (iii) In the absence of exempt income, s. 14A disallowance cannot be added to s. 115JB book profits even if assessee has accepted s. 14A disallowance in the normal computation|
(i) There is a conflict of opinion between the judgement of the ITAT Special Bench in DCIT Vs Times Guaranty Limited (2010) 4 ITR (Trib) 210 Mum (SB) and that of the Gujarat High Court in General Motors India Pvt Ltd Vs DCIT [(2013) 354 ITR 244 (Guj) on the question whether unabsorbed depreciation for the assessment years prior to the amendment made to s. 32(2) w.e.f. AY 2002-03 can be treated as “current depreciation” and set-off against non-business income and be available for carry forward indefinitely. A judgement of the non-jurisdictional High Court binds the Tribunal benches as held in CIT Vs Godavaridevi Saraf (1978) 113 ITR 589 (Bom) and has to be followed over a judgement of the Special Bench.
(ii) The assessee may have accepted the disallowance under section 14A but once it is a settled legal position, in the light of the law laid down in CIT Vs Holcim India Pvt Ltd (Del) 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 to meet the tests of law and what cannot be considered to be ‘expenditure relatable to exempt income’ under the law, cannot be subjected to the adjustment either. There is no estoppel against the law. The mere fact that the assessee has accepted this disallowance affects that disallowance only and nothing more than that; it does not clothe such an adjustment, in computation of book profit under section 115JB, with legality.