Deputy Commissioner of Income tax, Circle-12(3), Bangalore V. M/s Sami Labs Ltd, Bangalore

ITA 1227/BANG/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90006 (ITAT-BANGALORE)
• Duration Of Justice: 9 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-07-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 17-06-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 29-09-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: FARHAT HUSSAIN QURESHI
• Assessee Lawyers: CHERIAN K BA
• Keywords: Business income; Depreciation; Question of law; Commercial expediency; Revenue expenditure
• Section: 143(3); 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH B BEFORE SHRI VIJAYPAL RAO , JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER I.T.A. NO. 1227 /BANG/201 4 (ASSESSMENT YEAR : 20 06 - 07 ) DY. COMMISSIONER OF INCOME TAX, CIRCLE 12(3), BANGALO RE. VS. M/S. SAMI LABS LTD., 18/1, 19/2, FIRST MAIN ROAD, II PHASE, PEENYA INDL. AREA, BANGALORE. PAN AADCS 2549E APPELLANT RESPONDENT. APPELLANT BY : SHRI FARHAT HUSSAIN QURESHI, CIT (D.R) RESPONDENT BY : SHRI CHERIAN K BABY, C.A. DATE OF H EARI NG : 17.6.2015. DATE OF P RONOUNCEMENT : 10.7. 201 5 . O R D E R PER SHRI JASON P. BOAZ, A.M. : THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - III, BANGALORE DT. 26.6.2014 FOR ASSESSMENT YEAR 200 6 - 0 7 . 2. THE FACTS OF THE CASE, BRIEFLY, ARE AS UNDER : - THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISS IONER OF INCOME TAX (APPEALS) - III, BANGALORE DT.26.6.2014 FOR ASSESSMENT YEAR 2006 - 07. 2. THE FACTS OF THE CASE, BRIEFLY, ARE AS UNDER : - 2 ITA NO. 1227 /BANG/ 2014 2.1 THE ASSESSEE COMPANY, CARRYING ON BUSINESS OF MANUFACTURE, EXPORT AND LOCAL SALE OF HERBAL PRODUCTS AND MA NUFACTURE OF FINE CHEMICALS, PHYTONUTRIENTS, COSMECEUTICALS AND PROBIOTICS, FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2006 - 07 ON 30.11.2006 DECLARING A LOSS OF RS/13,47,71,093. THE RETURN WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT') AND THE CASE WAS SUBSEQUENTLY TAKEN UP FOR SCRUTINY. THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT VIDE ORDER DT30.11.2009 WHEREIN THE LOSS OF THE ASSESSEE COMPANY WAS DETERMINED AT RS.2,67,523, AS AGAINST THE DECLARED LOSS OF RS.13,47,71,093 IN VIEW OF THE FOLLOWING ADDITIONS/DISALLOWANCES : - (I) DISALLOWANCE OF CULTIVATION EXPENSES : RS.86,85,191. (II) DISALLOWANCE OF DEDUCTION U/S.10B : RS.12,58,16,379. 2.2 AGGRIEVED BY THE ORDER OF ASSESSMENT DT.30.11.2009 FOR ASSESSMENT YEAR 2006 - 07, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT (APPEALS) III, BANGALORE. THE LEARNED CIT (APPEALS) DISPOSED OFF THE APPEAL VIDE ORDER DT.26.6.2014 ALLOWING THE ASSESSEE RELIEF ON BOTH THE ISSUES IN RESPECT OF WHICH THE ASSE SSING OFFICER HAD MADE DISALLOWANCES IN THE ORDER OF ASSESSMENT. 