D.C.I.T Cir - 4,kolkata, Kolkata V. M/s Stewart Holl ( India ) Ltd, Kolkata

ITA 1889/KOL/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5062 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 9 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-04-2016
• Appeal Filed By: Department
• Bench Allotted: C
• Assessment Year: 2004-2005
• Appeal Filed On: 12-06-2013
• Court: TRIBUNAL
• Department Lawyers: RAJAT KR KUREEL
• Assessee Lawyers: P N RAJENDRAN
• Keywords: Depreciation
• Section: 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KOLKATA [BEFORE HONBLE SRI N.V.VASUDEVAN, JM & SHRI WASE EM AHMED, AM] I.T.A NO. 1889/KOL/20 13 ASSESSMENT YEAR : 2004-0 5 D.C.I.T., CIRCLE-4, -VS.- M/S. STEWART HOLL(INDIA)LTD. KOLKATA KOLKATA [PAN : AAECS3091C] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI RAJAT KR.KURE EL, ADDL.CIT FOR THE RESPONDENT : SHRI P.N.RAJENDRAN, FCA DATE OF HEARING : 22.03.2016. DATE OF PRONOUNCEMENT : 6.4.2016. ORDER PER N.V.VASUDEVAN, JM THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDER DATED 18.3.2013 OF CIT(A)- IV, KOLKATA, RELATING TO AY 2004-05. 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE REA DS AS FOLLOWS: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS.5001369/- ON ACCOUNT OF CESS ON GREEN LEAF WITHOUT CONSIDERING THE FACT THAT EXPENSES ON ACCOUNT OF CESS ON GREEN LEAF IS RELATED TO 100% AGRICULTURAL OPERATION AND SLP IS PENDING BEFORE THE HONBLE SUP REME COURT AGAINST THE DECISION OF CALCUTTA HIGH COURT IN THE CASE OF AFT INDUSTRIES L TD VS- CIT (270 ITR 167) IN THE LIGHT OF WHICH LD. CIT(A) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN LAW IN DELETING THE DISALLOWANCE OF RS.38,66,258/- ON ACCO UNT OF DEPRECATION ON PLANT AND MACHINERY PURCHASED OUT OF THE AMOUNT WITHDRAWN FRO M NABARD. 3. THAT THE APPELLANT CRAVES FOR LEAVE TO ADD, DELE TE OR MODIFY ANY OF THE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING. 3. AS FAR AS GROUND NO.1 RAISED BY THE REVENUE IS CONCERNED, THE FACTS ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF GR OWING, MANUFACTURING AND SELLING 2 ITA NO.1889/KOL/2013 M/S. STEWART HOLL (INDIA)LTD.. A.YR.2004-05 2 OF TEA. THE ASSESSEE FILED RETURN OF INCOME FOR AY 2004-05 DECLARING LOSS OF RS.1,58,36,280/-. IN ARRIVING AT THIS LOSS THE ASS ESSEE HAD DEDUCTED A SUM OF RS.50,01,369/-BEING CESS ON GREEN LEAF. INCOME FRO M GROWING, MANUFACTURING AND SALE OF TEA WOULD BE COMPOSITE INCOME, WHICH MEANS IT CO MPRISES AGRICULTURAL INCOME TO THE EXTENT OF GROWING TEA, WHICH IS NOT CHARGEABLE TO T AX AND NON-AGRICULTURAL INCOME TO THE EXTENT IT COMPRISES OF INCOME FROM MANUFACTURE AND SALE OF TEA, WHICH INCOME IS CHARGEABLE TO TAX. RULE 8 OF THE INCOME TAX RULES, 1062 PROVIDES METHOD OF COMPUTATION FOR COMPOSITE INCOME FROM MANUFACTURE O F TEA. UNDER RULE 8 (1) OF THE INCOME TAX RULES, 1962 (RULES) INCOME DERIVED FROM SALE OF TEA GROWN AND MANUFACTURED BY THE SELLER IN INDIA SHALL BE COMPUT ED AS IF IT WERE INCOME DERIVED FROM BUSINESS, AND FORTY PER CENT OF SUCH INCOME SHALL B E DEEMED TO BE INCOME LIABLE TO TAX. ACCORDING TO THE AO CESS ON GREEN LEAF WAS AN EXPEN DITURE WHICH WAS ATTRIBUTABLE TO THE ACTIVITY OF GROWING OF TEA AND WOULD