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

ITA 2105/KOL/2010

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9437 (ITAT-KOLKATA)
• Duration Of Justice: 6 year(s) 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2017
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 05-09-2016
• Assessment Year: 2004-2005
• Appeal Filed On: 23-11-2010
• Court: TRIBUNAL
• Department Lawyers: N O N E
• Assessee Lawyers: MA NISH SHETH; PRASUN K R MAITY ARS
• Keywords: Depreciation; Transfer pricing; International transaction; Notional interest
• Section: 143(3); 80HHC; 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA [BEFORE SHRI N. V. VASUDEVAN, JM & SHRI M. BALAGAN ESH, AM] I.T.A NO.511/KOL/2010 ASSESSMENT YEAR: 2004-05 TATA GLOBAL BEVERAGES LTD VS. DEPUTY COMMISSIO NER OF INCOME-TAX, (FORMERLY KNOWN AS TATA TEA LTD.) CIRCLE-4, KOLKAT A. (PAN:AABCT0602K) (APPELLANT ) ( RESPONDENT ) & I.T.A NO.2105/KOL/2010 ASSESSMENT YEAR: 2004-05 DEPUTY COMMISSIONER OF INCOME-TAX, VS. TATA GLOBAL BEVERAGES LTD CIRCLE-4, KOLKATA. (FORMERLY KNOWN AS TATA TEA LTD.) ( APPELLANT ) ( RESPONDENT ) DATE OF HEARING: 21.11.2016 DATE OF PRONOUNCEMENT: 03.02.2017 FOR THE ASSESSEE: S/SHRI MANISH SHETH & PRASUN K R. MAITY, ARS FOR THE REVENUE : N O N E ORDER PER SHRI M. BALAGANESH, AM: THESE CROSS APPEALS BY ASSESSEE AND REVENUE ARE ARI SING OUT OF ORDER OF CIT(A)- IV, KOLKATA VIDE APPEAL NO. 146/CIT(A)-IV/06-07 DAT ED 20.11.2009. ASSESSMENT WAS FRAMED BY ACIT, CIRCLE-4, KOLKATA U/S. 143(3) OF TH E INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2004- 05 VIDE HIS ORDER DATED 29.12.2006. SINCE THESE ARE CROSS APPEALS AND TAKEN UP TOGETHER , WE DISPOSE OF THE SAME BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. ITA NO. 511/KOL/2010 ASST YEAR 2004-05 ASSESSEE APPEAL 2. THE FIRST ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD CITA IS JUSTIFIED IN UPHOLDING THE ADDITION MADE IN THE SUM OF RS. 1,18,71,000/- TOWARDS NOTIONAL INTEREST ON ADVANCES MADE TO M/S HALDIA PE TROCHEMICALS LTD (HPL) IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 2.1. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSE SSEE ALONG WITH OTHER TATA GROUP COMPANIES WERE THE PROMOTERS OF M/S HALDIA PETROCHE MICALS LTD (HPL). THE LD AO OBSERVED THAT THE ASSESSEE ON ONE HAND HAD BEEN SUF FERING INTEREST LIABILITY ON THE LOANS BORROWED BY IT BUT ON THE OTHER HAND HAD MADE INTER EST FREE ADVANCES TO HPL AND 2 ITA NOS.511/K/2010 & 2105/K/2010 TATA TEA LTD. (NEW NAME TATA GLOBAL BEVERAGE LTD.), AY 2004-05 ACCORDINGLY SOUGHT TO TAX THE NOTIONAL INTEREST INC OME @ 12% ON THE AMOUNTS ADVANCED IN THE SUM OF RS. 989.21 LAKHS. THE ASSESSEE REP LIED THAT ADVANCE WAS GIVEN TO HPL DURING THE PERIOD THAT ASSESSEE WAS PROMOTER OF HPL PRIOR TO COMMENCEMENT OF PRODUCTION FACILITIES, ALONG WITH OTHER JOINT VENTU RE PARTNERS. THE ADVANCE PROVIDED TO HPL WAS AGREED TO BE ADJUSTED AGAINST THE EQUITY CO NTRIBUTION AND THEREFORE IT WAS AGREED THAT NO INTEREST WAS TO BE CHARGED ON SUCH A DVANCE. SUBSEQUENTLY THE ASSESSEE HAD DECIDED TO WITHDRAW FROM FURTHER PARTICIPATION IN THE PROJECT. HOWEVER, AS HPL WAS NOT IN A POSITION TO REPAY THE MONEY ADVANCED, IT W AS AGREED THAT UNTIL COMMENCEMENT OF COMMERCIAL PRODUCTION, HPL WOULD NOT BE COMPELLE D TO MAKE ANY REFUND NOR WOULD PAY ANY INTEREST ON SUCH ADVANCES. THE ASSESSEE ST ATED THAT UNDER THE INCOME TAX ACT, THERE IS NO CONCEPT OF SUBJECTING TO TAX ANY NOTION AL INCOME WHICH HAD NOT ACCRUED TO THE ASSESSEE, IN SUPPORT OF THIS PROPOSITION, PLACE D RELIANCE ON THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF CIT VS SHOORJI VA LLABHDAS & CO REPORTED IN (1962) 46 ITR 144 (SC) . THE ASSESSEE ALSO STATED THAT THE AMOUNT WAS ADV ANCED OUT OF ITS SURPLUS FUND OVER THE PERIOD FY 1989-90 TO 1993-94 AS DETAILED BELOW:- F. YEAR AMOUNT ADVANCED OPENING SHARE CAPITAL & RESERVE AMOUNT ADDED TO RESERVE DURING THE YEAR TOTAL SHARE CAPITAL & RESERVE RS./LAKHS 1989-90 1990-91 1991-92 1992-93 1993-94 3.96 422.07 410.33 265.62 87.23 1189.21 9588.18 12711.69 16276.65 19635.35 22824.02 3123.51 3564.96 3358.70 3188.67 3063.34 12711.69 16276.65 19635.35 22824.02 25887.42 ACCORDINGLY, IT WAS PLEADED THAT NO ADDITION TOWARD S NOTIONAL INTEREST NEED TO BE ADDED BACK. THE LD AO HOWEVER PROCEEDED