Pr. Commissioner of Income Tax - 2 v. British Motor Car Co.(1934) Ltd

S. RAVINDRA BHAT, J

A. K. CHAWLA, J JANUARY 09, 2018 nn

* IN THE HIGH COURT OF DELHI AT NEW DELHI Date of decision: 09.01.2018 + PR. COMMISSIONER OF INCOME TAX - 2 ..... Appellant Through: Mr. Zoheb Hossain, Sr. Standing Counsel. versus BRITISH MOTOR CAR CO. (1934) LTD ..... Respondent Through: Mr. Salil Kapoor, Mr. Sumit Lalchandani and Ms. Soumya Singh, Advocates. CORAM: HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MR. JUSTICE A. K. CHAWLA HON'BLE MR. JUSTICE S. RAVINDRA BHAT (ORAL) % CM APPL. 42239/2017 (for condonation of delay) 1. For the reasons mentioned in the application, the delay in re- filing the present appeal is hereby condoned. CM stands disposed of. 2. The question of law urged by the Revenue in the appeal is whether the interpretation of Section 32(2) of the Income Tax Act, 1961 ('the Act') as amended by Finance Act, 2001, could be given effect to beyond the period of eight years, prior to its commencement? 3. The assessee in this case had carried forward depreciation for a number of years – the earliest of which, was 1998-99. 4. For Assessment Year (A.Y.) 2010-11, the Assessing Officer (AO) disallowed the amounts claimed as depreciation on the ground that the amendment to Section 32(2) of the Act, which removed the cap, was prospective and effective only from 01.04.2002. The CIT(A) however reversed that decision relying upon CIT v. Govind Nagar Sugar Ltd., (2011) 334 ITR 13 (Del); CIT V s. Haryana Hotels Ltd., (2005) 276 ITR 521 (P&H); CIT v. Fabriquip Private Ltd., (2003) 260 ITR 207 (Guj), and several other decisions. 5. The ITAT, by its impugned order, upheld the decision of the CIT(A) and relied upon a subsequent judgment of the Gujarat High Court in General Motors India Pvt. Ltd. v. DCIT, 354 ITR 244 (Guj). That judgment had been followed by this Court in Motor & General Finance Ltd. v. ITO, 2017 80 Taxxman.com 14 (Delhi). Mr. Zoheb Hossain, learned counsel for the Revenue contends that the decision in Motor & General Finance Ltd (supra) cannot be considered conclusive because it was rendered in the context of validity of a re- opening of an assessment under Section 147 of the Act and the Court was not really called upon to decide on the scope of Section 32(2) of the Act. 6. Learned counsel for the assessee on the other hand, appearing on advance notice, contended that the decision in Motor & General Finance (supra) has been approved on the Special Leave Petition rejected by the Supreme Court, and, more particularly, this Court has approved the reasoning in General Motors India Pvt. Ltd.(supra) by the Gujarat High Court. 7. Section 32(2) of the Act to the extent is relevant, reads, as follows:- "32. Depreciation (1) ....... ....... ....... ...... (2) 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 being less than the allowance, then, subject to the provisions or sub-section (2) of Section 72 and sub-section (3) of Section 73, the allowance or the part of the allowance to which effect has not been given, as the case may be, shall be added to the amount of the allowance for depreciation for the following previous year and deemed to be part of that allowance, or if there is no such allowance for that previous year, be deemed to be the allowance for that previous year, and so on for the succeeding previous years." 8. Prior to its amendment, the provision had limited the carry forward of depreciation to 8 years. This restriction was brought in, by Finance Act, 1996. Prior to that amendment, there was no restriction or cap in the carrying forward of depreciation. In General Motors India Pvt. Ltd. (supra), the entire history of the legislation was considered by the Gujarat High Court including the reasons for the Finance Act No.2 of 1996, the amendment of 2001-brought into force with effect from 01.04.20002 as well as the circular of the Central Board of Direct Taxes