DCIT, Central Circle - III, Kolkata, Kolkata V. M/s. Apeejay Tea Ltd., Kolkata

ITA 1092/KOL/2010

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87636 (ITAT-KOLKATA)
• Duration Of Justice: 4 year(s) 8 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2015
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 28-05-2010
• Court: TRIBUNAL
• Department Lawyers: RAJENDRA PRASAD J CIT LDSR
• Assessee Lawyers: MANISH TIWARI F C A LD
• Keywords: Capital asset; Business income; Depreciation; Opportunity of being heard
• Section: 43B; 40A(3); 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : KOLKATA [BEFORE HON BLE SHRI N.K.SAINI , AM & HON BLE SHRI GEORGE MATHAN, JM] I.T.A NO. 1092/KOL/2010 A.Y 200 6 - 07 D.C.I.T , CENTRAL CIRCLE - III, KOLKATA VS. M/S. APEEJAY TEA LTD PAN: AACCA1955F [ APPELLANT ] [ R RESPONDENT ] C.O NO. 79 /KOL/2010 [ARISING OUT OF ITA NO. 1092 /KOL/2010 A.Y 200 6 - 07 ] M/S. APEEJAY TEA LTD VS. D.C.I.T , CENTRAL CIRCLE - III KOLKATA [ CROSS OBJECTOR ] [ RESPONDENT/DEPARTMENT] I.T.A NO. 1093/KOL/2010 A.Y 200 6 - 07 D.C.I.T , CENTRAL CIRCLE - III, KOLKATA VS. M/S. EMPIRE & SINGLO TEA LTD PAN: AAACE5739R [ APPELLANT ] [ R RESPONDENT ] C.O NO. 80 /KOL/2010 [ARISING OUT OF ITA NO.1093/KOL/2010 A.Y 2006 - 07] M/S. EMPIRE & SINGLO TEA LTD VS. D.C.I.T ,CENTRAL CIRCLE - III KOLKATA [ CROSS OBJECTOR ] [ RESPONDENT/DEPARTMENT] APPELLANT /DEPARTMENT BY : SHRI RAJENDRA PRASAD, J CIT/ LD/SR.DR RESPONDENT BY : SHRI MANISH TIWARI, FCA , ADVOCATE, LD.AR DATE OF HEARING : 2 8 - 01 - 2015 DATE OF PRONOUNCEMENT: 30 - 01 - 2015 ORDER SHRI N.K. SAINI , ACCOUNTANT MEMBER TH ESE APPEALS BY THE DEPARTMENT AND THE CROSS OBJECTION S BY THE ASSESSEE S ARE DIRECTED AGAINST THE SEPARATE ORDER S EACH DATED 16 - 03 - 2010 OF CI T(A), CENTRAL - I, KOLKATA FOR THE ASSESSMENT YEAR 200 6 - 07 . 2. SINCE THE ISSUES INVOLVED ARE COMMON AND THE APPEALS ALONG WITH CROSS OBJECTIONS WERE HEARD TOGETHER , THEREFORE, TH ESE ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENC E. ITA NO. 1092 & CO 79 & ITA NO.1093 & CO 80 /KOL/10 - A - AM M/S. APEEJAY TEA LTD & M /S. EMPIRE & SINGLO TEA LTD 2 3. FIRST WE WILL DEAL WITH THE APPEAL IN ITA NO.1092/KOL/2010 (BY THE DEPARTMENT) FOR THE ASSESSMENT YEAR 2006 - 07 AND C.O NO.79/KOL/2010 (BY THE ASSESSEE) ARISING OUT OF ITA NO.1092/KOL/2010 RELATING TO M/S. APEEJAY TEA LTD . 4. IN THE DEPARTMENTAL APPE AL IN ITA NO.1092/KOL/2010 FOR THE ASSESSMENT YEAR 2006 - 07, THE DEPARTMENT HAS RAISED THE FOLLOWING GROUNDS: - 1. THAT, THE LEARNED CIT(APPEALS) HAS ERRED IN DELETING THE DISALLOWANCE OF RS.5,27,971/ - FOR BELATED DEPOSIT OF EMPLOYEES CONTRIBUTION TO P.F. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (APPEALS) HAS ERRED IN LAW IN DELETING THE DISALLOWANCE OF RS.1,99,20,614/ - TOWARDS CESS PAYABLE BY THE ASSESSEE COMPANY ON CULTIVATION OF GREEN TEA LEAVES. 5. THE FIRST ISSUE IS RELATING TO BELATED DEPOSIT OF EMPLOYEES CONTRIBUTION TO P.F . 