TO BRING TO TAX A SUM OF RS. 118.71 LAKHS BEING 12% OF 989.21 LAKHS ON THE PRETEXT THAT SIMILAR ADD ITIONS MADE FOR FY 1999-2000 TO 2002-03 WERE CONFIRMED BY THE LD CITA IN FIRST APPE AL. 2.2. BEFORE THE LD CITA, THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LD AO AND APART FROM THAT, RELIED ON THE FOLLOWING DEC ISIONS IN SUPPORT OF ITS PROPOSITION :- (A) WOOLCOMBERS OF INDIA LTD VS CIT REPORTED IN (19 82) 134 ITR 219 (CAL) (B) RECKITT & COLMAN OF INDIA LTD VS CIT REPORTED I N (1982) 135 ITR 698 (CAL) (C ) INDIAN EXPLOSIVES LTD VS CIT REPORTED IN (1983 ) 147 ITR 392 (CAL) 3 ITA NOS.511/K/2010 & 2105/K/2010 TATA TEA LTD. (NEW NAME TATA GLOBAL BEVERAGE LTD.), AY 2004-05 THE LD CITA RELYING ON THE EARLIER ORDER OF HIS PRE DECESSOR FOR THE ASST YEAR 2000-01 CONFIRMED THE DISALLOWANCE OF NOTIONAL INTEREST AMO UNTING TO RS. 118.71 LAKHS. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US ON T HE FOLLOWING GROUNDS:- 1A. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED BOTH IN FACTS AND IN LAW, BY CONFIRMING THE SUM OF RS.1,18,71,000/-, ADDED BACK BY THE ASSESSING OFFICER PURELY BASED ON SURMISE AND CONJE CTURE, ALLEGING HYPOTHETICAL NOTIONAL INTEREST ON ADVANCES MADE TO HALDIA PETRO CHEMICAL LIMITED AS A CO-PROMOTER. 1B. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE THE LEARNED CIT (A) HAD FAILED TO APPRECIATE THE FACT THAT THE AMOUNT WAS ADVANCED (AS CO-PROMOTER) BY THE APPELLANT, OUT OF IT'S OWN FUNDS AND THEREBY FURTHER ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER, IGNORING THE SETTLED PRINCIPLES LAID DOWN BY THE JURISDICTIONAL HIGH COURT. 1C. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LEARNED CIT (APPEALS) HAD IGNORED TO CONSIDER THE SUBMISSION OF THE APPELLANT FILED DURING THE APPEAL HEARING AND WHILE MECHANICALLY FOLLOWING THE EARLIER ORDERS, HA D FAILED TO CONSIDER THAT THE LOANS APPEARING IN THE BOOKS OF THE APPELLANT AT THE TIME OF MAKING THE ADVANCES, WERE ALL PAID-OFF BEFORE THE BEGINNING OF THE PREVIOUS YEAR RELEVANT TO THE YEAR UNDER APPEAL. 2.3. THE LD AR ARGUED THAT THIS ISSUE IS COVERED B Y THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR T HE ASST YEAR 2006-07 IN ITA NO. 2006/KOL/2013 DATED 21.10.2016 WHEREIN THE ISSUE WA S SET ASIDE TO THE FILE OF THE LD AO AND PRAYED FOR THE SIMILAR DIRECTION FOR THIS YEAR ALSO. IN RESPONSE TO THIS, THE LD DR FAIRLY AGREED FOR THE SAME. 2.4. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND THAT THE ISSUE UNDER DISPUTE IS COVERED BY THE EARLIER ORDER OF THIS TRIBUNAL IN AS SESSEES OWN CASE AS STATED SUPRA WHEREIN THIS TRIBUNAL HAD REMANDED THE ISSUE BACK T O THE FILE OF THE LD AO TO DECIDE THIS ISSUE AFRESH IN ACCORDANCE WITH LAW. RESPECTFULLY FOLLOWING THE SAID DECISION, WE DEEM IT FIT AND APPROPRIATE TO SET ASIDE THIS ISSUE TO T HE FILE OF THE LD AO AND DECIDE THE SAME AFRESH IN ACCORDANCE WITH LAW. ACCORDINGLY, THE G ROUNDS 1(A) TO 1 (C ) RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 3. THE NEXT ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD CITA IS JUSTIFIED IN UPHOLDING THE DISALLOWANCE OF RS. 5,50 ,000/- U/S 40A(9) OF THE ACT ON ACCOUNT OF EXPENDITURE INCURRED TOWARDS EMPLOYEES R ECREATION CLUB IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3.1. THE BRIEF FACTS OF THIS ISSUE IS THAT THE LD AO OBSERVED THAT THE ASSESSEE HAD PAID A SUM OF RS. 5,50,000/- TO ITS EMPLOYEES RECREATION C LUB. THE LD AO SOUGHT TO DISALLOW 4 ITA NOS.511/K/2010 & 2105/K/2010 TATA TEA LTD. (NEW NAME TATA GLOBAL BEVERAGE LTD.), AY 2004-05 THE SAME IN THE ASSESSMENT FOR WHICH SHOW CAUSE NOT ICE WAS ISSUED TO THE ASSESSEE. IN RESPONSE TO THE SHOW CAUSE NOTICE, THE ASSESSEE REP LIED THAT A SUM OF RS. 5,50,000/- WAS SPENT TOWARDS EMPLOYEE WELFARE ACTIVITIES I.E ANNUA L SPORTS / EMPLOYEE HOLIDAY HOME ETC. THIS EXPENDITURE WAS ROUTED THROUGH EMPLOYEE RECREATION CLUB AND THE SAME ARE NOT IN THE NATURE OF ANY CONTRIBUTION OR TOWARDS SETTIN G UP OR FORMATION OF ANY TRUST, SOCIETY OR ANY AOP ETC AND HENCE DOES NOT FALL UNDER THE A MBIT OF DISALLOWANCE U/S 40A(9) OF THE ACT. THE LD AO HOWEVER PROCEEDED TO DISALLOW THE SAME U/S 40A(9) OF THE ACT. THIS ACTION OF THE LD AO WAS UPHELD BY THE LD CITA. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUND :- 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (A) ERRED IN HOLDING THAT THE REIMBURSEMENT OF EXPENSES OF APPEL LANT MADE TO ITS STAFF RECREATION CLUB IS NOT ALLOWABLE, BY WRONGLY INVOKING THE PROVISIONS I N TERMS OF SECTION 40A (9) ACT. 3.2. THE LD AR ARGUED THAT THIS ISSUE IS COVERED B Y THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR T HE ASST YEAR 2003-04 IN ITA NO. 89/KOL/2007 DATED 30.9.2009 IN FAVOUR OF THE ASSESS EE AND PRAYED FOR FOLLOWING THE SAME FOR THIS YEAR ALSO. IN RESPONSE TO THIS, THE LD DR FAIRLY AGREED FOR THE SAME. 3.3. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND THAT THE ISSUE UNDER DISPUTE IS COVERED BY THE EARLIER ORDER OF THIS TRIBUNAL IN AS SESSEES OWN CASE AS STATED SUPRA WHEREIN IT WAS HELD AS BELOW:- 15. AT THE TIME OF HEARING BEFORE US, THE LD. COU NSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE D ECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS BHARAT PETROLEUM CORPOR ATIONLTD 252 ITR 43 (BOM) WHEREIN IT HAS BEEN HELD THAT 40A(9) OF THE ACT IS NOT APPL ICABLE IN CASE THE ASSESSEE HAS REIMBURSED EXPENSES TO THE CLUB FORMED FOR THE BENE FIT OF THE EMPLOYEES. HE ALSO PLACED RELIANCE ON THE DECISION OF THIS TRIBUNAL IN THE CA SE OF DCIT VS CHLORIDE INDUSTRIES LTD REPORTED IN 76 ITD 1 (KOL). 16. ON THE OTHER HAND , THE LD DR RELIED ON THE ORD ERS OF THE LOWER AUTHORITIES. 17. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED TH E MATERIALS AVAILABLE ON RECORD AND THE CASE LAWS CITED BY THE LD. COUNSEL FOR THE ASSE SSEE. WE FIND THAT THE FACTS ARE NOT IN DISPUTE. WE, THEREFORE, FIND MERIT IN THE PLEA OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE TRIBUNAL, KOLKATA BENCH IN THE CASE DCIT VS CHLORID E INDUSTRIES LTD (SUPRA) HAS DELETED THE ADDITION BY OBSERVING AS UNDER: THE COMMISSIONER (APPEALS) HAD DELETED THE SAID AD DITION BY FOLLOWING THE TRIBUNALS ORDER IN THE CASE OF DCIT VS APE BELLISS INDIA LTD (IT APPEAL NOS. 527 TO 531 (CAL) OF 1989) . THE TRIBUNAL OBSERVED THAT SECTION 40A(9) IS NOT APPLICABLE BECAUSE THIS SECTION STANDS FOR ANY FUND S, INSTITUTIONS, WHERE THE ASSESSEE MADE THE SUBSCRIPTION FOR THE PURPOSE OF W ELFARE OF THE EMPLOYEES. THAT MEANS THAT THERE SHOULD BE A COMPLETE IDENTITY BETW EEN THE DONOR AND THE DONE. HERE STAFF RECREATION CLUB AND THE STAFF CLUB WERE A PART AND PARCEL OF THE 5 ITA NOS.511/K/2010 & 2105/K/2010 TATA TEA LTD. (NEW NAME TATA GLOBAL BEVERAGE LTD.), AY 2004-05 ORGANIZATION ITSELF AND THEY WERE GIVEN MONEY BY WA Y OF SUBSIDY, AN AGE OLD PRACTICE . IN VARIOUS GOVERNMENT DEPARTMENTS ALSO SUBSIDIES ARE GIVEN AS A MATTER OF COURSE FOR CARRYING ON WELFARE ACTIVITIES . SO FINALLY THE TRIBUNAL UPHELD THE ORDER OF THE COMMISSIONER (APPEALS) WHO HAD DELETED THE SAID ADDITION. BY RESPECTFULLY FOLLOWING THE EARLIER OR DER OF THE TRIBUNAL THERE WAS NO INFIRMITY WITH THE ORDER OF THE COMMISSIONER (APPEA LS) WHO HAD RIGHTLY DELETED THE SAID ADDITIONS PERTAINING TO THE STAFF WELFARE. IN THIS VIEW OF THE MATTER AND IN THE ABSENCE OF AN Y DISTINGUISHABLE MATERIAL BROUGHT ON RECORD BY THE REVENUE, WE RESPECTFULLY FOLLOWING TH E ORDER OF THE TRIBUNAL (CITED SUPRA) HOLD THAT THE DISALLOWANCE OF RS. 5,37,755/- IS NOT SUSTAINABLE IN LAW AND THEREFORE, THE SAME IS HEREBY DELETED. THE GROUND OF APPEAL OF TH E ASSESSEE IS, THEREFORE , ALLOWED.. RESPECTFULLY FOLLOWING THE SAME, WE DIRECT THE LD A O TO DELETE THE DISALLOWANCE MADE IN THE SUM OF RS. 5,50,000/- U/S 40(A)(9) OF THE ACT. ACCORDINGLY, THE GROUND NO. 2 RAISED BY THE ASSESSEE IS ALLOWED. 4. THE NEXT ISSUE TO BE DECIDED IN THIS APPEAL OF THE ASSESSEE IS AS TO WHETHER THE LD CITA IS JUSTIFIED IN UPHOLDING THE DISALLOWANCE OF DEDUCTION U/S 80HHC OF THE ACT ON TOTAL COMPANY AS AGAINST THE INDIVIDUAL PRODUCT WIS E CLAIMED BY THE ASSESSEE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 4.1. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASS ESSEE IS ENGAGED IN EXPORT OF BLACK TEA, INSTANT TEA, PACKET TEA AND SPICES ETC AND HAD CLAI MED DEDUCTION U/S 80HHC OF THE ACT IN RESPECT OF EACH PRODUCT SEPARATELY, AS AGAINST THE RELIEF GRANTED BY THE DEPARTMENT ON GLOBAL BASIS I.E AGGREGATING THE TRADING RESULTS OF ALL THE BUSINESSES. THE LD AO BY FOLLOWING THE PRINCIPLES LAID DOWN BY THE HONBLE S UPREME COURT IN THE CASE OF IPCA LABORATORY LTD VS DCIT REPORTED IN (2004) 266 ITR 5 21 (SC) HELD THAT WHILE COMPUTING THE BUSINESS PROFIT FOR THE PURPOSE OF SE CTION 80HHC OF THE ACT, ALL THE TRADING RESULTS OF DIFFERENT UNITS OF THE BUSINESS OF THE ASSESSEE ARE TO BE AGGREGATED AND DEDUCTION U/S 80HHC OF THE ACT WOULD BE ALLOWABLE O NLY WHEN THERE IS POSITIVE INCOME OF THE BUSINESS AFTER SUCH AGGREGATION. THE LD AO OBSERVED THAT OBVIOUSLY, WHETHER NET INCOME OF BUSINESS OF AN ASSESSEE IS POSITIVE OR NE GATIVE CANNOT BE DETERMINED UNLESS THE TRADING RESULTS OF ALL THE UNITS ARE AGGREGATED . ACCORDINGLY, THE LD AO DETERMINED THE DEDUCTION ELIGIBLE U/S 80HHC OF THE ACT AT RS. 2,27,79,937/-. THIS ACTION OF THE LD AO WAS UPHELD BY THE LD CITA. AGGRIEVED, THE ASSES SEE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS :- 3A THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT (A) ERRED IN HOLDING THAT THE DEDUCTION UNDER SECTION 80HHC OF THE ACT A LLOWABLE ON A GLOBAL BASIS, BY 6 ITA NOS.511/K/2010 & 2105/K/2010 TATA TEA LTD. (NEW NAME TATA GLOBAL BEVERAGE LTD.), AY 2004-05 WRONGLY RELYING ON THE JUDGMENT OF THE HON'BLE SUPR EME COURT (266 ITR 521), WHICH HAS NO RELEVANCE IN THE PRESENT CONTEXT. 3B THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE LD CIT(A) SHOULD HAVE HELD THAT THE DEDUCTIONS U/S 80HHC MUST HAVE BEEN COMPUTED BA SED ON INDIVIDUAL PRODUCT BASIS AS CLAIMED BY THE APPELLANT. 4.2. THE LD AR FAIRLY AGREED THAT THIS ISSUE IS C OVERED AGAINST ASSESSEE BY THE DECISION OF THE HONBLE APEX COURT RELIED UPON BY THE LD AO SUPRA. 4.3. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND THAT AS AGREED BY THE LD AR THAT THIS ISSUE IS COVERED AGAINST THE ASSESSEE BY THE D ECISION OF THE HONBLE APEX COURT IN THE CASE OF IPCA LABORATORY LTD VS DCIT SUPRA AND A CCORDINGLY DISMISS THE GROUNDS 3(A) AND 3 (B) RAISED BY THE ASSESSEE. 5. THE LAST ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD CITA IS JUSTIFIED IN UPHOLDING THE ADJUSTMENT MADE BY THE LD TPO / LD AO TO THE ARMS LENGTH PRICE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 5.1. THE BRIEF FACTS OF THIS ISSUE IS THAT THE LD AO OBSERVED THAT THE ASSESSEE HAD ENTERED INTO CERTAIN INTERNATIONAL TRANSACTIONS WIT H ITS ASSOCIATED ENTERPRISES (AE) AND THEREFORE THE CASE WAS REFERRED TO LD TPO FOR DETER MINATION OF ARMS LENGTH PRICE. THE ASSESSEE IS A MULTINATIONAL NON-ALCOHOLIC BEVERAGES COMPANY AND IT IS CLAIMED TO BE THE WORLDS SECOND LARGEST MANUFACTURER AND DISTRIBUTOR OF TEA WITH A TURNOVER OF RS. 775.82 CRORES IN FINANCIAL YEAR 2003-04. THE TRANSACTIONS OF THE ASSESSEE WITH REGARD TO EXPORT OF TEA WAS PART OF THE INTERNATIONAL TRANSACTIONS E NTERED INTO BY THE ASSESSEE. THE TEA EXPORTED COMPRISED OF VARIOUS GRADES, EITHER MANUFA CTURED FROM ITS OWN GARDENS OR TEAS BOUGHT IN AUCTION MARKET THROUGH BIDDING PROCESS OR TEAS SOURCED FROM THIRD PARTIES UNDER PRE-EXISTING CONTRACTS. THE INTERNATIONAL TRA NSACTIONS ENTERED INTO BY THE ASSESSEE PERTAIN TO THE PURCHASE OF TEA FROM AUCTION MARKETS THROUGH BIDDING PROCESS AND SALE TO ITS AE TETLEY, UK (HEREINAFTER REFERRED TO AS AU CTION SALES) AND THE PURCHASE OF TEA FROM THIRD PARTY PLAYERS DIRECTLY UNDER PRE-EXISTIN G CONTRACTS AND SALE TO TETLEY, UK (HEREINAFTER REFERRED TO AS PRIVATE SALES). 5.2. THE ASSESSEE IN ITS TRANSFER PRICING STUDY SE LECTED ITSELF AS THE TESTED PARTY, SELECTED THE TRANSACTIONAL NET MARGIN METHOD (TNMM) AND COMPARED ITS OVERALL 7 ITA NOS.511/K/2010 & 2105/K/2010 TATA TEA LTD. (NEW NAME TATA GLOBAL BEVERAGE LTD.), AY 2004-05 PROFITABILITY (OPERATING PROFIT / SALES AT 8.18%) W ITH THAT OF COMPARABLE COMPANIES (UNADJUSTED OPERATING PROFIT / SALES AT 2.4% AND WO RKING CAPITAL ADJUSTED OPERATING PROFIT / SALES AT 1.84 % ) AND JUSTIFIED THE ARMS LENGTH NATURE OF TRANSACTIONS. FURTHER IT ALSO CARRIED OUT A SEGMENTAL ANALYSIS WHERE THE ASSESSEE COMPARED THE SEGMENTAL MARGINS FROM SALES TO AES (OP / SALES AT 1.53%) WIT H THAT OF THE COMPARABLE COMPANIES (OP / SALES AT 1.07%). WITH REGARD TO THE METHODO LOGY ADOPTED BY THE LD TPO IN THE PROCEEDINGS U/S 92CA OF THE ACT, WHEREIN HE HAD PRO POSED TO COMBINE THE AUCTION AND PRIVATE SALES WITH AE TO COMPARE THE MARGINS IN THI S SEGMENT WITH THE MARGINS OF THE AUCTION SUB-SEGMENT OF THE NON AE SEGMENT, THE ASSE SSEE REPLIED THAT THE SAID COMPARISON