Rungamattee Tea & Industries Limited , Kolkata V. DCIT, Circle - 4(2) , Kolkata

ITA 2448/KOL/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 2406 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 3 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 20-02-2020
• Assessment Year: 2013-2014
• Appeal Filed On: 22-11-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RANU BISWA S CIT LD
• Assessee Lawyers: MRS NILIMA JOSHI FCA LD
• Keywords: Rule of consistency; Earning of tax free income; Rule 8D
• Section: 14A; 201; 13

Judgement Text

, C , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOLKATA ( . . , . . , ) [BEFORE SHRI A. T. VARKEY, JM & DR. A.L. SAINI, AM ] I.T.A. NO. 2448 /KOL/201 8 ASSESSMENT YEAR: 20 13 - 1 4 RUNGAMATEE TEA & INDUSTRIES LTD. PAN: AABCR1833Q VS. DEPUTY COMMISSIONER OF INCOME - TAX CIRCLE - 4(2), KOLKATA APPELLANT RESPONDENT FOR THE ASSESSEE MRS. NILIMA JOSHI, FCA, LD.AR FOR THE ASSESSEE SMT. RANUBISWAS, ADDL. CIT, LD.DR DATE OF HEARING 20.02.2020 DATE OF PRONOUNCEMENT 18 . 03 .20 20 ORDER PER SHRIA.T.VARKEY, JM : T H IS IS AN APPEAL PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A) - 2 , KOLKATA DATED 04 - 10 - 2018 FOR THE ASSESSMENT YEAR 2013 - 14. 2. FIRST GROUND OF ASSESSEES APPEAL IS AGAINST THE ACTION OF THE LD. CIT(A) IN CONFIRMING THE ADDITION OF RS. 18,527/ - DISALLOWED U/S. 14A OF THE INCOME - TAX ACT, 1961 ( IN SHORT, HEREINAFTER THE ACT) R EAD WITH RULE 8D OF THE INCOME - TAX RULES, 1962 ( IN SHORT, HEREINAFTER THE RULES ). IT IS NOTED THAT THE ASSESSEE HAD AN EXEMPT INCOME (DIVIDEND) OF RS. 2976/ - . IT WAS BROUGHT TO OUR NOTICE THAT SAID EXEMPT INCOME/DIVIDEND IS FROM THE SHARES HELD BY THE ASSESSEE , FOR WHICH THE ASSESSEE HAD INCURRED COS T OF RS. 4,715/ - . IT WAS BROUGHT TO OUR NOTICE THAT NO EXPENSES WERE INCURRED BY THE ASSESSEE FOR EARNING THE EXEMPT INCOME. THE AO WAS OF THE OPINION SINCE THE ASSESSEE HAD TAKEN CERTAIN LOANS, HE MADE DISALLOWANCE UNDER RULE 8D OF THE RULES . WE NOTE THAT THE LOAN EXPENSES WERE FOR CAR LOAN, BUSINESS ETC AND NOT FOR PURCHASING THE SHARES OR EARNING OF THE EXEMPT INCOME. IN SUCH A SCENARIO, WE HOLD THAT THE DISALLOWANCE AT THE MOST HAS TO BE RESTRICTED AT 0 .5% OF THE COST OF INVESTMENT OF RS. 4715/ - I .E ONLY AT RS. 235.75 ROUNDED OFF AT RS. 236/ - . THIS GROUND OF ASSESSEE IS PARTLY ALLOWED TO THAT EXTENT. 