6. THE FACTS OF THE CASE IN BRIEF ARE THAT THE AO HAD MADE THE ADDITION OF RS.5,27,971/ - ON ACCOUNT OF LATE DEPOSIT TOWARDS EMPLOYEES CONTRIBUTION TO PROVIDENT FUND BY INVOKING THE PROVISIONS OF SECTIO N 36(1) (VA) R.W.S 2(24)(X) OF THE I.T ACT 1961(HEREINAFTER REFERRED TO AS CT ) . THE SUBMISSIONS OF THE ASSESSEE BEFORE THE AO WAS THAT DUE TO FREQUENT B ANDH S LEADING TO DISRUPTION OF NORMAL LIFE IN THE STATE OF ASSAM , THE PAYMENT OF THE PF AND OTHER ST ATUTORY DUES GOT DELAYED. BUT THE AO DID NOT FIND MERIT IN THE SUBMISSIONS OF THE ASSESSEE AND MADE THE IMPUGNED ADDITION. 7. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO THE LD.CIT(A) , WHO DELETED THE ADDITION BY OBSERVING AS UNDER: - 3.1 I HAVE C AREFULLY CONSIDERED THE SUBMISSION OF THE LD.A. R . IN THE CASE UNDER CONSIDERATION THOUGH THE PAYMENT WAS EFFECTED BEYOND THE TIME PRESCRIBED IN SECTION 36(1)(VA) BUT THE SAME WAS DULY PAID BY THE APPELLANT WITHIN THE CLOSE OF ACCOUNTING YEAR, HENCE WELL BE FORE THE DUE DATE OF FURNISHING OF THE RETURN. HENCE CONSIDERING THE DECISION OF THE HON BLE KARNATAKA HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX V SABARI ENTERPRISES (2008) 298 ITR 141(KARN) AND DULY AFFIRMED BY THE APEX COURT IN THE RATIO OF C IT VS. ALOM EXTRUSIONS LTD [319 ITR 306] AND THE RECENT DECISION OF THE HON BLE DELHI HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX V AIMIL LIMITED THE DISALLOWANCE OF RS.5,27,971/ - ON ACCOUNT OF BELATED PAYMENT P.F CONTRIBUTION MADE BY THE AO U/S.4 3B /36(1)(VA) OF THE ACT IS DELETED. THE APPELLANT WILL GET NECESSARY RELIEF ACCORDINGLY. NOW, T HE DEPARTMENT IS IN APPEAL BEFORE US. 8 . THE LD.DR HAS STRONGLY SUPPORTED THE ORDER OF THE AO . 9 . IN HIS RIVAL SUBMISSIONS, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE AMOUNT WAS DULY PAID BY THE ASSESSEE WITHIN THE CLOSE OF ACCOUNTING YEAR I.E. WELL BEFORE THE DUE DATE OF ITA NO. 1092 & CO 79 & ITA NO.1093 & CO 80 /KOL/10 - A - AM M/S. APEEJAY TEA LTD & M /S. EMPIRE & SINGLO TEA LTD 3 FURNISHING OF THE RETURN, WHICH WAS ALLOWABLE. RELIANCE WAS PLACED ON THE JUDGMENT OF THE HON BLE SUPREME COURT IN THE CASE OF CIT VS. ALOM EXTRUSION LTD REPORTED IN (2009) 319 ITR 306(SC). 10 . WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND THE MATERIAL AVAILABLE ON RECORD. IN THE PRESENT CASE, IT IS AN ADMITTED FACT THAT THE ASSESSEE HAS DEPOSITED THE PF W ELL BEFORE THE DUE DATE OF FILING OF THE RETURN . WE FIND THAT IT IS ALLOWABLE AS PER DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF CIT VS. ALOM EXTRUSION LTD REPORTED IN (2009) 319 ITR 306(SC), WHEREIN IT HAS BEEN HELD AS UNDER: - T IS IMPORTANT TO NOTE ONCE AGAIN THAT, BY THE FINANCE ACT, 2003, NOT ONLY THE SECOND PROVISO IS DELETED BUT EVEN THE FIRST PROVISO IS SOUGHT TO BE AMENDED BY BRINGING ABOUT UNIFORMITY IN TAX, DU T Y, CESS AND FEE ON THE ONE HAND, VIS - - VIS CONTRIBUTIONS TO WELFARE FUND S OF EMPLOYEES(S) ON THE OTHER. THIS IS ONE MORE REASON WHY WE HOLD THAT THE FINANCE ACT,2003, IS RETROSPECTIVE IN OPERATION. MOREOVER, THE JUDGMENT IN ALLIED MOTORS P.LTD (SUPRA) IS DELIVERED BY A BENCH OF THREE LEARNED JUDGES, WHICH IS BINDING ON US. AC CORDINGLY, WE HOLD THAT THE FINANCE ACT, 2003, WILL OPERATE RETROSPECTIVELY WITH EFFECT FROM APRIL 1, 1988 (WHEN THE FIRST PROVISO STOOD INSERTED) . LASTLY, WE MAY POINT OUT THE HARDSHIP AND THE INVIDIOUS DISCRIMINATION WHICH WOULD BE CAUSED TO THE ASSESSE E(S) IF THE CONTENTION OF THE DEPARTMENT IS TO BE ACCEPTED THAT THE FINANCE ACT, 2003, TO THE ABOVE EXTENT, OPERATED PROSPECTIVELY. TAKE AN EXAMPLE - IN THE PRESENT CASE, THE RESPONDENTS HAVE DEPOSITED THE CONTRIBUTIONS WITH THE R.P.F.C AFTER MARCH, 31(END O F THE ACCOUNTING YEAR ) BUT BEFORE FILING OF THE RETURNS UNDER THE INCOME - TAX ACT AND THE DATE OF PAYMENT FALLS AFTER THE DUE DATE UNDER THE EMPLOYEES PROVIDENT FUND ACT, THEY WILL BE DENIED DEDUCTION FOR ALL TIMES. IN VIEW OF THE SECOND PROVISO, WHICH ST OOD ON THE STATUTE BOOK AT THE RELEVANT TIME, EACH OF SUCH ASSESSEE(S) WOULD NOT BE ENTITLED TO DEDUCTION UNDER SECTION 43B OF THE ACT FOR ALL TIMES. THEY WOULD LOSE THE BENEFIT OF DEDUCTION EVEN IN THE YEAR OF ACCOUNT IN WHICH THEY PAY THE CONTRIBUTION S TO THE WELFARE FUNDS, WHEREAS A DEFAULTER, WHO FAILS TO PAY THE CONTRIBUTION TO THE WELFARE FUND RIGHT UP TO APRIL 1, 2004 AND WHO PAYS THE CONTRIBUTION AFTER APRIL 1, 2004, WOULD GET THE BENEFIT OF DEDUCTION UNDER SECTION 43B OF THE ACT. IN OUR VIEW, THEREFORE, THE FINANCE ACT , 2003, TO THE EXTENT INDICATED ABOVE, SHOULD BE READ AS RETROSPECTIVE. IT WOULD, THEREFORE, OPERATE FROM APRIL 1, 1988, WHEN THE FIRST PROVISO WAS INTRODUCED . IT IS TRUE THAT PARLIAMENT HAS EXPLICIT L Y STATED THAT THE FINANCE ACT , 2003, WILL OPERATE WITH EFFECT FROM APRIL 1,2004. HOWEVER, THE MATTER BEFORE US INVOLVES THE PRINCIPLE OF CONSTRUCTION TO BE PLACED ON THE PROVISIONS OF THE FINANCE ACT, 2003. 1 0 .1 IN VIEW OF THE ABOVE, WE DO NOT SEE ANY MERIT IN THIS GROUND OF THE DEPARTMENTAL APPEAL. THE SAME IS DISMISSED. 1 1 . THE NEXT ISSUE RELATES TO DELETION OF DISALLOWANCE MADE BY THE AO ON ACCOUNT OF CESS PAYABLE . ITA NO. 1092 & CO 79 & ITA NO.1093 & CO 80 /KOL/10 - A - AM M/S. APEEJAY TEA LTD & M /S. EMPIRE & SINGLO TEA LTD 4 1 2 . THE FACTS RELATING TO THIS ISSUE IN BRIEF ARE THAT THE ASSESSEE HAS DEBITED A SUM OF R S. 1,99,20,614/ - ON ACCOU NT OF CESS ON GREEN LEAF. 1 3 . THE AO WAS OF THE VIEW THAT THE SAID AMOUNT WAS ALLOWABLE AS A DEDUCTION AGAINST THE AGRICULTURAL INCOME ONLY, WHICH IS COMPUTED AS PER RULE 8 OF THE INCOME TAX RULES, 1962 AT 60% OF THE COMPOSITE INCOME. THE SUBMISSION OF THE ASSESSEE WAS THAT THE SAID AMOUNT WAS ELIGIBLE FOR DEDUCTION U/S. 37(1) OF THE ACT AS PER RATIO LAID DOWN BY THE HON BLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. A.F.T INDUSTRIES LTD (NOW, APEEJAY TEA LTD) REPORTED IN (2004) 270 ITR 167(CAL). BUT TH E AO DID NOT FIND ANY MERIT IN THE SUBMISSIONS OF THE ASSESSEE STATING THAT THE SLP NO.CC 9153/2005 IN THE CASE OF CIT VS. AFT INDUSTRIES LTD WAS PENDING BEFORE THE HON BLE SUPREME COURT AGAINST THE SAID JUDGMENT OF THE HON BLE CALCUTTA HIGH COURT DATED 3 0/07/2004 IN ITA NO.56/2004 . 1 4 . BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO THE LD.CIT(A), WHO DELETED THE ADDITION BY OBSERVING AS UNDER: - 4.1 I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE L.D A. R RULE 8 PRESCRIBE THE METHOD FOR CALCULATION OF THE TAXABLE INCOME FROM MANUFACTURE OF TEA. UNDER THIS RULE THE COMPOSITE INCOME FROM SALE OF TEA GROWN AND MANUFACTURED BY THE SELLER IS COMPUTED TOGETHER AND THEREAFTER 40% OF SUCH INCOME SHALL BE DEEMED TO BE INCOME LIABLE TO TAX. THE AO IS NOT REQU IRED TO APPROPRIATE THE EXPENSES RELATED TO AGRICULTURAL AND MANUFACTURING PROCESS. IT MAKE NO DIFFERENCE IF ANY PARTICULAR EXPENDITURE IS TOTALLY ATTRIBUTED TO AGRICULTURAL PROCESS. RULE 8 IS A COMPOSITE METHOD AND NO FURTHER APPROPRIATION IS REQUIRED. M OREOVER, THIS ISSUE HAS BEEN DECIDED BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. AFT INDUSTRIES LTD 141 TAXMAN 433, 270 ITR 169(CAL) . ACCORDINGLY, THE DISALLOWANCE OF RS.1,99,20,614/ - MADE BY THE AO TOWARDS CESS ON GREEN LEAF FOR THE PURPOSE OF COMPUTATION OF COMPOSITE BUSINESS INCOME IS DELETED. NOW, THE DEPARTMENT IS IN APPEAL. 1 5 . THE LD.DR HAS REITERATED THE OBSERVATIONS MADE BY THE AO IN THE ASSESSMENT ORDER DATED 26/12/2008 AND STRONGLY SUPPORTED THE SAID ORDER . 1 6 . THE LD. COUNSEL FOR T HE ASSESSEE IN HIS RIVAL SUBMISSION HAS STRONGLY SUPPORTED THE IMPUGNED ORDER PASSED BY THE LD.CIT(A). 1 7 . WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IT IS NOTICE D THAT A SIMIL AR ISSUE HAS BEEN ADJUDICATED BY THE HON BLE JURISDICTIONAL CALCUTTA HIGH COURT IN THE CASE OF CIT VS. AFT INDUSTRIES LTD REPORTED IN 270 ITR 167(CAL), WHEREIN IT HAS BEEN HELD AS UNDER: - N RESPECT OF COMPUTATION OF INCOME OF TEA GROWN AND MANUFACTURE D, A FICTION HAS BEEN CREATED UNDER WHICH BOTH THE AGRICULTURAL COMPONENT AND THE BUSINESS COMPONENT OF THE INCOME WOULD BE ASSESSED TOGETHER FOR THE ITA NO. 1092 & CO 79 & ITA NO.1093 & CO 80 /KOL/10 - A - AM M/S. APEEJAY TEA LTD & M /S. EMPIRE & SINGLO TEA LTD 5 PURPOSE OF COMPUTING THE INCOME UNDER THE ACT AND ONLY AFTER THE COMPUTATION OF THE TOTAL INCOME, THE AP PO RTIONMENT IS TO BE MADE DETERMINING 60 PER CENT, AS AGRICULTURAL INCOME. WHEN BY FICTION THE INCOME IS COMPUTED AS AN INCOME UNDER THE ACT , ALL DEDUCTIONS AS ARE AVAILABLE BOTH FOR THE AGRICULTURAL COMPONENT AND FOR THE BUSINESS COMPONENT OF THE INCOME ARE TO BE ALLOWED AS A NATURAL COROLLARY. THEREFORE, THE ENTIRE AMOUNT PAID AS CESS UNDER THE AGRICULTURAL INCOME - TAX ACT IS ELIGIBLE FOR DEDUCTION. 18. WE, THEREFORE, BY K EEPING IN VIEW THE RATIO LAID DOWN BY THE HON BLE JURISDICTIONAL CALCUTTA HIGH COURT IN THE AFORESAID REFERRED TO CASE , DO NOT SEE ANY INFIRMITY IN THE ORDER OF THE LD.CIT(A) ON THIS ISSUE. WE UPHOLD THE SAME. THIS ISSUE OF DEPARTMENTAL APPEAL IS DISMISSED. C.O NO.79/KOL/2010 ARISING OUT OF ITA NO.1092/KOL/2010 FOR THE A.Y 2006 - 07 . . 1 9 . IN THIS CROSS OBJECTION, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: - 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD.CIT(A) HAS ERRED IN HOLDING THAT LIABILITY IN RESPECT OF FOREIGN LOAN DUE TO EXCHANGE FLUCTUATION HAS NOT ACCRUED AND THEREBY CONFIRMING THE DISALLOWANCE OF RS.28,53,019/ - ON THIS SCORE. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD.CIT(A) IS WRONG AND UNJUSTIFIED IN CONFIRMING DISALLOWANCE OF RS.25,999/ - U/S. 40A(3) OF I.T ACT, 1961. 20 . THE FIRST I SSUE RELATES TO CONFIRMATION OF DISALLOWANCE MADE BY THE AO ON ACCOUNT OF EXCHANGE FLUCTUATION ON THE FOREIGN LOAN. 2 1 . THE FACTS RELATING TO THIS ISSUE IN BRIEF ARE THAT THE ASSESSEE HAS CLAIMED NET FOREIGN EXCHANGE LOSS OF RS.22,86,545/ - . THE GROSS AM OUNT OF SUCH LOSS WAS RS. 28,53,019/ - . THE AO DID NOT ALLOW THIS LOSS BY OBSERVING THAT CONVERSION OF SAID LOAN IN INDIAN CURRENCY AT THE PREVALENT RATE OF EXCHANGE WAS NOT ALLOWABLE. 