D.C.I.T., Circle-5, Kolkata, Kolkata V. M/S. Suraj Govind Estates Pvt. Ltd., Kolkata

ITA 1627/KOL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1762 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 27-04-2017
• Assessment Year: 2004-2005
• Appeal Filed On: 07-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S ALLONG YADEN CIT LD
• Assessee Lawyers: G R SAHA LD
• Section: 142(1); 147; 148

Judgement Text

1 ITA NO.1627/KOL/14 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA BEFORE: SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI S.S. VISWANETHRA RAVI, JU DICIAL MEMBER I.T.A NO. 1627/KOL /2014 A.Y 2004-0 5 DEPUTY COMMISSIONER VS. M/S. SURAJ GOVIND ESTATE OF INCOME-TAX, CIR-5, PVT. LTD. PAN: AAHCS6437K KOLKATA [APPELLANT] [RESPONDENT] FOR THE APPELLANT : SHRI SALLONG YADEN, ADDL.C IT, LD.SR.DR FOR THE RESPONDENT : SHRI G.R SAHA, ADVOCATE, LD .AR DATE OF HEARING : 08-06-2017 DATE OF PRONOUNCEMENT : 11-08-2017 ORDER SHRI S.S.VISWANETHRA RAVI, JM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS),VI, KOLKAT A DT. 20-05- 2014 FOR THE A.Y 2004-05. 2. THE ONLY ISSUE IS TO BE DECIDED AS TO WHETHER TH E CIT(A) WAS JUSTIFIED IN ALLOWING THE LOSS OF RS.74,15,354/- I N THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A COMPANY AND IS AN OPERATOR OF TEA GARDEN. THE ASSESSEE FILE D ITS RETURN ON 30- 10-04 DECLARING A LOSS OF RS.86,98,094/-. THE SAID RETURN WAS PROCESSED U/S. 143(1) OF THE ACT ON 25-8-05. THEREA FTER, ON SCRUTINY OF RECORDS THE AO FOUND THAT THE ASSESSEE DEBITED A N AMOUNT OF RS.75,15,354/- UNDER THE HEAD LOSS ON OPERATING DI MA TEA GARDEN AS PER MOU WITH M/S. BUXA DOORS TEA CO. THEREFORE, THE AO INITIATED RE-OPENING OF ASSESSMENT PROCEEDINGS U/S. 147 BY I SSUANCE OF NOTICE U/S. 148 DT. 5-9-07. IN RESPONSE TO NOTICES ISSUE U /S. 143(2) AND 2 ITA NO.1627/KOL/14 142(1) OF THE ACT, THE A/R OF THE ASSESSEE APPEARED TIME TO TIME AND FILED VARIOUS DOCUMENTS IN SUPPORT OF THE RETURN F ILED. 4. IN EXPLANATION REGARDING THE LOSS CLAIMED, THE A SSESSEE SUBMITTED THAT THE LEGAL OWNERSHIP OF THE SAID TEA GARDEN WAS NOT TRANSFERRED TO THE ASSESSEE AND BENEFICIAL OWNERSHI P WAS VESTED WITH THE ASSESSEE FROM 03-02-03 AS PER MOU SIGNED BY BOT H THE SAID TWO PARTIES ( ASSESSEE AND M/S. BUXA DOOARS TEA CO.). T HE TEA GARDEN WAS MANAGED BY M/S. BUXA DOOARS TEA CO. ON BEHALF OF ASSESSEE AS PER MOU AND AS SUCH LOSS ARISING FROM OPERATION OF GARDEN SHOULD BE CONSIDERED IN THE HANDS OF THE ASSESSEE. IN SUPPORT OF THE CONTENTIONS THE ASSESSEE RELIED ON CASE LAWS OF THE HONBLE CALCUTTA HIGH COURT IN THE CASES OF CIT VS. TEA PRODUCING C O. OF INDIA REPORTED IN 48 ITR 200(CAL) AND CIT VS. JHANZIE TEA ASSOCIATION REPORTED IN 179 ITR 295(CAL). CONSIDERING THE SUBMI SSIONS OF THE ASSESSEE THE AO WAS OF THE VIEW THAT THE CONTENTION OF ASSESSEE IS CONTRARY TO AUDITORS REPORT ON NOTES ON ACCOUNTS ( 2A) AND AS THE ASSESSEE HAS TO TAKE OVER ASSETS OF M/S. DIMA TEA E STATE AS PER MOU WITH M/S. BUXA DOOARS TEA CO.(I) LTD W.E.F 3-2-03 AND THE TITLE OF PROPERTY WAS NEVER TRANSFERRED TO ASSESSEE AND AS S UCH DISALLOWED AND ADDED THE LOSS OF RS.75,15,354/- TO THE INCOME OF THE ASSESSEE BY AN ORDER DT 31-12-08 PASSED U/S. 143(3)/147 OF T HE ACT. 5. THE ASSESSEE CHALLENGED THE SAME BEFORE THE CIT- A AND CONTENDED THAT AS PER MOU WITH THE ASSESSEE, THE VE NDOR, M/S. BUXA DOOARS TEA CO. LTD WOULD CARRY ON THE BUSINESS OF C ULTIVATION, MANUFACTURE AND SALE OF TEA IN THE SAID GARDEN FOR AND ON BEHALF OF THE ASSESSEE. ALL INCOME AND/ OR LOSSES SHALL BE CO NSIDERED IN THE HANDS OF THE ASSESSEE. THE ASSESSEE ALSO CONTENDED THAT ACTUAL FACT THAT THE LEASE OF THE SAID TEA GARDEN WAS OBTAINED FROM GOVT. OF WEST BENGAL. THE SAID LEASE IS BEING RENEWED PERIODICALL Y FROM TIME TO TIME. THE SAID RENEWAL BY THE GOVT OF W.B COULD NOT BE EXECUTED TILL 31-01-04 AND THEREAFTER TILL 31-03-05. AS PER AGREE MENT (MOU) BETWEEN THE ASSESSEE AND THE VENDOR(TRANSFEROR), TH E TRANSFEROR 3 ITA NO.1627/KOL/14 MANAGED AND MAINTAINED THE SAID TEA GARDEN ON BEHA LF OF THE ASSESSEE. 6. CONSIDERING THE SUBMISSIONS OF ASSESSEE AND RELY ING ON THE DECISION OF THE HONBLE HIGH COURT OF CALCUTTA IN T HE CASES OF JHANZIE TEA ASSOCIATION SUPRA AND TEA PRODUCING CO. OF INDIA LTD SUPRA DIRECTED THE AO TO ALLOW LOSS OF DIMA TEA ESTATE IN THE HANDS OF ASSESSEE BY STATING AS UNDER:- 5. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CA SE. THE APPELLANT HAD ENTERED INTO AN AGREEMENT FOR TRANSFER OF DIMA TEA ESTATE. ACCOR DING TO THE TERMS AND CONDITIONS OF THE AGREEMENT, PENDING EXECUTION AND REGISTRATION O F THE DEED OF CONVEYANCE, THE VENDOR, BUXA DOOARS TEA CO. LTD, WAS TO CARRY ON TH E OPERATION OF THE TEA GARDEN FOR AND ON BEHALFOF THE APPELLANT W.E.F.3.2.2003. AS A RESULT, PROFIT/LOSS FROM OPERATION OF TEA GARDEN AFTER 3.2.2003 WOULD ACCRUE TO THE TRANS FEREE I.E. THE APPELLANT. THE ASSESSING OFFICER HAS OBJECTED TO THIS ARRANGEMENT ON THE GROUND THAT ACTUAL TRANSFER OF THE TEA ESTATE HAD BEEN COMPLETED TILL END OF THE P REVIOUS YEAR AND HENCE PROFIT/LOSS FROM THE TEA ESTATE BELONGED TO BUXA DOOARS TEA CO. LTD. AND NOT THE APPELLANT. THE APPELLANT HAS CITED DECISIONS OF JURISDICTION HIGH COURT IN THE CASES OF CIT, WB VS. TEA PRODUCING CO OF INDIA 48 ITR 200(CAL.) AND CIT VS J HANZIE TEA ASSOCIATION 179 ITR 295 (CAL.) THE SAID DECISIONS WERE CITED BEFORE THE ASS ESSING OFFICER AS WELL. HOWEVER, HE HAS NOT FOLLOWED THE RATIO OF THE DECISIONS WITHOUT GIV ING ANY REASONING. ON GOING THROUGH THE DECISION IN THE CASE OF JHANZIE TEA ASSOCIATION (SUPRA), IT IS SEEN THAT THE MATERIAL FACTS OF THAT CASE ARE QUITE SIMILAR TO THE APPELLA NT'S CASE. IN THAT CASE, THE HON'BLE HIGH COURT HAD CONFIRMED THE DECISION OF THE TRIBUNAL BY OBSERVING, THAT WHERE INCOME HAS BEEN DIVERTED BY AN OVER-RIDING TITLE EVEN BEFORE A CCRUAL, THE INCOME SUCH DIVERTED HAS TO BE ASSESSED IN THE HANDS OF TRANSFEREE ONLY. HON 'BLE HIGH COURT ALSO REFERRED TO THE DECISION IN THE CASE OF TEA PRODUCING CO. OF INDIA LTD. (SUPRA). IN THAT CASE, IT WAS OBSERVED THAT IF A BUSINESS CARRIED ON BY 'A' IS TR ANSFERRED TO 'B' FROM CERTAIN POINT OF TIME, 'B' ALONE CAN BE ASSESSED TO TAX IN RESPECT O F THE PERIOD SUBSEQUENT TO THE CHANGE OF OWNERSHIP. 'A' AND 'B' MAY AGREE THAT ANY PROFIT /LOSS OF THE BUSINESS AS FROM A DATE ANTERIOR TO THAT OF THE CHANGE OF OWNERSHIP WILL BE ON B'S ACCOUNT. IN SUCH CASE 'A' WILL HAVE TO ACCOUNT TO 'B' FOR THAT INCOME AND PROFIT O F THE BUSINESS COVERED BY THE PERIOD OF THE AGREEMENT AND THE 'A' MAY BE HELD TO HAVE CARRI ED ON THE BUSINESS AS 'B' S AGENT FROM THE AGREED DATE. IN THE APPELLANT'S CASE, THER E WAS AGREEMENT WITH BUXA DOOARS TEA CO. LTD. FOR TRANSFER OF ITS TEA GARDEN (DIMA T EA ESTATE) TO THE APPELLANT COMPANY. IT WAS MENTIONED IN THE AGREEMENT THAT THE SAID TEA ES TATE SHALL BE TRANSFERRED AS A RUNNING AND GOING CONCERN W.E.F. 03.02.2003, THE OP ERATION OF THE TEA ESTATE FROM 03.02.2003 SHALL BE RUN AND OPERATED FOR AND ON BEH ALF OF THE PURCHASER (APPELLANT). THUS THE RATIO GIVEN BY THE HON'BLE HIGH COURT IN T HE CASES OF JHANZIE TEA ASSOCIATION (SUPRA) AND TEA PRODUCING CO. OF INDIA LTD. (SUPRA) IS SQUARELY APPLICABLE ON FACTS IN THE APPELLANT'S CASE. IT MAY ALSO BE MENTIONED HERE THA T IN THE ASSESSMENT FOR A SUBSEQUENT YEAR I.E. A.Y. 2006-07, THE ASSESSING OFFICER HAS H IMSELF ACCEPTED THE POSITION AND PROFIT/LOSS PERTAINING TO DIMA TEA ESTATE WAS ASSES SED IN THE HANDS OF THE APPELLANT COMPANY ONLY EVEN THOUGH THE DEED OF TRANSFER OF LE ASE HAD BEEN SIGNED AS LATE AS ON 07.05.2007. CONSIDERING THESE FACTS AND RESPECTFULL Y FOLLOWING THE RATIO GIVEN BY THE HONBLE KOLKATA HIGH COURT IN THE CASES OF JHANZIE TEA ASSOCIATION (SUPRA) AND TEA PRODUCING CO. OF INDIA LTD (SUPRA), THE ASSESSING O FFICER IS DIRECTED TO ALLOW LOSS OF DIMA TEA ESTATE IN THE HANDS OF THE APPELLANT. 