3. GROUND NO. 2 OF ASSESSEES APPEAL IS AGAINST THE ACTION OF THE LD. CIT(A) IN DISALLOWING A SUM OF RS. 2,22,417/ - ON FOREIGN TRAVEL EXPENSES. THIS G ROUND OF 2 I.T.A. NO . 2448/KOL/18 AY 2013 - 14 RUNGAMATEE TEA & INDUSTRIES LTD. ASSESSEES APPEAL IS NOT PRESSED AT THE TIME OF HEARING BEFORE US BY THE LD.AR . THE SAME STANDS DISMISSED. 4. GROUND NOS. 3(A) & (B) ARE AGAINST THE ACTION S OF THE LD. CIT(A) IN UPHOLDING THE ACTION OF THE AO IN COMPUTING RS.5,72,991/ - BEING PROFI T ON TEA MADE OUT OF PURCHASED TEA AS PER AOS OWN COMPUTATION IGNORING THE COMPUTATION MADE BY THE ASSESSEE AT RS. 5,61,449/ - A ND ACTION OF THE LD. CIT(A) IN CONFIRMING THE COMPUTATION OF RS. 29,03,258/ - BEING PROFIT ON TEA MADE OUT OF PURCHASED TEA LEAF AS PER AOS OWN COMPUTATION IGNORING THE COMPUTATION MADE BY THE ASSESSEE AT RS. 13,49,103/ - . 5. THE LD. AR OF THE ASSESSEE HAS SUBMITTED AS UNDER: - 4. THE ASSESSEE PURCHASED BLACK TEA FROM OTHER GARDENS WHICH IS MIXED WITH THE TEA PRODUCED BY THE COMPANY AND THEN SOLD. PROFIT FOR THE SAME ARE COMPUTED GARDEN WISE WHERE SUCH TEA IS BLENDED. DURING THE YEAR ONLY 71,958 KG. OF TEA WAS PURCHASED AND THE O WN MANUFACTURED TEA WAS 29,92,572 KG. TOTAL TEA MANUFACTURED AND PURCHASED WAS 30,64,530 KG. THE COMPANY HAS ALL ALONG TAKEN PROFIT FROM SUCH PURCHASES TEA GARDEN WISE WHICH IS THE INDUSTRY NORM AND A SYSTEM REGULARLY FOLLOWED BY THE ASSESSEE BUT THE AO HA S COMPUTED THE PROFIT ON TEA PURCHASED ON THE RATIO OF THE TOTAL QUANTITY OF TEA MANUFACTURED IN PLACE OF THE TEA MANUFACTURED BY THE GARDEN USING THE TEA. ASSESSMENT ORDERS AND COMPUTATION OF INCOME SHOWING SUCH CALCULATION FOR ASSTYEARS 2010 - 11,2011 - 12 AND 2012 - 1} ARE ENCLOSED AS ANNEXURE - B. IT MAY BE POINTED OUT THAT FOR THE ASST. YEAR 2010 - 11 APPEAL EFFECT OF ORDER OF CIT(A) HAS BEEN GIVEN FOR SUCH PURPOSE BY THE SAME ASSESSING OFFICER. COPY OF CIT ORDER IN CASE OF ASSESSEE FOR ASST. YEAR 2010 - 11 AN D 2009 - 10 IS ENCLOSED IN THIS RESPECT. 5. AS STATED IN THE ORDER BY DCIT, THE APPELLANT HAD BOUGHT GREEN LEAF FROM OTHER GROWERS AND MANUFACTURED TEA THEREFROM. THE TOTAL LEAF PURCHASED DURING THE YEAR WAS 16,30,430KGS. THE QUANTITY OF GREEN LEAF PLUCKED FROM THE APPELLANT'S OWN GARDENS WAS 1,17,51,848KGS. THUS, THE TOTAL LEAF PURCHASED, PLUCKED AND CONSUMED BY THE APPELLANT TO MCI7ALLACK - TEA WAS 1,33,82,278 KGS. THE A.O. HAS COMPUTED PROFIT ON TEA MADE OUT OF GREEN LEAF PURCHASED BY THE RESPECTIVE GARDE N USING THE GREEN LEAF THE PROFIT MADE BY THE APPELLANT AS PER FORMULA ADOPTED BY THE