Delhi HC: Section 32(2) of the Income Tax Act can be given effect to beyond 8 years prior to its commencement
The Delhi High Court on Tuesday headed by Justices S.Ravindra Bhat and A.K.Chawla dismissed an appeal filed by the Income Tax department thereby confirming and approving the decision of the Gujarat High Court in General Motors India Pvt. Ltd. v. DCIT, 354 ITR 244 (Guj).
The present matter related to a question of law urged by the Revenue in the appeal that whether the interpretation of Section 32(2) of the Income Tax Act, 1961 as amended by Finance Act, 2001, could be given effect to beyond the period of eight years, prior to its commencement or not.
The facts of the case are that the assessee in the present case had carried forward depreciation for a number of years – the earliest of which was 1998-99.
The Assessing Officer (AO), on the other hand, had disallowed the amounts claimed for Assessment Year (A.Y.) 2010-11, 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 Commissioner of Income Tax (Appeals) however reversed that decision relying upon the judgments in CIT v. Govind Nagar Sugar Ltd (2011) 334 ITR 13 (Del); CIT v. Haryana Hotels Ltd (2005) 276 ITR 521 (P&H); CIT v. Fabriquip Private Ltd (2003) 260 ITR 207 (Guj) and several other decisions.
Thereafter the Income Tax Appellate Tribunal as well 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).
Advocate Zoheb Hossain appeared as the Counsel on behalf of the appellant- The Income Tax department while Advocates Salil Kapoor, Sumit Lalchandani and Soumya Singh appeared on behalf of the respondent assessee.
Under the present petition the counsel on behalf of the Income Tax department alleged that the decision in Motor & General Finance Ltd could not 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.
However, on the other hand, the counsel appearing on behalf of the assessee contended that the decision in Motor & General Finance had been approved on the Special Leave Petition rejected by the Supreme Court, and, more particularly, the Delhi High Court has approved the reasoning in General Motors India Pvt. Ltd by the Gujarat High Court as followed by the Court in Motor & General Finance Ltd. v. ITO 2017 80 Taxxman.com 14 (Delhi).
The Court after critically examining the contentions raised under the present petition agreed with the reasoning of the Gujarat High Court given in its judgment General Motors India Pvt. Ltd as relied upon by the Income Tax Appellate Tribunal.
The Court held, “The rationale for the amendment appears to be that the restriction against set off and carry forward limited to 8 years, beyond which the benefit could not be claimed under provisions of the Income Tax Act, was for the reasons deemed appropriate by the Parliament. The limit was imposed in 1996 through Finance Act No.2. As the Gujarat High Court observed, Had the intention of Parliament being really to restrict the benefit (of unlimited carry forward prospectively), there were more decisive ways of doing so-such as, an expressed provision or an exception or proviso etc. The absence of any such legislative devise meant that provisions had to be construed in its own term and not so as to restrict the benefit or advantage, it sought to confirm.”
The Court thus opined that the reasoning in Motor & General Finance Ltd. v. ITO 2017 80 Taxxman.com 14 (Delhi) did not call for re-examination and further no substantive question of law arose.
Read the order below: