DEVON PLANTATIONS AND INDUSTRIES LTD., V. THE DY. COMMISSIONER OF INCOME TAX

ITA/247/2018

AI Insights

The case involves Devon Plantations and Industries Ltd., which appealed against the orders of the Income Tax Appellate Tribunal concerning the assessment of capital gains on the sale of shade trees and timber for the assessment year 2007-08. The primary legal issues revolved around the entitlement to adjust the indexed cost of acquisition under Section 48 of the Income Tax Act, 1961, and the Tribunal's findings regarding the existence of the trees prior to April 1, 1981. The High Court of Karnataka decided to remit the matter back to the Assessing Officer for a fresh assessment, highlighting the need for factual adjudication afresh.

• Counselvise Citation: [2021] 140 COUNSELVISE.COM (IT) 754559 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 22-03-2021
• Assessment Year: misc
• Other Referred Cases: TATA COFFEE LIMITED vs. THE JOINT COMMISSIONER OF INCOME TAX
• Laws Referred To: Income Tax Act 1961
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: E I SANMATHI
• Assessee Lawyers: THOMAS VELLAPALLY
• Keywords: Capital Gains; Income tax appellate tribunal; Indexed cost of acquisition; Long Term Capital Loss; Re-assessment; Short Term Capital Gain
• Section: 48; 260-A

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 22ND DAY OF MARCH 2021 PRESENT THE HON’BLE MR. JUSTICE ALOK ARADHE AND THE HON’BLE MR. JUSTICE M.G.S. KAMAL I.T.A. NO.247 OF 2018 BETWEEN: DEVON PLANTATIONS AND INDUSTRIES LTD., NO.29, EMPIRE INFANTRY INFANTRY ROAD, SHIVAJI NAGAR BENGALURU-560001 REP. BY ITS MANAGING DIRECTOR MS. ROSHIN VARGHESE. ... APPELLANT (BY SRI. THOMAS VELLAPALLY, ADV.,) AND: 1. THE DY. COMMISSIONER OF INCOME TAX CIRCLE 11(1), C.R. BUILDING QUEENS ROAD, BENGALURU-560001. 2. THE COMMISSIONER OF INCOME TAX C.R. BUILDING, QUEENS ROAD BENGALURU-560001. ... RESPONDENTS (BY SRI. E.I. SANMATHI, ADV., FOR R1 & R2) - - - THIS I.T.A. IS FILED UNDER SEC. 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 17.11.2017 PASSED IN ITA NO.1940/BANG/2016 (ANNEXURE-G), FOR THE ASSESSMENT YEAR 2007-08, PRAYING TO FORMULATE THE 2 SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE. ALLOW THE APPEAL AND SET ASIDE THE IMPUGNED ORDER OF THE INCOME TAX APPELLATE TRIBUNAL, 'C' BENCH, BANGALORE, PRONOUNCED ON 17.11.2017 IN ITA NO.1940/BANG/2016 (ANNEXURE-G) TO THE EXTENT QUESTIONED HEREIN. PASS SUCH OTHER OR FURTHER ORDERS AS THIS HON'BLE COURT DEEMS FIT TO GRANT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN THE INTERESTS OF JUSTICE AND EQUITY. THIS I.T.A. COMING ON FOR HEARING, THIS DAY, ALOK ARADHE J., DELIVERED THE FOLLOWING: JUDGMENT This appeal under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the Act for short) has been filed against the judgment dated 17.11.2017 passed by the Income Tax Appellate Tribunal. 2. The appeal was admitted by a bench of this Court vide order dated 09.11.2018 on the following substantial questions of law: “(i) Whether the appellant was entitled to adjust the indexed cost of acquisition under the second proviso to Section 48 of the 3 Income Tax Act, 1961, while computing capital gains on the sale of shade trees during the assessment year 2007-08? 2. Whether the findings of the Tribunal “that it was incumbent on the appellant to allege during the assessment proceedings that the trees which were now sold were in existence prior to 01.04.1981” and “no such material / evidence was brought on record before the Tribunal or the lower authorities” is perverse, contrary to the record and illegal?\" 3. Facts leading to filing of this appeal briefly stated are that the assessee is a Company engaged in tea/coffee business and owns estates in the State of Karnataka. For the assessment year 2007-08, the business income of the assessee was worked out as per Rule 7B and Rule 8 of the Income Tax Rules. The assessee had declared short term capital gain of Rs.78,412/- from sale of shares and long term capital loss on coffee futures exchange of Rs.7,200/-. The 4 assessee also declared loss of Rs.60,48,245/- under the head ‘long term capital loss’ on sale of timber. After adjusting long term capital loss on the sale of timber, the net loss of the assessee was Rs.59,77,032/-. 4. During the course of the re-assessment proceedings, it was found that the assessee was wrongly reporting income from capital gains, as the assessee had adopted wrong methods of indexation of sale of timber. The case was re-opened for assessment. The Assessing Authority, by an order dated 30.09.2014, completed the assessment and held that 30% of the total sale consideration should be taken as capital gain for the Assessment year 2007-2008 and Assessment year 2008-2009. 5. The Assessee filed appeals before the Commissioner of Income Tax (Appeals), who by order dated 10.08.2016, dismissed the appeals preferred by the Assessee in respect of the Assessment years 2007- 5 2008 and 2008-2009. The assessee thereupon filed appeals before the Income Tax Appellate Tribunal. The Tribunal, by a common order dated 17.11.2017, dismissed the appeals preferred by the assessee and interalia held that the assessee had no case on the issue that the trees in question were planted / acquired prior to 1981. 6. The learned counsel for the assessee submitted that the finding recorded by the Tribunal in this regard is perverse, as the same is based on surmises and conjectures. It is further submitted that the matter deserves to be remanded to the Assessing Officer, as the issue requires factual adjudication afresh. In support of the aforesaid submission, learned counsel places reliance on a decision of this court in the case of TATA COFFEE LIMITED vs. THE JOINT COMMISSIONER OF INCOME TAX (2012) 211 TAXMAN 7 (Kar). 6 7. Learned counsel for the Revenue submitted that all the contentions of both the parties may be kept open and the Assessing Officer may be directed to re-do the assessment, in accordance with law. 8. We have considered the submissions made on both sides and have perused the record. 9. After perusal of the record, in our considered opinion, the factual controversy between the parties requires adjudication afresh, in the light of the material available on record. The impugned orders passed by the Tribunal / Commissioner of Income Tax (Appeals) as well as by the Assessing Officer are hereby quashed. The matter is remitted to the Assessing Officer to make a fresh assessment again. It is needless to state that all the contentions of the parties to be kept open. Therefore, for the afore- mentioned reasons, it is not necessary for us to answer the substantial questions of law framed in this appeal. 7 In the result, the appeal is disposed of with the aforesaid direction. Sd/- JUDGE Sd/- JUDGE KS "