WOULD NOT BE APPROPRIATE GIVEN THE FACT THAT THERE IS HUGE DIFFERENCE IN THE NATURE OF BUSINESS AND THE FUNCTIONS PERFORMED IN R ELATION TO CARRYING OUT OF SUCH BUSINESS IN THE AUCTION AND PRIVATE SALES SEGMENT. IT WAS EXPLAINED THAT THE AUCTION BUSINESS OF THE ASSESSEE WAS IN THE NATURE OF SPOT CONTRACT WHEN THE PURCHASE WAS MADE AND IN THE NATURE OF A FORWARD CONTRACT WHEN THE SA LE WAS EFFECTED INTO. THE ASSESSEE TRIED TO EXPLAIN THE FLOW OF TRANSACTIONS UNDER AUC TION SUB-SEGMENT AS BELOW:- (A) THE ASSESSEE SENDS A BROAD BRUSH STATEMENT ALON G WITH SAMPLES TO ITS AES FOR APPROVAL. (B) THE LIST OF TEAS IN THE AUCTION MARKET ARE FORW ARDED TO THE AES. (C ) THE OFFER LIST IS RETURNED BACK BY THE AES WIT H AN APPROVAL FOR THE TEAS AND THE PRICE NEGOTIATED WITH THE AE. (D) THE ASSESSEE HAS A PRICE RANGE WITHIN WHICH IT HAS TO SELL TO THE AE. (E) THE ASSESSEE WOULD PUT INTO APPLICATION ITS PRO CURING SKILLS AND WEIGHTAGE IN COMMANDS THE MARKET TO PROCURE THE TEAS AT THE LOWE ST COST AND SELL AT THE PRICE NEGOTIATED. 5.2.1. THE ASSESSEE EXPLAINED THAT IN THE ABOVE SEQ UENCE OF TRANSACTIONS IT HAD PERFORMED THE FUNCTIONS OF A TRADER. IN THE COURSE OF ACTING IN CAPACITY OF A TRADER, IT HAD DISCHARGED FUNCTIONS IN RELATION TO IT AND ALSO BEA RS THE RISK IN RELATION TO IT. THIS IS PROVEN BY THE FACT THAT THE PRICE RISK IN RELATION TO THE SALE TO ITS AES AND AS WELL AS THE PRICE RISK IN RELATION TO THE COST OF PURCHASE FROM THE THIRD PARTY LIES WITH THE ASSESSEE. 5.2.2. WHEREAS, IN THE PRIVATE BUSINESS , IT IS ON LY IN THE NATURE OF A FACILITATOR ENTERING INTO FORWARD CONTRACTS AS STIPULATED BY THE ASSESSE E, WHETHER IT IS THE SALE OR THE PURCHASE 8 ITA NOS.511/K/2010 & 2105/K/2010 TATA TEA LTD. (NEW NAME TATA GLOBAL BEVERAGE LTD.), AY 2004-05 OF TEA. THE ASSESSEE ENTERS INTO A FORWARD SALE C ONTRACT WITH ITS AE ONCE THERE IS A BACK TO BACK FORWARD CONTRACT WITH A THIRD PARTY, DECIDE D BY THE AE FOR SUPPLYING THE TEA AT A FUTURE DATE AT A FIXED PRICE TO THE ASSESSEE. THE PRICE NEGOTIATIONS AND THE QUALITY OF TEA FOR THE AE IS DECIDED BY THE AE. THE ASSESSEE MERE LY ACTS IN CAPACITY OF A FACILITATOR, PASSING THE INFORMATION BETWEEN THE AE AND THE THIR D PARTY SUPPLIER, THE SAMPLE OF TEAS GIVEN BY THE SUPPLIER AND THE CONFIRMATION NOTES TO THE THIRD PARTY AND IS IN NO WAY SIGNIFICANTLY INSTRUMENTAL IN DECIDING THE PRICE OF THE TEA AT WHICH IT WOULD BE PROCURED. ALL THE COSTS ARE CONTROLLED BY THE AE WITH NO PLAC E FOR LEVERAGING BY THE ASSESSEE TO MAKE EXTRA PROFITS OR LOSSES. THERE COULD BE MINOR VARIATION IN THE PROFITS DUE TO THE VARIATION IN THE PRE-FIXED TRANSPORTATION COSTS OR FREIGHT COSTS OR ANY FOREIGN EXCHANGE FLUCTUATION, BUT NOT ON ACCOUNT OF THE PRICE OF TEA . THUS THE ASSESSEE BEARING SUCH LIMITED RISKS AND PERFORMING FUNCTIONS OF A FACILITATOR, IT WOULD NOT BE APPROPRIATE TO COMPARE ITS MARGINS TO THAT OF DISTRIBUTOR. ACCORDINGLY THE A SSESSEE SUBMITTED THAT THE FUNCTIONS PERFORMED, RISKS ASSUMED, CHARACTERIZATION OF THE T RANSACTIONS BEING ENTERED INTO ALONG THE VARYING NATURE OF PRICE RISKS ELEMENT IN EACH S EGMENT COULD NOT BE COMPARED WITH. 5.2.3. THE ASSESSEE WAS SHOW CAUSED AS TO WHY THE M ARGIN FOR AUCTION PURCHASES WITH NON AE SHOULD ALSO NOT BE USED FOR BENCHMARKING FOR AUCTION PURCHASES AS WELL AS THIRD PARTY PURCHASES WITH AE. THE ASSESSEE OBJECTED TO THE APPROACH OF THE LD TPO IN COMBINING THE AUCTION PURCHASES WITH AE (I.E AUCTIO N BUSINESS) AND THE THIRD PARTY PURCHASES OF THE ASSESSEE WITH AE (I.E PRIVATE BUSI NESS) AND COMPARING THE COMBINED MARGINS (GP / DIRECT COSTS) WITH THE SAME MARGINS O F AUCTION PURCHASES WITH THIRD PARTIES BY STATING THAT THE NATURE OF FUNCTIONS PER FORMED IN AUCTION BUSINESS AND IN PRIVATE BUSINESS ARE TOTALLY DISTINCT AND SEPARATE AND EVEN THE RISKS ASSUMED IN EACH CATEGORY ARE DISTINCT. NOT SATISFIED WITH THE REPL IES OF THE ASSESSEE, THE LD TPO PASSED AN ORDER DATED 26.12.2006 U/S 92CA(3) OF THE ACT RECOM PUTING THE ALP OF THE ASSESSEES INTERNATIONAL TRANSACTIONS BY MAKING AN ADJUSTMENT OF RS. 17,68,000/- WAS MADE AND WHICH WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE BY THE LD AO. 5.3. BEFORE THE LD CITA, THE ASSESSEE REITERATED T HE SUBMISSIONS MADE BEFORE THE LD TPO / LD AO. THE LD CITA HELD THAT THE TWO BUSINES SES I.E AUCTION AND PRIVATE BUSINESS ARE SIMILAR AND ACCORDINGLY SUSTAINED THE TP ADJUSTMENT MADE BY THE LD TPO. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US ON T HE FOLLOWING GROUNDS:- 9 ITA NOS.511/K/2010 & 2105/K/2010 TATA TEA LTD. (NEW NAME TATA GLOBAL BEVERAGE LTD.), AY 2004-05 4A. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE CIT(A) ERRED IN CONFIRMING DISALLOWANCE U/S 92 OF THE ACT. 4B. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE CIT(A) HAD ERRED IN NOT CONSIDERING THE 5% TOLERANCE BENEFIT AS ALLOWED UND ER THE PROVISO TO SECTION 92C(2) OF THE ACT. 5.4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERU SED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THE ASSESSEE IS A WIDELY HELD DOMESTIC COMPANY ENGAGED IN THE BUSINESS OF INTER ALIA BLENDING AND PACKAGING TEA F OR SALE IN THE DOMESTIC AND EXPORT MARKETS AND IN MANUFACTURING AND EXPORTING INSTANT TEA. THE ASSESSEE UNDERTOOK INTERNATIONAL TRANSACTIONS WITH ITS AE WHICH WERE D ULY LISTED IN FORM 3CEB REPORT FILED ALONG WITH THE RETURN OF INCOME. DURING THE COURS E OF LD TPO PROCEEDINGS, THE ASSESSEE WAS ASKED TO SUBMIT THE SEGREGATION OF TRANSACTIONS SHOWING SEGMENTAL RESULTS OF THE MARGIN ON TRANSACTIONS WITH AE AND MARGIN ON TRANSA CTIONS WITH NON AE WHICH WERE DULY SUBMITTED BY THE ASSESSEE. THE ASSESSEE WAS S HOW CAUSED AS TO WHY THE MARGIN FOR AUCTION PURCHASES WITH NON AE SHOULD ALSO NOT BE US ED FOR BENCHMARKING FOR AUCTION PURCHASES AS WELL AS THIRD PARTY PURCHASES WITH AE. THE REPLY IN THIS REGARD WAS FILED BY THE ASSESSEE VIDE SUBMISSIONS DATED 22.11.2006. THE LD TPO PASSED AN ORDER DATED 26.12.2006 U/S 92CA(3) OF THE ACT RECOMPUTING THE A LP OF THE ASSESSEES INTERNATIONAL TRANSACTIONS BY MAKING AN ADJUSTMENT OF RS. 17,68,0 00/- WAS MADE AND WHICH WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE BY THE LD AO. THE ASSESSEE OBJECTED TO THE APPROACH OF THE LD TPO IN COMBINING THE AUCTION PUR CHASES WITH AE (I.E AUCTION BUSINESS) AND THE THIRD PARTY PURCHASES OF THE ASSE SSEE WITH AE (I.E PRIVATE BUSINESS) AND COMPARING THE COMBINED MARGINS (GP / DIRECT COS TS) WITH THE SAME MARGINS OF AUCTION PURCHASES WITH THIRD PARTIES, IGNORING THE FACT THAT THE NATURE OF FUNCTIONS PERFORMED BY THE ASSESSEE IN RELATION TO AUCTION AN D PRIVATE BUSINESS. 5.4.1. THE LD AR ALSO MADE HIS SUBMISSIONS IN DETAI L AND ALSO PRESENTED THE FOLLOWING CHART EXPLAINING THE VARIOUS PARAMETERS VIS A VIS A UCTION AND PRIVATE BUSINESS AND DISTINCT FEATURES THEREON :- PARTICULARS AUCTION SALES PRIVATE SALES SALE IS A FORWARD CONTRACT PURCHASE IS A FORWARD CONTRACT X BACK TO BACK CONTRACTS WITH APPELLANT AND THIRD PAR TY X FIXED ARBITRAGE X PRE-DETERMINED PURCHASE PRICE X 10 ITA NOS.511/K/2010 & 2105/K/2010 TATA TEA LTD. (NEW NAME TATA GLOBAL BEVERAGE LTD.), AY 2004-05 PURCHASE IS A SPOT CONTRACT X PURCHASE EFFECTED THROUGH OPEN BIDDING PROCESS X PARTICULARS AUCTION SALES PRIVATE SALES PRICE RISK BORNE BY APPELLANT X APPLICATION OF PROCURING SKILLS X 5.4.2. WE FIND THAT IN THE AUCTION BUSINESS, IT IS ONLY IN THE NATURE OF A SPOT CONTRACT WHEN THE PURCHASE IS MADE AND IN THE NATURE OF A FO RWARD CONTRACT WHEN THE SALE IS EFFECTED INTO. WE FIND THAT IN THIS BUSINESS, THE ASSESSEE HAD DISCHARGED FUNCTIONS IN RELATION TO AUCTION BUSINESS AND ALSO BEARS THE RIS K IN RELATION TO IT. THE PRICE RISK IN RELATION TO THE SALE TO ITS AE AND AS WELL AS THE P RICE RISK IN RELATION TO THE COST OF PURCHASE FROM THE THIRD PARTY LIES WITH THE ASSESSE E. THUS THE ASSESSEE HAD PERFORMED THE FUNCTIONS ONLY OF A TRADER AS COULD BE EVIDENT FROM THE SEQUENCE OF TRANSACTIONS ENUMERATED SUPRA. WE FIND THAT IN THIS AUCTION BUSI NESS, A PRICE RANGE OF TEA IS NEGOTIATED WITH THE AE INSTEAD OF A SINGLE PRICE. THE ASSESSEE THEN EXPLORES THE AUCTION MARKET AND PUT INTO APPLICATION ITS PROCURING SKILL S SO AS TO OBTAIN TEAS AT A COST WHICH IT CAN SELL WITHIN THE PRICE RANGE NEGOTIATED AND MAKE PROFITS THEREON. THE ASSESSEE ENTERS INTO FORWARD CONTRACT WHILE SELLING TEAS BUT ENTER S INTO SPOT CONTRACT WHILE PURCHASING, HENCE , BEARING PRICE RISK FOR THE COST OF PURCHASE . 