DCIT, Circle - 4, Kolkata, Kolkata V. M/s. Tyroon Tea Co. Ltd., Kolkata

ITA 1938/KOL/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48245 (ITAT-KOLKATA)
• Duration Of Justice: 8 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-06-2011
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 23-06-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 13-10-2010
• Result in Favour of: Set Aside
• Court: TRIBUNAL
• Department Lawyers: M BHATTACHARYA
• Assessee Lawyers: P B MUKHERJEE; S P BAGADTHEY
• Keywords: Opportunity of being heard
• Section: 2

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL, BEN CH B, KOLKATA () BEFORE , , , , , SHRI MAHAVIR SINGH, JUDICIAL MEMBER. /AND . .. .!' !'!' !'. .. . , #$ SHRI C.D.RAO, ACCOUNTANT MEMBER % % % % / ITA NO . 1938/KOL/2010 &' ()/ ASSESSMENT YEAR : 2006-07 (+, / APPELLANT ) DCIT, CIRCLE-4, KOLKATA (PAN: AABCT 6058 R) - & - - VERSUS - . (./+,/ RESPONDENT ) M/S.TYROON TEA CO.LTD., KOLKATA +, 0 1 #/ FOR THE APPELLANT: SHRI M.BHATTACHARYA ./+, 0 1 #/ FOR THE RESPONDENT: SHRI S.P.BAGADTHEY & SHRI P.B.MUKHERJEE #2 / ORDER ( (( ( . .. .!' !'!' !'. .. . ) )) ), , , , #$ PER SHRI C.D.RAO, AM THIS APPEAL IS FILED BY THE REVENUE AGAINST THE OR DER DATED 10.03.2010 OF THE CIT(A)-IV, KOLKATA RELATING TO A.YR. 2006-07. 2. THE REVENUE HAS RAISED THE FOLLOWING GROU NDS OF APPEAL :- 1. THAT LD.CIT(A)-IV, KOLKATA HAS ERRED IN LAW AS WELL AS ON FACTS, IN DELETING THE ADDITION OF RS.15,08,251/- BEING CESS ON GREEN LEAF ONLY IN VIEW OF THE DECISION OF HONBLE CALCUTTA HIGH COURT, PRONOUNCED IN THE CASE OF AFT INDUSTRIES LTD. [270 ITR 167 (CAL.) 2004] WITHOUT C ONSIDERING THAT THE REVENUE HAS FILED SLP AGAINST THAT ORDER AND FINALITY IN TH IS CASE HAS NOT ARRIVED YET. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A)-IV, KOLKATA HAS ERRED IN LAW IN DELETING THE ADDITION OF RS.16,66,5 00/- ON ACCOUNT OF INTEREST ACCRUED RELYING ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS SHOORJI VALLABHADAS & CO. 46 ITR 144 (SC) WITHOUT C ONSIDERING THE PROVISION OF SEC.5 OF THE IT ACT, 1961. THE DELETION OF THIS ADDITION IS IN DIRECT CONTRAVENTION OF THE SAID SECTION. 2 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. THE FIRST ISSUE RAISED BY THE REVENUE RELATES TO DELETION OF ADDITION OF RS.15,08,251/- ON ACCOUNT OF CESS ON GREEN LEAF. 4. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE AO W HILE DOING THE SCRUTINY ASSESSMENT DISALLOWED AN AMOUNT OF RS.15,08,251/- ON ACCOUNT O F CESS ON GREEN LEAF BY OBSERVING AS UNDER :- THE ASSESSEE HAS DEBITED CESS ON GREEN LEAF IS AN EXPENDITURE RELATES TO 100% AGRICULTURAL OPERATION, IT IS NOT ALLOWABLE DEDUCTI ON FROM COMPOSITE INCOME. SINCE CESS IS NOT ALLOWABLE ACCORDINGLY RS.15,08,25 1/- IS DISALLOWED AND ADDED BACK WITH THE TOTAL INCOME. 