2005 (4) TMI 517 - AT - Income Tax

Depreciation - Appellate Tribunal - Whether or not the assessee has an option to claim depreciation allowance while computing deduction u/s 80-IA - Effect of Binding Precedents - Rule of per incuriam - HELD THAT - The effect of binding precedents in India is that the decisions of the Supreme Court are binding on all the courts. Indeed, article 141 of the Constitution embodies the rule of precedent. All the subordinate courts are bound by the judgments of the High Court. A single Judge of a High Court is bound by the judgment of another single Judge and a fortiori judgments of Benches consisting of more judges than one. So also, a Division Bench of a High Court is bound by judgments of another Division Bench and Full. A single judge or Benches of High Courts cannot differ from the earlier judgments of co-ordinate jurisdiction merely because they hold a different view on the question of law for the reason that certainty and uniformity in the administration of justice are of paramount importance. But, if the earlier judgment is erroneous or adherence to the rule of precedents results in manifest injustice, differing from the earlier judgment will be permissible. It is thus beyond dispute that a decision which is per incuriam is not a binding judicial precedent. It is also well-settled that when it is not open to a High Court Bench to differ from the decision of a Bench of equal strength, it cannot also be open to a Bench of this Tribunal to differ from the view taken by a co-ordinate Bench of equal strength. The only option in case one doubts the correctness of such a decision is to refer the matter for constitution of a larger Bench. A decision ignoring this rule of precedent, which is duly approved by the Hon ble Courts from time to time, cannot but be viewed as per incuriam. Therefore, following the Hon ble AP Court Full Bench decision in the case of B.R. Constructions 1992 (6) TMI 13 - ANDHRA PRADESH HIGH COURT , such a decision of the co-ordinate Bench was no precedence value. Accordingly, following Hon ble AP Full Bench judgment in the case of B.R. Constructions (supra), we decline to be guided by the same. In any case, larger Bench request has already been turned down, and, accordingly, the only option open to us is to follow the co-ordinate Bench decision in the case of Plastiblends India Ltd. 2004 (2) TMI 691 - ITAT MUMBAI . We do so. Accordingly, we hold that it is not open to the Assessing Officer to thrust depreciation allowance while computing deduction u/s 80-IA of the Income-tax Act, 1961, in a case where the assessee has not claimed the depreciation in the books of account. The assessee gets relief accordingly. In the result, the appeal is allowed.

Issues Involved:
1. Whether the assessee has an option to claim depreciation allowance while computing deduction under section 80-IA of the Income-tax Act, 1961, if the depreciation is not claimed in the books of account.

Issue-wise Detailed Analysis:

1. Option to Claim Depreciation Allowance under Section 80-IA:

The primary issue in this appeal is whether the assessee can opt not to claim depreciation allowance while computing deduction under section 80-IA of the Income-tax Act, 1961, if the depreciation is not claimed in the books of account.

Tribunal's Decision in Plastiblends India Ltd.:
The Tribunal's decision in the case of Plastiblends India Ltd. v. ITO [2005] 94 ITD 295 (Mum.) supports the assessee's position. This decision concluded that if the assessee has not claimed depreciation in the books of account, it cannot be imposed upon the assessee for the purpose of computing the deduction under section 80-IA.

Contrary Decisions:
The Departmental Representative argued that subsequent Tribunal decisions have favored the revenue, specifically citing Prince SWR Systems (P.) Ltd. v. Dy. CIT [IT Appeal No. 2811 (Mum.) of 2004, dated 10-9-2004] and ITO v. Venus Jewels [IT Appeal No. 3842 (Mum.) of 2001, dated 25-10-2004]. These decisions followed the Bombay High Court judgment in Indian Rayon Corpn. Ltd. v. CIT [2003] 261 ITR 98, which was perceived to support the revenue's stance.

Analysis of Conflicting Decisions:
The Tribunal noted that in the Prince SWR Systems (P.) Ltd. case, the Tribunal did not follow the co-ordinate Bench decision in Plastiblends India Ltd. and instead relied on the Bombay High Court judgment in Indian Rayon Corpn. Ltd. However, the Plastiblends decision had already considered and dismissed the relevance of the Indian Rayon Corpn. Ltd. case to the issue at hand. According to the Supreme Court in Union of India v. Paras Laminates (P.) Ltd., a co-ordinate Bench should not disregard another co-ordinate Bench's decision on an identical issue.

Per Incuriam Decisions:
The Tribunal concluded that the decisions in Prince SWR Systems (P.) Ltd. and Venus Jewels were per incuriam, meaning they were made in ignorance of a binding precedent. The Tribunal emphasized the importance of judicial consistency and the doctrine of stare decisis, as articulated in CIT v. B.R. Constructions [1993] 202 ITR 222 (FB).

Binding Precedent:
The Tribunal reiterated that a decision which is per incuriam does not constitute a binding judicial precedent. It is not open for a Bench to differ from the view taken by a co-ordinate Bench of equal strength without referring the matter to a larger Bench, as per the principles laid down by the Hon'ble Andhra Pradesh High Court in B.R. Constructions.

Conclusion:
The Tribunal followed the decision in Plastiblends India Ltd., holding that it is not permissible for the Assessing Officer to impose depreciation allowance while computing deduction under section 80-IA if the assessee has not claimed the depreciation in the books of account. Consequently, the appeal was allowed, granting relief to the assessee.

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