3. REVENUE IS AGGRIEVED WITH THE ORDER OF THE CIT (APPEALS) III, BANGALORE DT.26.6.2014 FOR ASSESSMENT YEAR 2006 - 07 AND HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL RAISING THE FOLLOWING GROUNDS : - 3 ITA NO. 1227 /BANG/ 2014 1. THE ORDER OF THE LEARNED CIT (APPEALS) IS OPPOSED TO LAW AND FACTS OF THE CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT (APPEALS) ERRED IN DIRECTING THE ASSESSING OFFICER TO COMPUTE DEDUCTION UNDER SECTION 10B WITHOUT SETTING OFF OF LOSSES (DEPRECIATION / BUSINESS) PERTAINING TO NON - 10B UNITS AGAINST THE PROFIT OF 10B UNITS BY PLACING RELIANCE ON THE DECISION OF HON'BLE HIGH COURT OF KARNATAKA IN THE CASE OF M/S. YOKOGAWA INDIA LTD., BUT WITHOUT APPRECIATING THE FACT THAT DEDUCTION UNDER SECTION 10B HAS TO BE ALLOWED FORM THE TOTAL INCOME OF THE ASSESSEE, AND AS PER SECTION 2(45) OF THE IT ACT, THE TOTAL INCOME SHOULD BE COMPUTED FROM VARIOUS SOURCES AFTER SET OFF OF LOSSES FROM ONE SOURCE AGAINST INCOME FROM OTHER SOURCES UNDER THE SAME HEAD OF INCOME IN TERMS OF SECTION 70(1). 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT (APPEALS) ERRED IN DIRECTING THE ASSESSING OFFICER TO COMPUTE DEDUCTION UNDER SECTION 10B IN THE ABOVE MANNER B Y PLACING RELIANCE ON THE DECISIONOF HON'BLE HIGH COURT OF KARNATAKA IN THE CASE OF M/S. YOKOGAWA LTD. WHICH HAS NOT BECOME FINAL SINCE THE SAME HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND SLPS ARE PENDING BEFORE THE HON'BLE SUPREME COURT ON THIS ISSUE. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT (APPEALS) ERRED IN HOLDING THAT EXPENSES OF CULTIVATION OF RS.86.85 LACS TO BE SET OFF AGAINST OTHER BUSINESS INCOMES ON THE G R O UND THAT THEY WERE INCURRED DUE TO COMMERCIAL EXPEDIENCY WITHOUT APPRECIATING THAT THE ASSESSEE HAS UNDERTAKEN CULTIVATION AS A SEPARATE ACTIVITY BY WAY OF ENTERING INTO AGREEMENTS WITH THE FARMERS WHICH IS IN THE NATURE OF CONTRACT FARMING BY PLACING RELIANCE ON THE ORDER OF HIGH COURT OF KARNATAKA IN THE CASE OF ASSESSEE FOR A.Y. 2004 - 05 WHICH HAS STILL NOT BECOME FINAL. 5. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING IT IS PRAYED THAT THE ORDER OF THE CIT (APPEALS) IN SO FAR AS IT RELATES TO THE ABOVE GROUNDS MAY BE REVERSED AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED. 6. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND / OR DELETE ANY OF THE GROUNDS MENTIONED ABOVE. 4. THE GROUNDS AT S.NOS.1, 5 AND 6 ARE GENERAL IN NATURE AND THEREFORE NO ADJUDICATION IS CALLED FOR TH EREON. 4 ITA NO. 1227 /BANG/ 2014 5. GROUNDS AT S.NOS.2 AND 3 : DEDUCTION U/S.10B OF THE ACT . 