4.1. ON APPEAL THE LD. CIT(A) DISALLOWED THE SAME B Y RESPECTFULLY FOLLOWING THE ORDER OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF AFT INDUSTRIES LTD. VS CIT (270 ITR 167) BY RESPECTFULLY FOLLOWING THE DECISIONS OF THE ITAT, KOLKATA FOR THE EARLIER YEARS. 5. THE LD. DR APPEARING ON BEHALF OF THE REVENUE RE LIED ON THE ORDER OF THE AO. ON THE OTHER HAND, THE LD.COUNSEL FOR THE ASSESSEE REL IED ON THE ORDERS OF THE LD. CIT(A). 6. AFTER HEARING THE RIVAL SUBMISSIONS AND O N CAREFUL PERUSAL OF THE MATERIALS AVAILABLE ON RECORD, KEEPING IN VIEW OF THE FACT TH AT THE ISSUE IS CONCLUDED BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CAS E OF CIT VS AFT INDUSTRIES LTD. 270 ITR 167 (CAL) WHERE THE AMOUNT PAID AS CESS WAS HEL D 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. WE MAY FURTHER MENTION THAT IDENTICAL ISSUE WAS THE SUBJECT MATTER OF APPEAL BEFORE THE TRIBUNAL IN THE CASE OF M/S.EMPIRE PLANT ATIONS (INDIA) LTD. AND THE TRIBUNAL VIDE ORDER DATED 28.2.2005 IN I.T.A.NO.1600 (KOL)/2 004 FOR A.Y. 2000-01 HAS ALLOWED THE CLAIM OF THE ASSESSEE. RESPECTFULLY FOLLOWING T HE DECISIONS OF THE TRIBUNAL WE DISMISS GROUND NO.1 OF THE REVENUE. 3 7. THE SECOND ISSUE IS RELATING TO DELETI ON OF ADDITION OF RS.16,66,500/- ON ACCOUNT OF ACCRUED INTEREST. 8. THE BRIEF FACTS OF THIS CASE ARE THAT T HE AO WHILE DOING THE SCRUTINY ASSESSMENT HAS DISALLOWED BY OBSERVING AS UNDER :- ON EXAMINATION OF DETAILS IT IS SEEN THAT THE SYST EM OF ACCOUNTING OF THE ASSESSEE IS MERCANTILE EXCEPT INTEREST ON LOANS, RECOVERABLE FROM CERTAIN PARTIES AGAINST WHOM SUITS HAVE BEEN FILED, HAS BEEN/OR TO BE ACCOU NTED FOR ON CASH BASIS. FROM THE SUBMISSION DETAILS IT IS SEEN TH AT THE ASSESSEE HAS NOT ACCOUNTED FOR INTEREST IN CASE OF KONTACK INDIA PVT. LTD. (AMOUNT OF LOAN OF RS.25,00,000) AND IN THE CASE OF DEVENDRA BAJORIA (AMOUNT OF LOAN OF RS. 1,19,00,000) THOUGH IN RESPECT OF THEM NO SUITS HAVE BEEN FILED THE ASSESSEE DID N OT SHOWN ANY INTEREST AS ACCRUED THOUGH IT IS NOT THE FACT THE SAID WAS INTEREST FRE E. THE A/R FILED ONE SUBMISSION CITING SOME J UDGEMENT OF HONBLE CALCUTTA HIGH COURT. THE A/R SUBMITTED THAT INTEREST IN RESP ECT OF TWO LOAN DEBTORS HAVE NOT BEEN PROVIDED FOR THE CURRENT YEAR ONLY BECAUSE THE DEBTORS WERE NOT PAYING INTEREST FOR LOAN PROVIDED BY THE COMPANY. RELIED O N JUDGEMENT IN THE CASE OF DC BAGRI BS. CIT (83 ITR 207) LD. A/R STATED THAT THE ISSUE HAS TO BE VIEWED IN THE CONTEXT OF COMMERCIAL AND BUSINESS REALITIES OF THE SITUATION. THE ACCRUAL OF THIS INCOME OR ITS RECEIPT, YET THE SUBSTANCE OF THE MAT TER IS THE INCOME. IF THE INCOME DOES REFLECT AT ALL, THERE CANNOT BE TAXED, EVEN TH OUGH IN BOOK KEEPING AN ENTRY IS MADE ABOUT A HYPOTHETICAL INCOME WHICH DOES NOT MAT ERIALIZED. I HAVE GONE THROUGH THE ASSESSMENT RECOR D OF THE ASSESSEE FOR LAST YEAR. AS PER SEC.5 OF I.T.ACT INCOME RECEIVED OR DEEMED TO B E RECEIVED OR INCOME ACCRUES OR DEEMED TO BE ACCRUED ARE TAXED. IN THE CASE OF T HE ASSESSEE INCOME IS TO BE ASSESSED ON ACCRUAL BASIS SINCE MERCANTILE. SINCE T HE LOAN IS INTEREST BEARING INTEREST IS ACCRUED, IT IS IMMATERIAL WHETHER INCOM E WAS CHARGED OR NOT BY THE ASSESSEE. FROM THE LAST YEARS AMOUNT IT REVEALED TH AT THE ASSESSEE DID NOT INCLUDE INTEREST ON RECEIPT BASIS SINCE THE SYSTEM OF ACCOU NTING IS MERCANTILE. THEREFORE, INTEREST ADDED ON RECEIPT BASIS WAS DELETED BY THE APPELLATE AUTHORITY. THEREFORE, THE SUBMISSION IS NOT CONSIDERE D FOR EXCLUSION FROM TOTAL INCOME AS FOR THE SAME ISSUE DIFFERENT TREATMENT IS NOT PO SSIBLE. ACCORDINGLY INTEREST AS SHOWN IN PARA 5 O F SCHEDULE 15 FOR RS.14,28,000 AND RS.2,38,500/- TOTAL TS.16,66,500/- IS ADDED WITH TO TAL INCOME. 8.1. ON APPEAL THE LD. CIT(A) HAS DELETED THE SAME BY TAKING INTO CONSIDERATION VARIOUS SUBMISSIONS AND THE RESOLUTION OF THE COMPA NY WHICH WAS NOT BEFORE THE AO. 8.2. AGGRIEVED BY THIS THE REVENUE IS IN A PPEAL BEFORE US. 9. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CAREFUL PERUSAL OF MATERIALS AVAILABLE ON RECORD, IT IS OBSERVED THAT THE ASSESSEE HAS FIL ED THE COPY OF RESOLUTION WHICH WAS PLACED AT PAGE 16 ONLY BEFORE THE LD. CIT(A) AND TH E LD. CIT(A) WITHOUT OBTAINING THE 4 REMAND REPORT HAS DELETED THE SAME BASED ON THE COP Y OF THE RESOLUTION SUBMITTED BEFORE HIM, WHICH IN OUR CONSIDERED OPINION IS IN VIOLATIO N OF RULE 46A OF IT RULES. THEREFORE, WE SET ASIDE THIS ISSUE TO THE FILE OF THE AO TO RE -CONSIDER THE SAME AND DECIDE AS PER LAW AFTER GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 10. IN THE RESULT THE APPEAL OF THE REVENUE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 23.06.2011. SD/- SD/- MAHAVIR SINGH, JUDICIAL MEMBER . .. .!' !'!' !'. .. . , ,, , #$ #$ #$ #$ , C.D.RAO, ACCOUNTANT MEMBER. ( (( ('$ '$ '$ '$) )) ) DATE: 23.06.2011 #2 0 .3 4#3(5- COPY OF THE ORDER FORWARDED TO: 1. M/S.TYROON TEA CO.LTD., 3, N.S.ROAD, KOLKATA-700071 . 2 THE D.C.I.T., CIRCLE-4, KOLKATA 3. THE CIT, 4. THE CIT(A)- IV, KOLKATA. 5. DR, KOLKATA BENCHES, KOLKATA /3 ./ TRUE COPY, #2&:/ BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES R.G.(.P.S.)