“Higher wisdom has to prevail over better wisdom” is the mantra judges mumble when they are forced to follow a precedent that they don’t quite agree with. However, judges do find ways of getting out of having to follow a judgement of a higher court. The latest salvo on this front is the Third Member judgement in Kanel Oil which shows that a High Court judgement, though superior in status to the Tribunal, may have to yield to the latter. In this case, the Bench was faced with a piquant situation. It had to decide whether an assessee liable to pay Minimum Alternate Tax (“MAT”) under section 115JA of the Act was also liable to pay advance tax under sections 234B and 234C for default in paying advance tax. The issue as such was covered against the assessee by the decision of the Special Bench in Ashima Syntex 117 ITD 1 but the assessee must have been very smug during the hearing because there was a subsequent judgement of the Bombay High Court in Snowcem India 313 ITR 170 which held, following the judgement of the Supreme Court in Kwality Biscuits 284 ITR 434, that assessees paying tax on book profits u/s 115JA were not liable to pay advance tax. The Judicial Member did oblige and decided in favour of the assessee by following the judgement of the Bombay High Court. However, the Accountant Member wrote a detailed dissenting judgement and followed the judgement of the Special Bench. This is how the matter landed up before the Third Member.

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The twin losses in quick succession on the depreciation front have put depreciation – aficionados in a sense of gloom. First, in Techno Shares & Stocks, they were told in no uncertain terms that their esoteric arguments on the intangible assets front was far fetched. Second, in Plastiblends, they were told that their gambit to extract maximum deduction u/s 80-IA while postponing the claim for depreciation for later years when the s. 80-IA relief would run out was not going to work.

To be fair to the aficionados, on the first part, the Legislature did lead them up the garden path by promising depreciation on virtually everything under the sun. The draftsman, probably having a moment of “goodwill” towards the taxpayers, drafted the term “intangible assets” to include not only all the known intangible assets like “knowhow, patents, copyrights, trademarks, licences and franchises” but also “any other business or commercial rights of similar nature”. Enthused by the seemingly unlimited scope of the definition, the aficionados set off a flurry of claims – on goodwill, non-compete fees, stock exchange card – there was no stopping them – if it looked intangible, it was depreciable!

The aficionados also displayed a remarkable sense of alacrity. When their argument that a stock exchange card is not a capital asset for purposes of wealth-tax and capital gains was successively thrown out by the Special Bench in Jagan Nath Sanyal 72 ITD 1 (Del) (SB) and R. M. Valliappan 103 ITD 63 (Che) (SB), they quickly recovered their wits and used the same arguments that had been used to decide against them to urge that they were entitled to depreciation. After all, if a stock exchange card is an “asset” liable to wealth-tax and is also a “capital asset” liable for capital gains, then surely it is also an “intangible asset” for purposes of depreciation, they argued.

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