2 2 . BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO THE LD.CIT(A) A ND SUBMITTED THAT THE ASSESSEE OBTAINED UNSECURED LOAN OF US $ 50,00,000/ - FROM M/S. ASSAM FRONTIER TEA HOLDINGS LTD FOR A PERIOD OF THREE YEARS AND CONVERSION RATE IN TERMS OF INDIAN CURRENCY ON 31 - 03 - 2005 AND 31 - 03 - 2006 WAS @RS.43.75/ - AND @ RS.44.64/ - P ER US DOLLAR RESPECTIVELY. IT WAS FURTHER STATED THAT AS PER ACCOUNTING POLICY OF THE COMPANY RELATING TO FOREIGN CURRENCY TRANSACTIONS YEAR - END CURRENT ASSETS (MONETARY ITEMS) AND LIABILITIES WERE RESTATED AT THE YEAR END EXCHANGE RATE , WHICH IS IN CONFO RMITY WITH AS - II ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA AND S INCE THE ASSESSEE HAS BEEN FOLLOWING MERCANTILE SYSTEM, IT HAS TO MAKE PROVISION AS PER LAW AND AS PER THE RATE PREVALENT ON THE LAST DATE OF ACCOUNTING YEAR. ITA NO. 1092 & CO 79 & ITA NO.1093 & CO 80 /KOL/10 - A - AM M/S. APEEJAY TEA LTD & M /S. EMPIRE & SINGLO TEA LTD 6 2 3 . THE LD.CIT( A) DID NOT FIND MERIT IN THE ABOVE SUBMISSION OF THE ASSESSEE AND CONFIRMED THE IMPUGNED DISALLOWANCE BY OBSERVING AS UNDER: - 5.1 I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE L.D A.R . ONLY THOSE EXPENDITURE ARE ALLOWABLE IN THE PREVIOUS YEAR, WHIC H HAS ACCRUED OR PAID BY THE ASSESSEE. IN THE CASE UNDER CONSIDERATION NEITHER THE REPAYMENT HAS BEEN MADE NOR THE LIABILITY FOR THE SAME HAS ACCRUED. HENCE, THE NOTIONAL LOSS IN THE LOAN AMOUNT DUE TO FLUCTUATION OF FOREIGN EXCHANGE CLAIMED BY THE ASSESSE E IS NOT AN ALLOWABLE EXPENDITURE. CONSIDERING ABOVE THE DISALLOWANCE OF RS.28,53,019/ - IS CONFIRMED AND THE GROUND TAKEN BY THE APPELLANT IS DISMISSED. NOW, THE ASSESSEE IS IN C.O 2 4 . THE LD. COUNSEL FOR THE ASSESSEE HAS REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW . HE FURTHER SUBMITTED THAT THE FOREIGN EXCHANGE LOAN WAS ALLOWABLE AS THE ASSESSEE HAS MAINTAINED THE BOOKS OF ACCOUNT ON MERCANTILE SYSTEM OF ACCOUNTING. THEREFORE , AS PER AS - II , THE IMPUGNED LO SS WAS ALLOWABLE. RELIANCE W AS PLACED ON THE JUDGMENT OF THE HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS. WOODWARD GOVERNOR INDIA P.LTD REPORTED IN (2007) 294 ITR 451(DEL) . 2 5 . IN HIS RIVAL SUBMISSION, THE LD.DR HAS STRONGLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 2 6 . WE H AVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. ON A SIMILAR ISSUE THE HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS. WOODWARD GOVERNOR INDIA P.LTD (SUPRA) HAS HELD AS UNDER: - (II) THAT THERE WAS NO PROVISION FOR THE ASSESSMENT OF THE ACTUAL COST AT A STAGE SUBSEQUENT TO THE DATE OF ACQUISITION OF THE ASSET. DEPRECIATION HAD TO BE WORKED OUT THEREAFTER ONLY ON THE BASIS OF THE ACTUAL COST AT THE TIME OF ACQUISITION TO PROVIDE FOR SU BSEQUENT REVISIONS TO THE ACTUAL COST. IN COMPUTING THE CAPITAL GAINS ARISING TO THE ASSESSEE ON THE SALE OR TRANSFER OF A CAPITAL ASSET ACQUIRED BY HIM FROM ABROAD ON DEFERRED PAYMENT TERMS OR AGAINST A FOREIGN LOAN, THE ADDITIONAL RUPEE LIABILITY INCUR RED BY HIM IN REPAYING THE INSTALMENTS OF THE COST OR THE FOREIGN LOAN, AS THE CASE MAY BE, AFTER THE DATE OF DEVALUATION OF THE RUPEE, WOULD BE ADDED TO THE ORIGINAL ACTUAL COST OF THE ASSET. SECTION 43A SECURES THAT