THEREFORE BE NOT ALLOWABLE AS DEDUCTION WHILE COMPUTING INCOME FROM MANUFACTURE AND SALE OF TEA. HE ACCORDINGLY ADDED THE SAME TO THE LOSS DECLARED IN THE RETURN OF INCOME AND LATER ON HELD THAT 40% OF SUCH LOSS ALONE WAS LOSS FROM BUSINESS OF MANUFACTURE AND SALE OF T EA. THE PLEA OF THE ASSESSEE WAS THAT THE ENTIRE GREEN LEAF CESS HAD TO BE ALLOWED A S DEDUCTION FIRST AND ONLY ON THE LOSS OR PROFIT ARRIVED AT AFTER SUCH DEDUCTION RULE 8(1) OF THE RULES HAVE TO BE APPLIED AND 40% OF SUCH SUM HAS TO BE CONSIDERED AS INCOME OR LOSS FROM THE BUSINESS OF MANUFACTURE AND SALE OF TEA. 4. ON APPEAL BY THE ASSESSEE, THE CIT(A) DELETED T HE DISALLOWANCE MADE BY THE AO BY FOLLOWING THE ORDER OF THE HON'BLE CALCUTTA HIGH CO URT IN THE CASE OF AFT INDUSTRIES LTD. VS CIT (270 ITR167) WHEREIN IT WAS HELD THAT GREEN LEAF C ESS HAS TO BE ALLOWED AS DEDUCTION BEFORE APPLYING RULE 8(1) OF THE RULES A ND ONLY THEREAFTER 40% OF SUCH INCOME HAS TO BE BROUGHT TO TAX. 3 ITA NO.1889/KOL/2013 M/S. STEWART HOLL (INDIA)LTD.. A.YR.2004-05 3 5. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVEN UE HAS RAISED GR.NO.1 BEFORE THE TRIBUNAL. THE LD. DR APPEARING ON BEHALF OF THE RE VENUE RELIED ON THE ORDER OF THE AO. ON THE OTHER HAND, THE LD.COUNSEL FOR THE ASSESSEE RELIED ON THE ORDERS OF THE LD. CIT(A). 6. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CARE FUL PERUSAL OF THE MATERIALS AVAILABLE ON RECORD, KEEPING IN VIEW OF THE FACT THAT THE ISS UE IS CONCLUDED BY THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS AFT INDUSTRIES LTD . 270 ITR 167 (CAL) WHERE THE AMOUNT PAID AS CESS WAS HELD AS ELIGIBLE FOR DEDUCTION IN COMPUTING THE COMPOSITE INCOME UNDER RULE 8 OF I.T. RULES. THIS ISSUE IS, THEREFORE, DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE R EVENUE BY UPHOLDING THE ORDER OF THE C.I.T.(A) WHO HAS ALLOWED THE DEDUCTION OF PAYMENT OF CESS ON GREEN LEAVES IN COMPUTING THE COMPOSITE INCOME FROM TEA BUSINESS OF THE ASSESSEE UNDER RULE 8 OF THE I.T. RULES. THE FACT THAT THE SLP IS PENDING BEFORE THE HON'BLE SUPREME COURT AGAINST THE DECISION OF THE HON'BLE CALCUTTA HIGH COURT IN RESPECT OF AFT INDUSTRIES LTD. VS CIT (270 ITR 167) WILL NOT HAVE ANY EFFECT SINCE THE H ON'BLE APEX COURT HAS NEITHER SET ASIDE THE ORDERS OF THE CALCUTTA HIGH COURT NOR GRA NTED ANY STAY. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO BROUGHT TO OUR NOTICE THE DEC ISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. M/S.APEEJAY TEA CO. LTD. CIV IL APPEAL NO.3168 OF 2006 DATED 6.8.2015 WHEREIN THE HONBLE SUPREME COURT HAS UPHE LD VIEW AS WAS TAKEN IN THE CASE OF AFT INDUSTRIES LTD. (SUPRA). WE THEREFORE DISMI SS GR.NO.1 RAISED BY THE REVENUE. 7. AS FAR AS GR.NO.2 RAISED BY THE REVENUE IS CONC ERNED, THE FACTS ARE THAT DURING THE RELEVANT ASSESSMENT YEAR, THE ASSESSING OFFICER NOT ICED THAT THE ASSESSEE HAD ACQUIRED FIXED ASSETS OUT OF WITHDRAWALS MADE FROM NABARD A/ C. ASSESSEE HAD CLAIMED DEPRECIATION ON THESE ASSETS. AFTER CONSIDERING TH E PROVISIONS OF SECTION 33AB(6), THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO EXPLAIN AS TO WHY THE CLAIM OF DEPRECIATION BE NOT DISALLOWED AS TERM 'EXPENDITURE' ALSO INCLUD ES DEPRECIATION. HE OBSERVED THAT THE ASSESEE HAD ALREADY CLAIMED THE BENEFIT OF THE AMOU NT DEPOSITED IN NABARD A/C. IN THE 4 ITA NO.1889/KOL/2013 M/S. STEWART HOLL (INDIA)LTD.. A.YR.2004-05 4 YEAR IN WHICH IT WAS DEPOSITED AND HENCE BY FURTHER CLAIMING DEPRECIATION ON ASSETS PURCHASED OUT OF WITHDRAWAL, DOUBLE BENEFIT ACCRUED TO THE ASSESSEE ON THE AMOUNT DEPOSITED WHICH IS AGAINST THE VERY PRINCIPLE OF TA XATION. HE, THEREFORE, DISALLOWED RS.36,27,225/- UNDER SECTION 33AB(6) OF THE ACT. IT WAS POINTED BEFORE AO THAT SIMILAR DISALLOWANCE MADE IN AY 2001-02 HAS BEEN DELETED BY CIT(A) AND THE ORDER OF CIT(A) WAS CONFIRMED BY THE ITAT IN ASSESSEES CASE IN ITA NO.2728/KOL/2004 ORDER DATED 28.7.2005. THE AO HOWEVER WAS OF THE VIEW THAT AN APPEAL HAS BEEN FILED BY THE REVENUE BEFORE THE HONBLE CALCUTTA HIGH COURT AND HENCE TO KEEP THE ISSUE ALIVE SIMILAR DISALLOWANCE OF DEPRECIATION WAS BEING MADE . ON APPEAL BY THE ASSESSEE, THE LD. CIT(APPEALS) ALLOWED THE ASSESSEE'S CLAIM FOLLO WING THE DECISION OF ITAT, KOLKATA IN THE CASE OF CIT -VS.- GOODRICK GROUP LIMITED IN ITA NO. 2557/KOL./2004 AND ASSESSEES OWN CASE. 8. AGGRIEVED BY THE ORDER OF THE CIT(A) THE REVENU E HAS RAISED GR.NO.2 BEFORE THE TRIBUNAL. WE HAVE CONSIDERED THE SUBMISSIONS OF BO TH THE PARTIES AND PERUSED THE RECORDS OF THE CASE. AT THE TIME OF HEARING, LD. CO UNSEL FOR THE ASSESSEE FILED BEFORE US THE DECISION DATED 07.05.2010 OF THIS TRIBUNAL IN A SSESSEE'S OWN CASE IN ITA NO.2728/KOL/2004 ORDER DATED 28.7.2005 FOR AY 2001- 02 WHEREIN THIS TRIBUNAL HELD AS FOLLOWS: 5. WE HAVE HEARD BOTH THE PARTIES AND HAVE PERUSED THE ORDERS OF TAX AUTHORITIES. WE HAVE ALSO CONSIDERED THE ORDER OF THIS BENCH AND OB SERVED THAT THIS BENCH IN CASE OF BOROJALINGH TEA CO.(SUPRA) HAS ALREADY DECIDED THE ISSUE IN FAVOUR OF ASSESSEE AND EVEN OTHERWISE THE DEPRECIATION IS STATUTORY ALLOWANCE F OR WHICH THE ASSESSEE HAS FULFILLED THE CONDITION PRESCRIBED UNDER SECTION 32 OF THE INCOME TAX ACT AND AS THE PROVISION OF SECTION 33AB WAS INSERTED WITH A VIEW TO ENCOURAGIN G BUSINESS OF GROWING AND MANUFACTURING OF TEA, THE SAME SHOULD BE INTERPRETE D IN A LIBERAL WAY. WE, THEREFORE, IN VIEW OF THE ABOVE JUDGMENT AND DISCUSSION, ARE OF T HE OPINION THAT THE ID. CIT(A) WAS JUSTIFIED IN ALLOWING SUCH CLAIM OF THE ASSESSEE AN D HENCE WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF ID. CIT(A) AND UPHOLD T HE SAME AND REJECT THE GROUND RAISED BY THE REVENUE. 5 ITA NO.1889/KOL/2013 M/S. STEWART HOLL (INDIA)LTD.. A.YR.2004-05 5 9. RESPECTFULLY FOLLOWING THE DECISION OF COORDINA TE BENCH OF TRIBUNAL (SUPRA), WE FIND THAT LD. CIT(APPEALS) WAS JUSTIFIED IN DELETIN G THE DISALLOWANCE. HENCE, GROUND NO.2 TAKEN BY THE REVENUE IS DISMISSED. 10. IN THE RESULT, APPEAL BY THE REVENUE IS DISMIS SED. ORDER PRONOUNCED IN THE COURT ON 6.4.2016. SD/- SD/- [WASEEM AHMED] [ N.V.VASUDEVAN ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 6.4.2016. [RG PS] COPY OF THE ORDER FORWARDED TO: 1 M/S. STEWART HOLL (INDIA) LTD., 14, GURUSADAY ROA D, KOLKATA-700019.. 2. D.C.I.T., CIRCLE-4, KOLKATA.. 3. CIT(A)- IV, KOLKATA 4. CIT-II, KOLKATA . 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER ASSTT.REGISTRAR, ITAT, KOLKATA BENCHES