7. THE LD. DR RELIED ON THE ORDER OF THE AO. ON THE OTHER HAND, THE LD.AR OF THE ASSESSEE REITERATED HIS SAME SUBMISSIO NS MADE BEFORE THE CIT-A. THE DELAY IN EXECUTING THE CONVEYANCE DE ED WAS CAUSED DUE TO GOVERNMENT POLICY AND THE CONVEYANCE DEED C OULD NOT BE EXECUTED TILL 31-03-05, THEREBY THE TRANSFEROR MAN AGED AND MAINTAINED THE SAID TEA GARDEN ON BEHALF OF THE AS SESSEE AND AS 4 ITA NO.1627/KOL/14 SUCH ANY LOSS OR GAIN SHOULD BE CONSIDERED IN THE H ANDS OF THE ASSESSEE. IN SUPPORT OF THE CONTENTION, HE RELIED O N THE ORDER OF THE CIT-A IN ALLOWING THE SAME. 8. HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIA L AVAILABLE ON RECORD. WE FIND THAT THE CIT-A OBSERVED THAT THE MA TERIAL FACTS IN THE CASE OF JHANZIE TEA ASSOCIATION SUPRA OF THE HONBLE HIGH COURT OF CALCUTTA ARE QUITE SIMILAR TO THE PRESENT FACTS OF THE CASE, WHEREIN THE HONBLE CALCUTTA HIGH COURT CONFIRMED THE DECISION OF THE TRIBUNAL BY HOLDING THAT WHERE INCOME HAS BEEN DIVERTED BY AN OVER-RIDING TITLE EVEN BEFORE ACCRUAL, THE INCOME SUCH DIVERTED HAS T O BE ASSESSED IN THE HANDS OF TRANSFEREE ONLY. IN THE PRESENT CASE, THE TRANSFEROR IS M/S. BUXA DOOARS TEA CO. LTD, WHO MANAGED AND MAINT AINED THE SAID TEA GARDEN ON BEHALF OF THE ASSESSEE, AND THE TRANS FEREE IS ASSESSEE. THE CONVEYANCE DEED WAS DELAYED DUE TO GOVT. POLICY AS DISCUSSED ABOVE. WE ARE OF THE VIEW THAT THE PRINCIPLE AS LAI D DOWN BY THE HONBLE HIGH COURT OF CALCUTTA IN THE CASE OF JHANZ IE TEA ASSOCIATION SUPRA IS SQUARELY APPLICABLE TO THE PRESENT FACTS OF THE CASE. THE CIT- A ALSO EXAMINED THE MOU, WHICH SAID TO HAVE BEEN EN TERED BETWEEN THE ASSESSEE AND M/S. BUXA DOOARS TEA CO. LTD FOR T RANSFER OF ITS TEA GARDEN ( M/S. DIMA TEA ESTATE) TO THE ASSESSEE COMP ANY. THE CIT-A ALSO FOUND THAT SAID TEA ESTATE (M/S. DIMA TEA ESTA TE) SHALL BE TRANSFERRED AS A RUNNING AND GOING CONCERN W.E.F 03 -02-03, THE OPERATION OF THE TEA ESTATE FROM 03-02-03 SHALL BE RUN AND OPERATED BY M/S. BUXA DOOARS TEA CO. FOR AND ON BEHALF OF TH E PURCHASER, THE ASSESSEE. THUS THE DECISION OF THE HONBLE HIGH CO URT OF CALCUTTA IN THE CASES OF JHANZIE TEA ASSOCIATION AND TEA PRODUC ING CO. INDIA LTD SUPRA IS APPLICABLE TO THE PRESENT FACTS OF THE CASE. WE FURTHER FIND THAT IN THE A.Y 2006-07, THE AO HIMSELF ACCEPTED T HE PROFIT/LOSS PERTAINING TO M/S. DIMA TEA ESTATE, WHICH WAS ASSES SED IN THE HANDS OF THE ASSESSEE COMPANY. IN VIEW OF ABOVE, THE CIT- A WAS JUSTIFIED IN DIRECTING THE ASSESSING OFFICER TO ALLOW LOSS OF DI MA TEA ESTATE IN THE 5 ITA NO.1627/KOL/14 HANDS OF ASSESSEE. THEREFORE, THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11-0 8-2017 SD/- SD/- P.M. JAGTAP S.S. VISWANETHRA RAVI ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 11-08-2017 PP(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT/REVENUE : THE DCIT, CIR-5,P-7 CHOWRINGHEE SQ. KOLKATA-69. 2 RESPONDENT/ASSESSEE: M/S. SURAJ GOVIND ESTATES PVT. LTD. 2 BRABOURNE ROAD(BIPLABI TRILOKYA MAHARAJ SARANI), KOLKATA-1. 3 . THE CIT(A), KOLKATA 4. 5. CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, SR.PS/H.O.O ITAT KOLKATA