Madras High Court
Sree Palaniappa Transports vs Commissioner Of Income-Tax on 18 September, 1997
Equivalent citations: [1999]238ITR492(MAD)
JUDGMENT J. Kanakaraj, J.
1. We are concerned with the asst. yr. 1973-74 corresponding to the previous year ended on 30th May, 1972. The assessee is a registered firm and claimed set off of unabsorbed depreciation of the earlier years. There were conflicting decisions of the various High Courts and the Tribunal chose to follow the decision of the Allahabad High Court in K.T. Wire Products vs. Union of India and that of the Gujarat High Court in CIT vs. Garden Silk Weaving Factory (1975) 101 ITR 658 (Guj) : TC 27R.802 and held that the assessee was not entitled to claim such set off in respect of unabsorbed depreciation of the earlier years. The decision of the Tribunal was rendered on 30th November, 1976. Subsequent to the said decision, the Madras High Court rendered a judgment in CIT vs. Nagapatinam Import & Export Corporation following certain decisions of the Bombay High Court. The view of the Madras High Court was that the assessee could claim such a set off. Armed with this decision of the Madras High Court, the assessee filed an application under s. 254(2) of the IT Act, 1961, seeking rectification.
2. Sec. 254(2) of the IT Act, 1961, is as follows :
"(2) The Tribunal may, at any time within four years from the date of the order, with a view to rectifying any mistake apparent from the record, amend any order passed by it under sub-s. (1), and shall make such amendment if the mistake is brought to its notice by the assessee or the ITO. .........."
3. The Tribunal held that the subsequent decision of the Madras High Court would become binding on the Tribunal in respect of orders pronounced after the date of the High Court judgment. In this view of the matter, the Tribunal held that the rectification application was not maintainable.
4. The question referred for decision by us is as follows :
"Whether, on the facts and in the circumstances of the case, there was any mistake apparent from the records in the order of the Tribunal made in ITA No. 1958/MDS/76-77, dt. 17th February, 1978, within the meaning of s. 254(2) of the IT Act, 1961, requiring rectification in view of the subsequent decision of the Madras High Court in CIT vs. Nagapatinam Import & Export Corporation "
5. We will first decide the question referred to us and then we will also advert to the merits of the case because of a subsequent judgment of the Supreme Court. On the maintainability of an application under s. 254(2) of the Act, reliance is placed on the judgment of Somasundaram J. in M. K. Kuppuraj vs. ITO . The learned judge has no doubt, categorically decided that an assessment contrary to a judgment subsequently rendered would also constitute an error on the face of the record and, therefore, rectifiable under s. 154 of the Act. The power under s. 254(2) is not different from the power under s. 154 of the Act. With respect to the learned Judge, we think that the learned Judge has committed an error in relying on the judgment of a Division Bench of this Court in Mettur Chemical & Industrial Corporation Ltd. vs. CIT . We have carefully perused the judgment in Mettur Chemical & Industrial Corporation Ltd. vs. CIT (supra) and we find that that was not a case, which related to a subsequent judgment of the jurisdictional High Court having an effect on earlier order of the Tribunal. All that the Division Bench held was that the ITO in that case had not followed a judgment of the jurisdictional High Court which was available to him on the date of his order. Therefore, we do not see how Justice Somasundaram has applied the said decision in respect of a judgment subsequently rendered, subsequent to the order of the Tribunal. On a bare reading of s. 254(2) we have no hesitation in coming to the conclusion that a Tribunal deciding a case on certain debatable issues, wherein there is no decision of the jurisdictional High Court could not be deemed to have made a mistake because subsequent to the decision of the Tribunal a judgment has been rendered by the jurisdictional High Court. This is precisely the issue before us. As rightly pointed out by the Tribunal, in respect of orders passed by the Tribunal subsequent to the decision of the jurisdictional High Court, if it does not follow the ratio of the judgment of the jurisdictional High Court, then it can be said that it has committed an error apparent on the face of the record. In this view of the matter, we are constrained to overrule the judgment of Somasundaram J. in M. K. Kuppuraj vs. ITO (supra).
In fine, we answer the question referred to us in the negative and against the assessee.
6. Before parting with this case, we may also refer to a recent judgment of the Supreme Court in Garden Silk Weaving Factory vs. CIT (1991) 189 ITR 512 (SC) : TC 27R.787. This judgment of the apex Court has resolved the conflicting opinions expressed by various High Courts and holds as follows :
"(i) Excessive depreciation should be adjusted in the assessment of the assessee against other business income and against other heads of income;
(ii) Depreciation which remains unabsorbed under (i) will be apportioned to the partners and the share of each will be adjusted against the business and other income of each of the partners pro tanto;
(iii) If full effect cannot be given to the depreciation allowance of the assessee by the above processes and some depreciation remains unadjusted, the assessee-firm will carry it forward to the succeeding assessment years."
7. Therefore, even on merits the assessee cannot succeed in seeking to set off unabsorbed depreciation of the earlier years. This is because it is admitted by the assessee that the entire amount of unabsorbed depreciation was fully allocated to all the three partners as seen from the order of the ITO dt. 28th February, 1976.