WHERE THERE WAS A DECREASE IN THE R UPEE LIABILITY OF THE ASSESSEE IN RESPECT OF ASSSETS ACQUIRED BY HIM FROM ABROAD DUE TO A CHANGE IN THE EXCHANGE VALUE OF THE RUPEE, THE ORIGINAL ACTUAL COST OF THE ASSET WOULD BE CORRESPONDINGLY REDUCED. THE PROVISIONS OF SECTION 43A APPLY IN A CASE WHER E AN ASSESSEE HAS ACQUIRED ANY CAPITAL ASSET FROM ABROAD FOR THE PURPOSE OF HIS BUSINESS OR PROFESSION, ON CREDIT OR ON DEFERRED PAYMENT TERMS, OR AGAINST A LOAN IN FOREIGN CURRENCY, AND THE WHOLE OR PART OF THE COST OF SUCH ASSET OR THE LOAN IN FOREING CURRENCY IS OUTSTANDING AS ON THE DATE ON WHICH THERE WAS A CHANGE IN THE RATE OF EXCHANGE OF CURRENCY. IN SUCH A CASE WHERE IN CONSEQUENCE OF THE CHANGE IN THE RATE OF EXCHANGE OF CURRENCY, THERE WAS AN INCREASE OR REDUCTION IN THE ASSESSEE S ITA NO. 1092 & CO 79 & ITA NO.1093 & CO 80 /KOL/10 - A - AM M/S. APEEJAY TEA LTD & M /S. EMPIRE & SINGLO TEA LTD 7 LIABI LITY AS EXPRESSED IN INDIAN CURRENCY FOR PAYMENT OF THE WHOLE OR A PART OF THE COST OF THE ASSETS OR OF THE LOAN IN FOREIGN CURRENCY, THE ORIGINAL ACTUAL COST TO THE ASSESSEE, OF THE MACHINERY OR PLANT OR OTHER CAPITAL ASSET, WAS REQUIRED TO BE INCREASED OR, AS THE CASE MAY BE, REDUCED, CORRESPONDINGLY. IN CAPITAL ACCOUNT CASES WHERE THE COST OF ASSET HAD BEEN EITHER PAID FULLY OR IN PART PRIOR TO THE FLUCTUATION IN THE RATE OF FOREIGN EXCHANGE, THE COST OF THE ASSET WOULD CORRESPONDINGLY BE PERMITTED TO BE REWORKED FOR PURPOSE OF REPAYMENT OR DEPRECIATION OR INVESTMENT ALLOWANCE, AS THE CASE MAY BE, WITH REFERENCE TO THE RATE PREVAILING ON THE LAST DATE OF THE FINANCIAL YEAR IN WHICH THE FLUCTUATION OCCURS. 2 7 . HOWEVER, IN THE PRESENT CASE IT IS CLEAR AS TO WHETHER THE TERM LOAN WAS CAPITAL IN NATURE RELATED TO THE PURCHASE OF A SSETS OR IT WAS REVENUE IN NATURE. WE, THEREFORE, RESTORE THIS ISSUE TO THE FILE OF THE AO , WHO WILL DECIDE THE SAME AFRESH IN ACCORDANCE WITH LAW AFTER CONSIDERING THE RATIO LA ID DOWN BY THE HON BLE DELHI HIGH COURT IN THE AFORESAID CASE( REFERRED TO SUPRA) . 2 8 . NEXT ISSUE RELATES TO THE DISALLOWANCE OF RS.25,999/ - MADE BY THE AO U/S. 40A(3) OF THE ACT. 2 9 . THE FACTS RELATING TO THE ISSUE IN BRIEF ARE THAT THE AO MADE THE IMPU GNED DISALLOWANCE BY OBSERVING THAT APPENDIX - VI OF THE TAX AUDIT REPORT DT. 31/07/2006 REVEALED THAT THE ASSESSEE HAD INCURRED CASH EXPENSES AGGREGATING TO RS. 1,29,993 / - IN EXCESS OF RS.20,000/ - ON EACH OCCASION AND T HE AUDIT OR INDICATED THAT RS. 25,999/ - WAS NOT ALLOWABLE U/S.40A(3) OF THE ACT. 30 . BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO THE LD.CIT(A). BEFORE HIM THE ASSESSEE SUBMITTED AS UNDER: - (I) LD. AO HAS MADE THE DISALLOWANCE BY REFERRING TO TAX AUDIT REPORT (APPENDIX - VI) WHICH GIVES DETAILS OF CASH PAYMENTS AGGREGATING TO RS.1,29,993/ - . IT IS NOT DENIED THAT EACH PAYMENT CONSTITUTING THE AGGREGATE FIGURE IS IN EXCESS OF RS.20,000/ - (II) THE APPELLANT EXPLAINED THE REASON FOR WHICH CASH PAYMENT AGGREGATING TO R S.1,29,993/ - WAS MADE. LD .AO HAS REJECTED SUCH EXPLANATION ON THE GROUND THAT THE REASON IS NOT COGENT OR CONVINCING. (III) THE PARTICULARS OF CASH PAYMENTS AS REPORTED IN APPENDIX VI OF TAR IS REPRODUCED FOR THE SAKE OF CONVENIENCE AS UNDER: - (IV ) PERUSAL OF EXPENDITURE DETAILED ABOVE WILL SHOW THAT ENTIRE PAYMENT WAS FOR THE WELFARE OF STAFF & LABOUR. THE EXPENSES RELATED MAINLY FOR PAYMENT TO GAS AGENCY FOR SUPPLY OF GAS IN CONNECTION WITH RUNNING OF CANTEEN FOR THE STAFF. THE REMAINING EXPENSES REPRESENTED COST OF MEDICINES SUP PLIED TO AILING LABOUR & STAFF THROUGH MEDICAL UNIT FUNCTIONING AT THE LABOURER S QUARTERS. (V) IT IS WELL KNOW THAT COST OF ONE GAS CYLINDER IS FAR LESS THAN RS .20,000/ - . THE VOUCHER SHOWING PAYMENT TO PANITOLA GAS AGENCY REFERS TO A NUMBER OF CYLINDERS & ON DIFFERENT OCCASIONS AND THEREBY THE TOTAL COST EXCEEDED RS.20,000/ - . SIMILARLY, THE VOUCHER FOR PURCHASE OF MEDICINE ITA NO. 1092 & CO 79 & ITA NO.1093 & CO 80 /KOL/10 - A - AM M/S. APEEJAY TEA LTD & M /S. EMPIRE & SINGLO TEA LTD 8 INCLUDED QUITE A NUMBER OF ITEMS ON DIFFERENT DATES AND COST OF EACH ITEMS IS MUCH LESS THAN R S.20,000/ - . THE PAYMENT ENTRIES ARE IN TH E NATURE OF REIMBURSEMENTS TO HEADS OF THE DEPARTMENTS WHO PROCURED GAS & MEDICINES AGAINST CASH PAYMENTS ON VARIOUS DATE. IN THIS VIEW, DISALLOWANCE U/S. 40A(3) ON SUCH EXPEND ITURE IS INAPPLICABLE. 3 1 . HOWEVER, THE LD.CIT(A) DID NOT FIND THE MERIT IN TH E ABOVE SUBMISSIONS OF THE ASSESSEE AND CONFIRMED THE DISALLOWANCE BY OBSERVING AS UNDER: - 6.1 I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE L D. A.R . THERE IS NO DISPUTE THAT PAYMENT EXCEEDING TWENTY THOUSAND RUPEES AMOUNTING TO RS. 1,29,993 HAS BEEN MADE OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE OR A ACCOUNT PAYEE BANK DRAFT. IT MAKES NO DIFFERENT THAT THE PAYMENT WERE AGAINST A COMBINED BILL ISSUED AGAINST THE PURCHASE OF DIFFERENT ITEMS NOT INDIVIDUALLY COSTING MORE THAN RS.20,000/ - . WHAT IS RELEV ANT IS WHETHER THE PAYMENTS EXCEEDING RS.20,000/ - HAS BEEN MADE AGAINST A SINGLE BILL. CONSIDERING ABOVE AND THE FACT THAT CASH PAYMENTS EXCEEDING THE PRESCRIBED LIMIT WAS MADE IN CONTRAVENTION OF THE PROVISION OF SECTION 40A(3) OF THE I.T ACT 1961, THE DI SALLOWANCE OF RS.25,999/ - MADE BY THE AO IS CONFIRMED. NOW, THE ASSESSEE HAS FILED THE CROSS OBJECTION. 3 2 . THE LD. COUNSEL OF THE ASSESSEE HAS REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT MOST OF THE PAYMENTS W ERE IN THE NATURE OF REIMBURSEMENT MADE ON ACCOUNT OF COST OF MEDICINES SUPPLIED TO AILING LABOUR AND STAFF AND ALSO ON ACCOUNT OF COST OF GAS CYLINDER . HOWEVER, HE REQUESTED THAT THE ISSUE MAY BE SENT BACK TO THE AO FOR VERIFICATION AND RE - EXAMINATION. 3 3 . THE LD.DR IN HIS RIVAL SUBMISSION SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 3 4 . AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE PARTIES AND THE MATERIAL AVAILABLE ON RECORD IT IS NOT CLEAR AS TO WHETHER THE AO HAS CONSIDERED THE PAYMENT OF INDI VIDUAL ITEM OR TOTAL ITEMS WHILE MAKING THE DISALLOWANCE U/S. 40A(3) OF THE ACT. WE, THEREFORE, DEEM IT APPROPRIATE TO SET ASIDE THIS ISSUE BACK TO THE FILE OF THE AO TO BE ADJUDICATED AFRESH IN ACCORDANCE WITH LAW AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ITA NO.1093/KOL/2010 FOR THE A.Y 2006 - 07 (BY THE DEPARTMENT) 3 5 . IN THE DEPARTMENTAL APPEAL IN ITA NO.1093/KOL/2010 FOR THE ASSESSMENT YEAR 2006 - 07, THE DEPARTMENT HAS RAISED THE FOLLOWING GROUNDS: - 1. THAT, THE LEARNED CI T(APPEALS) HAS ERRED IN DELETING THE DISALLOWANCE OF RS. 82,107 / - FOR BELATED DEPOSIT OF EMPLOYEES CONTRIBUTION TO P.F. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (APPEALS) HAS ERRED IN LAW IN DELETING THE DISALLOWANCE OF RS. 98,30,272/ - TOWARDS C ESS PAYABLE BY THE ASSESSEE COMPANY ON CULTIVATION OF GREEN TEA LEAVES. ITA NO. 1092 & CO 79 & ITA NO.1093 & CO 80 /KOL/10 - A - AM M/S. APEEJAY TEA LTD & M /S. EMPIRE & SINGLO TEA LTD 9 3 6 . IN THE C.O NO.80/KOL/2010 ARISING OUT OF ITA NO.1093/KOL/2010 FOR THE A.Y 2006 - 07 THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. THAT ON THE FACTS AND IN THE CIRCU MSTANCES OF THE CASE, LD.CIT(A) HAS ERRED IN HOLDING THAT LIABILITY IN RESPECT OF FOREIGN LOAN DUE TO EXCHANGE FLUCTUATION HAS NOT ACCRUED AND THEREBY CONFIRMING THE DISALLOWANCE OF RS. 4 8, 95,000/ - - ON THIS SCORE. 2. THAT ON THE FACTS AND IN THE CIRCUMSTAN CES OF THE CASE, LD.CIT(A) HAS PROCEEDED ON ERRONEOUS BELIEF IN HOLDING LOSS IN RESPECT OF SUFFRY TEA ESTATE AS A NOTIONAL ONE AND THEREBY CONFIRMING THE DISALLOWANCE OF RS.2,95,000/ - MADE BY THE ASSESSING OFFICER. 3 7 . FROM THE ABOVE GROUNDS OF THE DEPAR TMENTAL APPEAL, IT IS CLEAR THAT THE ISSUES ARE SIMILAR AS ARE INVOLVED IN THE CASE OF M/S. APEEJAY TEA LTD IN ITA NO.1092/KOL/2010 A.Y 2006 - 07(BY THE DEPARTMENT), WHICH WE HAVE ALREADY ADJUDICATED IN THE FORM ER PART OF TH IS ORDER. THEREFORE, OUR FINDING S GIVEN THEREIN SHALL APPLY MUTATIS MUTANDIS . IN THAT VIEW OF THE MATTER, WE DO NOT SEE ANY MERIT IN THE ABOVE MENTIONED DEPARTMENTAL APPEAL . . CO NO.80/KOL/2010 (BY THE ASSESSEE) 3 8 . FIRST ISSUE OF CROSS OBJECTION RELATING TO THE DISALLOWANCE ON ACCOUNT OF FOREIGN EXCHANGE IS ALSO SIMILAR AS IN THE CASE OF M/S.APEEJAY TEA LTD (SUPRA) . THEREFORE, OUR FINDINGS GIVEN THEREIN SHALL APPLY WITH EQUAL FORCE. IN THAT VIEW OF THE MATTER, THIS ISSUE IS RESTORED TO THE FILE OF THE AO TO BE ADJUDICATED AFRESH IN A CCORDANCE WITH LAW AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD. 3 9 . AS REGARD TO THE ANOTHER ISSUE RAISED RELATING TO CONFIRMATION OF DISALLOWANCE OF RS.2,95,000/ - ON ACCOUNT OF LOSS IN RESPECT OF S UFFRY TEA ESTATES . THE LD. COUNSEL FOR THE ASSES SEE WAS FAIR ENOUGH TO CONCEDE THAT THIS ISSUE IS AGAINST THE ASSESSEE VIDE ORDER DATED 23 - 8 - 11 OF ITAT KOLKATA IN ITA NO.9 2 6/KOL/2011 FOR THE A.Y 2007 - 08. ACCORDINGLY, THIS ISSUE IS DECIDED AGAINST THE ASSESSEE 40 . IN THE RESULT, THE DEPARTMENTAL APPEA L S IN ITA NOS. 1092 & 1093/KOL/2010 ARE DISMISSED AND CROSS OBJECTION NO.79/KOL/2010 IS ALLOWED FOR STATISTICAL PURPOSE WHILE THE CROSS OBJECTION NO. 80/KOL/2010 IS PARTLY ALLOWED FOR STATISTICAL PURPOSE AS STATED ABOVE. ORDER PRONOUNCED IN THE OPEN CO URT ON 30 - 01 - 2015 \ SD/ - SD/ - [ GEORGE MATHAN ] [ N.K.SAINI ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 30 - 01 - 2015 ITA NO. 1092 & CO 79 & ITA NO.1093 & CO 80 /KOL/10 - A - AM M/S. APEEJAY TEA LTD & M /S. EMPIRE & SINGLO TEA LTD 10 COPY OF THE ORDER FORWARDED TO: 1 . /APPELLANT - DCIT, CENTRAL CIR - III , KOLKATA . 2 RESPONDENT : M/S APEEJAY TEA LTD/M/S EMPIRE & SINGLO TEA LTD . 3 . CIT, 4 . CIT(A), 5 . DR, KOL KATA BENCHES, KOLKATA *PP/SPS TRUE COPY] BY ORDER, ASSTT REGISTRAR