INDUSTRY, HAS WORKED OUT BY THE APPELLANT AT RS. 19,10,552/ - INCLUDING PROFIT FROM PURCHASE OF BLACK TEA AS MENTIONED ABOVE. THIS METHOD HAS BEEN CONSISTENTLY FOLLOWED B Y THE ASSESSEE ALL ALONG AND ACCEPTED BY A.O. IN EARLIER YEARS. DCIT HAS DETERMINED THE AMOUNT OF PROFIT ON TEA MADE OUT OF BOUGHT TEA AT RS. 5,72,991/ - AND FROM BROUGHT LEAF AT RS. 29,03,258/ - AS PER FORMULA DETERMINED BY HIM WHICH IS ERRONEOUS. ASSESSM ENT ORDERS AND COMPUTATION 'OF INCOME' SHOWING SUCH CALCULATION FOR ASST YEARS 2010 - 11, 2011 - 12 AND 2012 - 13 ARE ENCLOSED AS ANNEXURE - B. IT MAY BE POINTED OUT THAT FOR THE ASST. YEAR 2010 - 11 APPEAL EFFECT OF 3 I.T.A. NO . 2448/KOL/18 AY 2013 - 14 RUNGAMATEE TEA & INDUSTRIES LTD. ORDER OF CIT(A) HAS BEEN GIVEN FOR SUCH PURPOS E BY THE SAME ASSESSING OFFICER. COPY OF ORDERS OF C.I.T(A) IN CASE OF ASSESSEE FOR ASST. YEAR 201 0 - 11 AND 2009 - 10 IS ENCLOSED IN THIS RESPECT. 6. AFTER MAKING THE AFORESAID DISALLOWANCE AND ADDITIONS, THE ASSESSING OFFICER DETERMINED THE COMPOSITE INC OME OF THE APPELLANT AT RS. 2,09,26,165/ - AND THE TOTAL INCOME OF THE APPELLANT AT RS. 1,22,45,330/ - BUT AT THE TIME OF CALCULATION OF TAX, TOTAL INCOME HAS BEEN TAKEN AT RS. 1,23,24,460/ - . THE ASSESSING OFFICER, ON COMPLETION OF THE ASSESSMENT, ALSO CHA RGED INTEREST U/S.2348 OF THE ACT THE GROSS TAX INCLUSIVE OF INTEREST, WAS DETERMINED BY THE ASSESSING OFFICER AT RS. 40.48,346/ - WHICH SHOULD BE RECALCULATED.' 6. IT WAS BROUGHT TO OUR NOTICE THAT THE LD. CIT(A) FOR THE AY 2009 - 10 HAD INTERFERED WITH THE ORDER OF THE AO WHEN HE TINKERED WITH THE COMPUTATION REGULARLY FOLLOWED BY ASSESSEE AND ORDERED AS UNDER: - 6. THE FOURTH GROUND OF APPEAL IS THAT THE AO SHOULD HAVE SEPARATELY COMPUTED THE RESPECTIVE INCOME OF THE TEA ESTATES IN THE STATE OF WEST BENGAL AND ASSAM AS WAS DONE IN THE PAST. THE AO HAS NOT GIVEN ANY FINDING IN THE ASSESSMENT ORDER AS TO WHY HE HAS SO COMPUTED THE INCOME OF THE APPELLANT. HE MAY VERIFY FROM HIS RECORD THE COMPUTATION ACCEPTED BY THE DEPARTMENT IN THE E A RLIER YEARS AND A DOPT THE SAME PATTERN OF COMPUTATION. HOWEVER, IN CASE HE DECIDES TO DEVIATE FROM THE EARLIER PRACTICE OF COMPUTATION ACCEPTED BY THE DEPARTMENT HE MAY DO SO AFTER GIVING THE APPELLANT AN OPPORTUNITY AND RECORDING HIS REASONS FOR DEVIATING. 