5.1 IN THESE GROUNDS, REVENUE CONTENDS THAT THE LEARNED CIT (APPEALS) ERRED IN DIRECTING THE ASSESSING OFFICER TO COMPUTE DEDUCTION UNDER SECTION 10B OF THE ACT WITHOUT SETTIN G OFF THE BUSINESS LOSSES AND DEPRECIATION PERTAINING TO NON 10B UNITS AGAINST THE PROFITS OF 10B UNITS BY FOLLOWING THE DECISION OF YOKOGAWA INDIA LTD. (2012) 341 ITR 386 (KAR) WHICH HAS NOT B E COME FINAL , SINCE THE SAME HAS NOT BEEN ACCEPTED BY THE DEPART MENT AND SLP IN THIS REGARD I S PENDING BEFORE THE HON'BLE APEX COURT. IT IS SUBMITTED THAT THE DEDUCTION UNDER SECTION 10B HAS TO BE ALLOWED FROM THE TOTAL INCOME OF THE ASSESSEE FROM VARIOUS SOURCES AFTER NET OFF OF LO SS ES FROM ONE SOURCE AGAINST INCOME FROM OTHER SOURCES UNDER THE SAME HEAD OF INCOME IN ACCORDANCE WITH THE PROVISIONS OF SECTION70(1) OF THE ACT. THE LEARNED DEPARTMEN T AL REPRESENTATIVE WAS HEARD IN SUPPORT OF THE GROUNDS. 5.2 PER CONTRA, THE LEARNED AUTHORISED REPRESENTATIVE FOR TH E ASSESSEE SUPPORTED THE DECISION OF THE LEARNED CIT (APPEALS) IN THE IMPUGNED ORDER ON THIS ISSUE. IT IS SUBMITTED THAT SINCE THE ISSUE OF DEDUCTION UNDER SECTION 10B OF THE ACT IS SQUARELY COVERED BY THE DECISION OF THE HON BLE KARNATAKA HIGH COURT IN T HE CASE OF C IT V YOKOGAWA INDIA LTD. (SUP R A), RE V ENUE S APPEAL ON THIS ISSUE IS LIABLE TO BE DISMISSED. 5.3.1 WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH PARTIES AND PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD; INCLUDING THE JUDI CIAL PRONOUNCEMENT RELIED 5 ITA NO. 1227 /BANG/ 2014 UPON BY THE ASSESSEE. WE FIND THAT THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF YOKOGAWA INDIA LTD. (SUPRA) HAD HELD THAT DEDUCTION U/S 10B IS ALLOWABLE WITHOUT SETTING OFF THE BROUGHT FORWARD LOSS AND LOSS OF THE CURRENT YEAR PERTAINING TO THE OTHER UNITS. THE HON BLE HIGH COURT WAS CONSIDERING THE FOLLOWING SUBSTANTIAL QUESTIONS OF LAW: - (I) WHETHER THE APPELLATE AUTHORITIES FAILED TO TAKE INTO CONSIDERATION THAT THE AMENDMENT TO SECTION 10A BY THE FINANCE ACT OF 2000 WITH EFFECT FROM APRIL 1, 2001, THE DEDUCTION OF PROFITS AND GAINS AS EARNED BY AN UNDERTAKING FROM THE EXPORT OF ARTICLES OR THINGS OR COMPUTER SOFTWARE IS REQUIRED TO BE ALLOWED FROM THE TOTAL INCOME OF THE ASSESSEE AND CONSEQUENTLY THE LOSS FROM THE NON - STP UNIT IS REQUIRED TO BE SET OFF AGAINST THE INCOME OF THE OTHER STP UNIT BEFORE ALLOWING DEDUCTION UNDER SECTION 10A OF THE AMENDED ACT? (II) WHETHER THE TRIBUNAL WAS CORRECT IN HOLDING THAT THE DEDUCTION UNDER SECTION 10A OR SECTION 10B OF THE ACT DUR ING THE CURRENT ASSESSMENT YEAR HAS TO BE ALLOWED WITHOUT SETTING OFF BROUGHT FORWARD UNABSORBED LOSSES AND THE DEPRECIATION FROM EARLIER ASSESSMENT YEAR OR CURRENT ASSESSMENT YEAR EITHER IN THE CASE OF NON - STP UNITS OR IN THE CASE OF THE VERY SAME UNDERTA KING? (EMPHASIS SUPPLIED) 5.3.2 THE RELEVANT FINDINGS OF THE HON BLE HIGH COURT AT PARAS 19, 20, 31 TO 33 READS AS FOLLOWS: - 19. IT IS AFTER THE DEDUCTION UNDER CHAPTER VI - A THAT THE TOTAL INCOME OF AN ASSESSEE AS ARRIVED AT. CHAPTER VI - A DEDUCTION S ARE THE LAST STAGE OF GIVING EFFECT TO ALL TYPES OF DEDUCTIONS PERMISSIBLE UNDER THE ACT. AT THE END OF THIS EXERCISE, THE TOTAL INCOME IS ARRIVED AT. TOTAL INCOME IS THUS, A FIGURE ARRIVED AT AFTER GIVING EFFECT TO ALL DEDUCTIONS UNDER THE ACT. THERE CANNOT BE ANY FURTHER DEDUCTION FROM THE TOTAL INCOME AS THE TOTAL INCOME IS ITSELF ARRIVED AT AFTER ALL DEDUCTIONS. 20 . FROM THE AFORESAID DISCUSSION IT IS CLEAR THAT THE INCOME OF 10A UNIT HAS TO BE EXCLUDED BEFORE ARRIVING AT THE GROSS TOTAL INCOME OF THE ASSESSEE. THE INCOME OF 10A UNIT HAS TO BE DEDUCTED AT SOURCE ITSELF AND NOT AFTER COMPUTING THE GROSS TOTAL INCOME. THE 6 ITA NO. 1227 /BANG/ 2014 TOTAL INCOME USED IN THE PROVISIONS OF SECTION 10A IN THIS CONTEXT MEANS THE GLOBAL INCOME OF THE ASSESSEE AND NOT THE TOTAL INC OME AS DEFINED IN SECTION 2(45). HENCE, THE INCOME ELIGIBLE FOR EXEMPTION U/S 10A WOULD NOT ENTER INTO COMPUTATION AS THE SAME HAS TO BE DEDUCTED AT SOURCE LEVEL. -------------------------------------------------------------- 31. AFTER MAKING ALL SUCH CO MPUTATION THE ASSESSEE WOULD BE ENTITLED TO THE BENEFIT OF SET OFF OR CARRY FORWARD OF LOSS AS PROVIDED U/S 72 OF THE ACT. THAT IS THE BENEFIT WHICH IS GIVEN TO THE ASSESSEE UNDER THE ACT IRRESPECTIVE OF THE NATURE OF BUSINESS WHICH HE IS CARRYING ON. T HE SAID BENEFIT IS AVAILABLE EVEN TO UNDERTAKINGS U/S 10B OF THE ACT. THE EXPRESSION DEDUCTION OF SUCH PROFITS AND GAINS AS DERIVED BY AN UNDERTAKING SHALL BE ALLOWED FROM THE TOTAL INCOME OF THE ASSESSEE , HAS TO BE UNDERSTOOD IN THE CONTEXT WITH WHICH THE SAID PROVISION IS INSERTED IN CHAPTER III OF THE ACT. SUB - SECTION (4) OF SECTION 10A CLARIFIES THIS POSITION. IT PROVIDES THAT THE PROFITS DERIVED FROM EXPORT OF ARTICLES OR THINGS FROM COMPUTER SOFTWARE SHALL BE THE AMOUNT WHICH BEARS TO THE PROFITS OF THE BUSINESS OF THE UNDERTAKING, THE SAME PROPORTION AS THE EXPORT TURNOVER IN RESPECT OF SUCH ARTICLES OR THINGS OR COMPUTER SOFTWARE BEARS TO THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY THE UNDERTAKING. THEREFORE, IT IS CLEAR THAT THOUGH THE AS SESSEE MAY BE HAVING MORE THAN ONE UNDERTAKING FOR THE PURPOSE OF SECTION 10A IT IS THE PROFIT DERIVED FROM EXPORT OF ARTICLES OR THINGS OR COMPUTER SOFTWARE FROM THE BUSINESS OF THE UNDERTAKING ALONE THAT HAS TO BE TAKEN INTO CONSIDERATION AND SUCH PROFIT IS NOT TO BE INCLUDED IN THE TOTAL INCOME OF THE ASSESSEE. IT IS ONLY AFTER THE DEDUCTION OF THE SAID PROFITS AND GAINS, THE INCOME OF THE ASSESSEE HAS TO BE COMPUTED. 32. THE PROVISIONS OF THIS SUB - SECTION WILL APPLY EVEN IN THE CASE WHERE AN ASSESSEE H AS OPTED OUT OF SECTION 10A BY EXERCISING HIS OPTION UNDER SUB - SECTION (8). AS DISCUSSED, IT IS PERMISSIBLE FOR AN ASSESSEE TO OPT IN AND OPT OUT OF SECTION 10A. IN THE YEAR WHEN THE ASSESSEE HAS OPTED OUT, THE NORMAL PROVISIONS OF THE ACT WOULD APPLY. THE PROFITS DERIVED BY HIM FROM THE STP UNDERTAKING WOULD SUFFER TAX IN THE NORMAL COURSE SUBJECT TO VARIOUS PROVISIONS OF THE ACT INCLUDING THOSE OF CHAPTER VI - A. IF IN SUCH A YEAR, THE ASSESSEE HAS 7 ITA NO. 1227 /BANG/ 2014 SUFFERED LOSSES, SUCH LOSSES WOULD BE SUBJECT TO INTER SOURCE AND INTER HEAD SET OFF. THE BALANCE IF ANY THEREAFTER CAN BE CARRIED FORWARD, FOR BEING SET OFF AGAINST PROFITS OF THE SUBSEQUENT ASSESSMENT YEARS IN THE NORMAL COURSE. U NABSORBED DEPRECIATION ALSO MERITS A SIMILAR TREATMENT. 33. AS THE INCOME OF 10 - A UNIT HAS TO BE EXCLUDED AT SOURCE ITSELF BEFORE ARRIVING AT THE GROSS TOTAL INCOME, THE LOSS OF NON 10 - A UNIT CANNOT BE SET OFF AGAINST THE INCOME OF 10 - A UNIT U/S 72. THE LOSS INCURRED BY THE ASSESSEE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION HAS TO BE SET OFF AGAINST THE PROFITS AND GAINS IF ANY, OF ANY BUSINESS OR PROFESSION CARRIED ON BY SUCH ASSESSEE. THEREFORE AS THE PROFITS AND GAINS UNDER SECTION 10 - A IS NOT BE INCLUDED IN THE INCOME OF THE ASSESSEE AT ALL, THE QUESTION OF SE TTING OFF THE LOSS OF THE ASSESSEE OF ANY PROFITS AND GAINS OF BUSINESS AGAINST SUCH PROFITS AND GAINS OF THE UNDERTAKING WOULD NOT ARISE. SIMILARLY, AS PER SECTION 72(2), UNABSORBED BUSINESS LOSS IS TO BE FIRST SET OFF AND THEREAFTER UNABSORBED DEPRECIAT ION TREATED AS CURRENT YEARS DEPRECIATION U/S 32(2) IS TO BE SET OFF. AS DEDUCTION U/S 10A HAS TO BE EXCLUDED FROM THE TOTAL INCOME OF THE ASSESSEE, THE QUESTION OF UNABSORBED BUSINESS LOSS BEING SET OFF AGAINST SUCH PROFIT AND GAINS OF THE UNDERTAKING WO ULD NOT ARISE. IN THAT VIEW OF THE MATTER, THE APPROACH OF THE ASSESSING AUTHORITY WAS QUITE CONTRARY TO THE AFORESAID STATUTORY PROVISIONS AND THE APPELLATE COMMISSIONER AS WELL AS THE TRIBUNAL WERE FULLY JUSTIFIED IN SETTING ASIDE THE SAID ASSESSMENT OR DER AND GRANTING THE BENEFIT OF SECTION 10A TO BE ASSESSEE. HENCE, THE MAIN SUBSTANTIAL QUESTION OF LAW IS ANSWERED IN FAVOUR OF THE ASSESSEES AND AGAINST THE REVENUE 5.3.3 RESPECTFULLY FOLLOWING THE DECISION OF THE HON'BLE HIGH COURT OF KARNATAKA I N THE CASE OF CIT V YOKOGAWA INDIA LTD. REPORTED IN 341 ITR 385 (KAR), WE HOLD THAT THE DEDUCTION UNDER SECTION 10B OF THE ACT FOR THE ELIGIBLE UNIT IS TO BE ALLOWED/COMPUTED WITH O UT SETTING OFF THE LOSSES OF OTHER UNITS , OTHER THAN THE ELIGIBLE UNIT , AGAIN ST THE PROFIT OF THE ELIGIBLE UNIT. AS THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE ABOVE DECISION IN THE CASE OF YOKOGAWA INDIA LTD. (SUPRA), WE UPHOLD THE DECISION OF 8 ITA NO. 1227 /BANG/ 2014 THE LEARNED CIT (APPEALS) IN ALLOWING THE ASSESSEE S CLAIM FOR DEDUC TION UNDER SECTION 10B OF THE ACT. CONSEQUENTLY, THE GROUNDS AT S.NOS.2 AND 3 OF REVENUE S APPEAL ARE DISMISSED. 6. GROUND NO.4 CULTIVATION EXPENSES 6.1 IN THIS GROUND, REVENUE CONTENDS THAT THE LEARNED CIT (APPEALS) ERRED IN HOLDING THAT THE E XPENSES OF CULTIVATION AMOUNTING TO RS.86.85 LAKHS IS TO BE SET OFF AGAINST THE BUSINESS INCOME OF THE ASSESSEE ON THE GROUNDS OF COMMERCIAL EXPEDIENCY. IT IS CONTENDED THAT THE LEARNED CIT (APPEALS) CAME TO THIS DECISION BY FOLLOWING THE JUDGEMENT OF THE HON'BLE HIGH COURT OF KARNATAKA IN THE ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2004 - 05 IN ITA NO.207/2011 DT.21.2.2012 . IT IS SUBMITTED THAT THE LEARNED CIT (APPEALS) HELD SO WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS UNDERTAKEN CULTIVATION AS A SEPARATE ACTIVITY BY WAY OF ENTERING INTO AGREEMENTS WITH FARMERS WAS IN THE NATURE OF CONTRACT FARMING AND BY FOLLOWING THE DECISION OF THE HON'BLE HIGH COURT OF KARNATAKA IN THE ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2004 - 05 IN ITA NO.207/2011 DT.21.2 .2012, WHICH HAS STILL NOT BECOME FINAL. THE LEARNED DEPARTMENTAL REPRESENTATIVE WAS HEARD IN SUPPORT OF THE GROUNDS RAISED. 6.2 PER CONTRA, THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THE IMPUGNED ORDER OF THE LEARNED CIT (APPEALS) ON THIS ISSUE IS CORRECT AS THE HON'BLE HIGH COURT OF KARNATAKA IN THE ASSESSEE'S OWN CASE IN ITA NO.207/2011 DT.21.2.2012 FOR ASSESSMENT YEAR 2004 - 05 HAS HELD THAT IDENTICAL EXPENDITURE INCURRED IN THAT YEAR TO BE REVENUE IN NATURE AND INCURRED FOR THE PURPOSE O F THE ASSESSEE'S BUSINESS. IT IS CONTENDED THAT, IN THE LIGHT OF THE ABOVE, REVENUE S APPEAL ON THIS ISSUE IS LIABLE TO BE DISMISSED. 9 ITA NO. 1227 /BANG/ 2014 6.3 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD, INCLUDING THE JU DICIAL PRONOUNCEMENT RELIED UPON BY THE ASSESSEE. WE FIND THAT, AS HELD BY THE LEARN ED CIT (APPEALS), THE HON'BLE KARNATAKA HIGH COURT IN ITA NO.207/2011 DT.21.2.2012 IN THE ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2004 - 05 HAS HELD THAT THE CULTIVATION EXP ENSES INCURRED BY THE ASSESSEE ON PAYMENT TO FARMERS FOR GROWING COLEUS PLANTS, BEING INCURRED FOR THE ASSESSEE'S BUSINESS PURPOSES, ARE TO BE TREATED AS REVENUE EXPENDITURE. IT HAS BEEN HELD BY THE LEARNED CIT (APPEALS) THAT THE FACTS OF THE MATTER ARE IDENTICAL FOR THIS YEAR ALSO, WHICH FINDING IS NOT DISPUTED BY REVENUE. WE, THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE HON'BLE HIGH COURT OF KARNATAKA IN THE ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2004 - 05 (SUPRA) UPHOLD THE ORDER OF THE LEARNE D CIT (APPEALS) IN DIRECTING THE ASSESSING OFFICER TO ALLOW THE AMOUNT OF RS.86,85,191 AS REVENUE EXPENDITURE. CONSEQUENTLY, GROUND NO.4 RAISED BY REVENUE IS DISMISSED. 7. IN THE RESULT, REVENUE S APPEAL FOR ASSESSMENT YEAR 2006 - 07 IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH JULY, 201 5 . SD/ - ( VIJAYPAL RAO ) JUDICIAL MEMBER SD/ - (JASON P BOAZ) ACCOUNTANT MEMB ER *REDDY GP