5.4.3. WE ARE IN AGREEMENT WITH THE ARGUMENTS ADVAN CED BY THE LD AR THAT THE PRIVATE BUSINESS OF THE ASSESSEE IS ONLY IN THE NATURE OF A FACILITATOR WHEREIN THE ASSESSEE ENTERS INTO A FORWARD SALE CONTRACT WITH ITS AE ONCE THERE IS BACK TO BACK FORWARD CONTRACT WITH A THIRD PARTY, DECIDED BY THE AE FOR SUPPLYING THE TEA AT A FUTURE DATE AT A FIXED PRICE TO THE ASSESSEE, MORESO, WHEN THE PRICE NEGOTIATIONS A ND THE QUALITY OF TEA FOR THE AE ARE DECIDED UPON BY THE AE. HENCE, IT COULD BE SAFELY CONCLUDED THAT THE ASSESSEE HAD MERELY ACTED AS A FACILITATOR PASSING THE INFORMATI ON BETWEEN THE AE AND THE THIRD PARTY SUPPLIER, THE SAMPLE OF TEA GIVEN BY THE SUPPLIER A ND THE CONFIRMATION NOTES TO THE THIRD PARTY. THE ASSESSEE IS NOT INSTRUMENTAL IN DECIDIN G THE PRICE OF THE TEA AT WHICH IT WOULD BE PROCURED. ALL THE COSTS ARE CONTROLLED BY THE AE AND NO OPPORTUNITY FOR THE ASSESSEE FOR LEVERAGING BY THE ASSESSEE TO MAKE EXTRA PROFIT S IN THE ENTIRE SET OF TRANSACTIONS. THE MINOR VARIATION IN THE PROFITS IS CONTRIBUTED BY TH E VARIATION IN THE PRE-FIXED TRANSPORTATION COSTS OR ANY FOREIGN EXCHANGE FLUCTU ATION AND NOT ON ACCOUNT OF THE PRICE OF THE TEA. HENCE THE ASSESSEE IS BEARING VERY LI MITED RISKS BY PERFORMING FUNCTIONS AS A 11 ITA NOS.511/K/2010 & 2105/K/2010 TATA TEA LTD. (NEW NAME TATA GLOBAL BEVERAGE LTD.), AY 2004-05 FACILITATOR. IN THIS SCENARIO, AS RIGHTLY ARGUED B Y THE LD AR IT WOULD NOT BE APPROPRIATE TO COMPARE ITS MARGINS TO THAT OF DISTRIBUTOR. 5.4.4. IN VIEW OF THE AFORESAID SPECIFIC FUNCTIONS PERFORMED IN EACH BUSINESS (I.E AUCTION AND PRIVATE BUSINESS) , WE HOLD THAT BOTH A UCTION AND PRIVATE BUSINESSES ARE DIFFERENT IN TERMS OF THE FUNCTIONS PERFORMED, RISK S ASSUMED AND HENCE SHOULD NOT BE COMBINED FOR THE PURPOSE OF COMPARISON. THE AUCTIO N BUSINESS OF THE ASSESSEE IS COMPARABLE WITH AUCTION PURCHASES WITH THIRD PARTIE S. THE SEGMENTAL RESULTS SHOW THAT THE GP / DIRECT COSTS OF THE ASSESSEE FROM AUCTION PURCHASES WITH THIRD PARTIES IS 34.03% WHICH IS HIGHER THAN GP / DIRECT COSTS IN THE AUCTI ON BUSINESS BEING 28.28%. 5.4.5. IN VIEW OF OUR AFORESAID FINDINGS, THE ASSES SEE GETS THE RELIEF ON THIS GROUND ITSELF AND WE HOLD THAT THE PRICE CHARGED BY THE ASSESSEE ON THE INTERNATIONAL TRANSACTIONS COMPUTED ON THE BASIS OF SEGMENTAL RESULTS OF AUCTI ON AND PRIVATE BUSINESS IS AT ARMS LENGTH AND NO ADJUSTMENT NEED TO BE MADE THEREON. IN VIEW OF THE ABOVE CONCLUSION, THE OTHER CONTENTIONS PUT FORTH ON BEHALF OF THE AS SESSEE DO NOT REQUIRE ANY CONSIDERATION. ACCORDINGLY THE GROUND NO. 4 A RAI SED BY THE ASSESSEE IS ALLOWED AND GROUND NO. 4 B IS DISMISSED AS INFRUCTUOUS AS STATE D ABOVE. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN IT A NO. 511/KOL/2010 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 2105/KOL/2010 ASST YEAR 2004-05 REVENU E APPEAL THIS APPEAL OF REVENUE IS DELAYED BY 43 DAYS AND C ONDONATION PETITION HAS BEEN FILED BY THE REVENUE. AFTER PERUSING THE CONDONATIO N PETITION AND THE CONCESSION GIVEN BY THE LD. AR, WE CONDONE THE DELAY AND ADMIT THE A PPEAL FOR HEARING. 7. THE FIRST ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD CITA IS JUSTIFIED IN DELETING THE DISALLOWANCE OF EXPENDITU RE INCURRED IN THE SUM OF RS. 3,69,88,000/- ON PAYMENT OF CESS ON GREEN LEAF FROM COMPOSITE INCOME IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 12 ITA NOS.511/K/2010 & 2105/K/2010 TATA TEA LTD. (NEW NAME TATA GLOBAL BEVERAGE LTD.), AY 2004-05 7.1. THE BRIEF FACTS OF THIS ISSUE IS THAT THE LD AO OBSERVED THAT THE ASSESSEE HAD DEBITED A SUM OF RS. 369.88 LAKHS UNDER THE HEAD C ESS ON GREEN LEAF WHICH WERE PAID TO GOVERNMENTS OF ASSAM AND WEST BENGAL. THE LD AO PLACED RELIANCE ON THE DECISION OF THE HONBLE GAUHATI HIGH COURT IN THE CASE OF JO RHAT GROUP LTD VS AGRICULTURAL ITO REPORTED IN 226 ITR 622 (GAU) WHEREIN IT WAS HELD T HAT THE CESS ON GREEN LEAF IS DEDUCTIBLE FROM THE AGRICULTURAL INCOME ONLY AND NO T FROM THE COMPOSITE INCOME. THE ASSESSEE PLACED RELIANCE ON THE DECISION OF THE HON BLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS A.F.T. INDUSTRIES LTD REPORTED IN (2004) 270 ITR 167 (CAL) WHEREIN IT WAS HELD THAT THE SAME WAS TO BE FULLY ALLOWED FROM THE COMPOSITE INCOME. AS THE APPEAL AGAINST THE ORDER OF THE HONBLE CALCUTTA HIGH COUR T WAS PREFERRED BEFORE THE HONBLE APEX COURT BY THE REVENUE, THE LD AO IN ORDER TO KE EP THE MATTER ALIVE THOUGHT IT FIT TO MAKE THE DISALLOWANCE