7. ACCORDING TO THE LD. AR THE DEPARTMENT HAS NOT MADE/PREFERRED ANY APPEAL BEFORE THE TRIBUNAL FOR THE AYS 2010 - 11, 2011 - 12 AND 2012 - 13. ACCORDING TO HIM, THE DEPARTMENT HAS BEEN CONSISTENTLY ACCEPTING THE COMPUTATION MADE BY THE ASSESSEE. SO ON THE PRINCIPLE OF CONSISTENCY THE ASSESSEE DOES NOT WANT THE SAME TO BE DISTURBED. PER CONTRA, T HE LD. DR SUPPORTED THE IMPUGNE D ORDER OF THE LD. CIT(A) AND DOES NOT WANT US TO INTERFERE WITH THE SAME. 8. WE NOTE THAT THE ASSESSEE HAS BEEN CONSISTE NTLY COMPUTING THE RESPECTIVE INCOME OF (I) TEA ESTATES IN THE STATE OF WEST BENGAL AND (II) ASSAM SEPARATELY AND COMPUTED THE INCOME OF TEA ESTATES TOGETHER . THIS PRACTICE/METHODOLOGY OF ACCOUNTING HAS BEEN CONSISTENTLY FOLLOWED BY THE ASSESSEE FOR DECA DES. HOWEVER, THE AO ONLY IN THE AY 20 09 - 10 TOOK DEVIATION FROM THE CONSISTENT PRACTICE WHICH WAS ALLOWED /ACCEPTED ALL THROUGHOUT BY THE DEPARTMENT . HOWEVER, ON APPEAL IN AY 2009 - 10 THE LD. CIT(A) HAS DIRECTED THE AO TO ADOPT/FOLLOW THE SAME PATTERN OF A CCOUNTING WHICH WAS CONSISTENTLY 4 I.T.A. NO . 2448/KOL/18 AY 2013 - 14 RUNGAMATEE TEA & INDUSTRIES LTD. FOLLOWED BY THE ASSESSEE. IT WAS BROUGHT TO OUR NOTICE THAT THE AO WHILE GIVING APPEAL EFFECT OF THE LD. CIT(A)S ORDER FOR AY 2009 - 10 HAS ACCEPTED THE COMPUTATION OF ASSESSEE (REFER PAGES - 57 OF THE P/B ) . SINCE WE NOTE THAT THE ASSESSEE HAS BEEN CONSISTENTLY FOLLOWING THE COMPUTATION OF INCOME SEPARATELY FOR TEA ESTATES IN WEST BENGAL AND ASSAM AND COMPUTING THE TOTAL INCOME OF TEA ESTATES TOGETHER AS PER THE DOCTRINE OF CONSISTENC Y THE SAME OUGHT TO HAVE BEEN F OLLOWED WITHOUT DISTURBING THE SAME . FOR THAT PROPOSITION WE REFER TO THE HONBLE SUPREME COURT S DECISION IN RADHASOAMISATSANG VS. CIT REPORTED IN (1992) 193 ITR 321 (SC) . THEREFORE, WE DIRECT THE AO TO ADOPT THE PATTERN OF COMPUTATION AS ACCEPT ED B Y THE DEPARTMENT/CONSISTENTLY WHICH WAS FOLLOWED BY THE ASSESSEE AND ALLOW THIS GROUND OF APPEAL . 9 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 1 8 M ARCH , 2020 . S D / - S D / - (A. L. SAINI) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 1 8 MARCH , 2020 **PP, SR. PS COPY OF THE ORDER FORWARDED TO: 1. APPELLANT / ASSESSEE: M/S. RUNGAMATEE TEA & INDUSTRIES LIMITED 90/31 DIAMOND HARBOUR ROAD, TARATALA, KOLKATA - 38. 2. RESPONDENT / DEPARTMENT: THE DCIT, CIRCLE 4(2), P - 7 AAYKARBHAWAN, 4 TH FL., ROOM NO. 11B, KOLKATA - 69. 3. CIT(A) - 20 , KOLKATA. (SENT THROUGH E - MAIL) 4. CIT, KOLKATA. 5. DR, KOLKATA BENCHES, KOLKATA. (SENT THROUGH E - MAIL ) TRU E COPY, BY ORDER, ASSISTANT REGISTRAR ITAT, KOLKATA BENCHES