AND ACCORDINGLY MADE THE SAME . THE LD CITA HOWEVER FOLLOWED THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COU RT RELIED UPON BY THE ASSESSEE SUPRA AND DELETED THE DISALLOWANCE. AGGRIEVED, THE REVEN UE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUND :- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E, LD. CIT(A), KOLKATA HAS ERRED IN LAW IN DELETING THE ADDITION OF RS.3,69,88,000/- ON ACC OUNT OF CESS ON GREEN LEAF WITHOUT CONSIDERING THE FACT THAT EXPENSES ON ACCOUNT OF CE SS ON GREEN LEAF IS RELATED TO 100% AGRICULTURAL OPERATION AND SLP IS PENDING BEFORE TH E HON'BLE SUPREME COURT AGAINST THE DECISION OF CALCUTTA HIGH COURT IN THE CASE OF AFT INDUSTRIES LTD. -VS- CIT (270 ITR 167) IN THE LIGHT OF WHICH LD. CIT(A) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. 7.2. THE LD DR FAIRLY AGREED THAT THE ISSUE DECID ED BY THE ORDER OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF AFT INDUSTRIES L TD SUPRA HAVE BEEN APPROVED BY THE HONBLE APEX COURT IN THE CASE OF M/S APEEJAY TEA C O LTD IN CIVIL APPEAL NO. 1105 OF 2006 AND ACCORDINGLY AGREED WITH THE ORDER OF THE L D CITA IN THIS REGARD. 7.3. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION RELIED UPON SUPRA IN FAVOUR OF THE ASSESSEE AND ESSENCE OF THE DECISION IS ALREADY DISCUSSED IN THE FACTS ABOVE. RESPECTFULLY FOLLOWING THE SAME, WE DISMISS THE GROUND NO.1 RAISED BY THE REVENUE. 8. THE LAST ISSUE TO BE DECIDED IN THIS APPEAL OF THE REVENUE IS AS TO WHETHER THE LD CITA IS JUSTIFIED IN ALLOWING THE CLAIM OF DEPRECIA TION OF THE ASSESSEE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 13 ITA NOS.511/K/2010 & 2105/K/2010 TATA TEA LTD. (NEW NAME TATA GLOBAL BEVERAGE LTD.), AY 2004-05 8.1. THE BRIEF FACTS OF THIS ISSUE IS THAT THE LD AO OBSERVED THAT THE ASSESSEE CLAIMED DEPRECIATION ON WRITTEN DOWN VALUE (WDV) OF DEPRECI ABLE ASSETS USED IN ITS BUSINESS OF GROWING AND MANUFACTURING TEA AS PER THE PRINCIP LE LAID DOWN BY THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS SUMAN TEA & PLYWOO D INDUSTRIES PVT LTD REPORTED IN 204 ITR 719 (CAL). SINCE THIS ISSUE WAS AGITATED B Y THE REVENUE BEFORE THE HONBLE APEX COURT, IN ORDER TO KEEP THE MATTER ALIVE, THE LD AO DISTURBED THE CLAIM OF DEPRECIATION OF THE ASSESSEE. THE LD CITA GRANTED RELIEF TO THE ASSESSEE BY FOLLOWING THE ORDER OF HIS PREDECESSOR. AGGRIEVED, THE REVENUE I S IN APPEAL BEFORE US ON THE FOLLOWING GROUND :- 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E, LD. CIT(A), KOLKATA HAS ERRED IN LAW IN ALLOWING THE DEPRECIATION AS CLAIMED BY THE ASSE SSEE AS PER REVISED COMPUTATION. 8.2. THE LD DR FAIRLY AGREED THAT THE ISSUE UNDER DISPUTE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE CALCUTTA HI GH COURT SUPRA. IN RESPONSE TO THIS, THE LD AR STATED THE VIEW TAKEN BY THE HONBLE CALC UTTA HIGH COURT HAD BEEN APPROVED BY THE HONBLE APEX COURT IN THE CASE OF CIT VS DOO M DOOMA INDIA LTD REPORTED IN (2009) 310 ITR 392 (SC). 8.3. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND THAT THE IMPUGNED ISSUE UNDER DISPUTE IS SETTLED BY THE DECISIONS OF THE HONBLE CALCUTTA HIGH COURT AND HONBLE SUPREME COURT WHEREIN IT WAS HELD THAT FOR THE PURP OSE OF COMPUTING THE WDV OF DEPRECIABLE ASSETS USED IN TEA BUSINESS, ONLY 40% I NSTEAD OF 100% OF DEPRECIATION ALLOWABLE AT THE PRESCRIBED RATE SHOULD BE DEDUCTED . RESPECTFULLY FOLLOWING THE SAME, WE HOLD THAT THE ORDER OF THE LD CITA DOES NOT REQU IRE ANY INTERFERENCE. ACCORDINGLY, THE GROUND NO.2 RAISED BY THE REVENUE IS DISMISSED. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA NO. 2105/KOL/2010 IS DISMISSED AND APPEAL OF THE ASSESSEE IN ITA NO. 511/KOL/2010 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 10. ORDER IS PRONOUNCED IN THE OPEN COURT 03.02.201 7 SD/- SD/- (N. V. VASUDEVAN) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTAN T MEMBER DATED : 3 RD FEBRUARY, 2017 JD.(SR.P.S.) 14 ITA NOS.511/K/2010 & 2105/K/2010 TATA TEA LTD. (NEW NAME TATA GLOBAL BEVERAGE LTD.), AY 2004-05 COPY OF THE ORDER FORWARDED TO: 1 . ASSESSEE TATA TEA LTD. (NEW NAME TATA GLOBAL BEV ERAGES LTD.), 1, BISHOP LEFROY ROAD, KOLKATA-700 020. 2 REVENUE DCIT, CIRCLE-4, KOLKATA. 3 . THE CIT(A), KOLKATA 4. 5. ACIT , KOLKATA. DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .