M/s Apeejay Tea Limited, Kolkata V. D.C.I.T CC - III,kolkata, Kolkata

ITA 2481/KOL/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4508 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 10 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 01-08-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 24-10-2013
• Court: TRIBUNAL
• Assessee Lawyers: MANISH TIWARI F C A LD
• Keywords: Business income; Depreciation; Revised return
• Section: 10

Judgement Text

ITA NO. 2481/KOL/13 M/S. APEEJAY TEA LIMITED 1 IN THE INCOME TAX APPELLATE TRIBUNAL, A BENCH, KOLKATA BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL M EMBER I.T.A. NO. 2481/KOL/ 2013 A.Y: 2009-10 M/S. APEEJAY TEA LIMITED VS. DCIT, CEN.CIR-III, K OLKATA PAN:AAECA 1925D (APPELLANT) (RESPONDENT) APPEARANCES BY: SHRI MANISH TIWARI, FCA, LD.AR FOR THE ASSESS EE SHRI SALLONG YADEN, ADDL.CIT, SR. D.R FOR THE REVENUE DATE OF HEARING : 01-08-2016 DATE OF PRONOUNCEMENT : 21-09-2016 O R D E R PER SHRI S.S. VISWANETHRA RAVI :- THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS), C ENTRAL-I, KOLKATA DATED 27 TH AUGUST, 2013 FOR THE ASSESSMENT YEAR 2009- 10. 2. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLL OWING GROUNDS:- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, LD.CIT (A) IS WRONG AND UNJUSTIFIED IN DISMISSING A SSESSEE'S APPEAL WITHOUT CONSIDERING THE INTERIM ORDER PASSED BY HON'BLE HIGH COURT BY ENTERTAINING WRIT PETITION NO. 1199 O F 2007 IN THE ASSESSEE'S OWN CASE. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, LD. CIT. (A) IS WRONG IN DISMISSING ASSESSEE'S APPEAL W ITHOUT MAKING ANY ATTEMPT TO INTERPRET THE LANGUAGE USED I N SECTION 115WA (1) IN DETERMINING FRINGE BENEFIT PROVIDED OR DEEMED TO BE PROVIDED TO THE EMPLOYEES IN TEA COMPANIES SINCE ONLY 40% ITA NO. 2481/KOL/13 M/S. APEEJAY TEA LIMITED 2 OF EX PEN E IS ALLOWED IN COMPUTING INCOME FROM BUS INESS OR PROFESSION. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, LD.CI.T. (A) IS WRONG AND UNJUSTIFIED IN CONFIRMING THE ORDER PASSED BY ASSESSING OFFICER U / S 115WE(3) OF INCOM E TAX ACT, 1961 TO COMPUTE VALUE OF FRINGE BENEFIT AT RS. 51,8 5,190/-. 4. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER, A DDUCE OR AMEND ANY GROUND OR GROUNDS ON OR BEFORE THE DATE O F HEARING OF THE APPEAL 3. THE ASSESSEE IS A COMPANY DEALING IN THE BUSINES S OF MANUFACTURING AND SELLING TEA AND PACKAGED TEA. THE ASSESSEE FILED ITS REVISED RETURN OF INCOME ON 27-09-2010 DE CLARING COMPUTED TOTAL VALUE OF FRINGE BENEFIT OF RS.26,03 ,966/ BEING COMPOSITE VALUE AND WAS DISCLOSED THE EXPENDITURE O F RS.1,90,11,052/- ON ACCOUNT OF APEEJAY TEA LTD AND RS.75,11,037/- ON ACCOUNT OF APEEJAY TYPHOO TEA PVT . LTD ON VARIOUS FRINGE BENEFITS. UNDER SCRUTINY, THE ASSESS EE SUBMITTED THAT IT COMPUTED THE VALUE OF TAXABLE FRINGE BENEFI T AFTER APPLICATION OF RULE-8 ON THE EXPENDITURE MADE BY AP EEJAY TEA LTD, WHICH HAS BUSINESS OF GROWING & MANUFACTURING OF TEA. 4. THE AO FOLLOWING THE ORDER DT. 7-1-2011 OF B B ENCH OF KOLKATA IN ITA NO.556/KOL/2010 IN ASSESSEES OWN CA SE FOR AY 2006-07, WHICH HELD THAT THE ASSESSEE BEING AN EMPL OYER IS LIABLE TO PAY FRINGE BENEFIT TAX U/S.115WA IN RELAT ION TO THE FRINGE BENEFIT PROVIDED BY IT TO ITS EMPLOYEES AND ALSO HELD THAT THE TAX ON FRINGE BENEFITS SHALL BE PAYABLE BY SUCH EMPLOYER. ACCORDINGLY, THE AO DETERMINED THE FBT AT RS.7,11,1 93/-. 5. AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE BY AN APPEAL BEFORE THE CIT-A AND ARGUED THAT THE VALUE OF THE F RINGE BENEFIT ITA NO. 2481/KOL/13 M/S. APEEJAY TEA LIMITED 3 SHOULD BE COMPUTED BY APPLYING RULE 8 AS THE ASSESS E IS ENGAGED IN THE BUSINESS OF GROWING AND MANUFACTURIN G OF TEA. THE CIT-A ALSO FOUND THE ISSUE IS COVERED BY ORDER OF B BENCH OF KOLKATA IN ITA NO.556/KOL/2010 AND CONFIRMED THE VALUE OF FRINGE BENEFIT AS DETERMINED BY THE AO. THE RELEVAN T PORTION OF WHICH IS REPRODUCED HEREIN BELOW: WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE LD REPRESENTATIVES OF THE PARTIES AND THE ORDERS OF TH E AUTHORITIES BELOW. WE HAVE ALSO CONSIDERED THE RELE VANT PROVISIONS LE, SECTION 115WA, 115WB & 115WE OF THE INCOME TAX ACT. WE OBSERVE' THAT AN EMPLOYER ASSESSEE IS L IABLE TO PAY FRINGE BENEFIT TAX U/S 115WA OF THE INCOME TAX ACT, IN RELATION TO FRINGE BENEFITS PROVIDED BY HIM TO ITS EMPLOYEES. SUB-SECTION (2) OF SECTION 115WASTARTS WITH A NON OBSTANTE CLAUSE AND STATES THAT NOTWITHSTANDING THAT NO INCO ME- TAX IS PAYABLE BY AN EMPLOYER TO ITS TOTAL INCOME COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THE ACT, THE TAX ON FRINGE BENEFITS SHALL BE PAYABLE BY SUCH AN EMPLOYER. THER EFORE, AN EMPLOYER IS LIABLE TO PAY FRINGE BENEFIT TAX EVEN W HEN NO INCOME-TAX IS PAYABLE BY AN EMPLOYER ON HIS TOTAL I NCOME COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THE I NCOME TAX ACT. THEREFORE, THE CONTENTION OF THE LD AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THAT VALUE OF FRING E BENEFIT SHOULD BE COMPUTED BY APPLYING RULE 8 OF INCOME TAX RULE HAS NO MERIT AS FRINGE BENEFIT TAX IS NOT PAYABLE O N THE INCOME ON THE OF AN ASSESSEE BUT ONLY FRINGE BENEFI TS PROVIDED BY AN EMPLOYER TO ITS EMPLOYEES. IN VIEW O F THE ABOVE, WE AGREE WITH THE LD DEPARTMENTAL REPRESENTA TIVE THAT THE CONTENTION OF THE LD. AUTHORIZED REPRESENT ATIVE FOR THE ASSESSEE HAS NO MERIT AND ACCORDINGLY, WE UPHOL D THE ORDER THE LD. CIT(A) BY REJECTING GROUNDS OF APPEAL TAKEN BY THE ASSESSEE. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISSED. 4. I HAVE PERUSED THE RELEVANT ORDERS. THE ISSUE IS COVERED DIRECTLY BY THE ORDER OF THE JURISDICTIONAL ITAT IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2006-07 AS DISCUSS ED ABOVE. ACCORDINGLY, GROUND NO.1 2 AND 3 ARE DISMISS ED. GROUND NO.4 IS GENERAL IN NATURE. 6. THE ASSESSE BEFORE US, CHALLENGING THE ORDER OF CIT -A BY AFOREMENTIONED GROUNDS OF APPEAL. THE LD.AR SUBMITS THAT THE ASSESSEE PREFERRED AN APPEAL BEFORE HONBLE JURISDI CTIONAL HIGH COURT OF CALCUTTA AGAINST THE ORDER DT. 07-01-2011 IN ITA ITA NO. 2481/KOL/13 M/S. APEEJAY TEA LIMITED 4 NO.555/KOL/2010 PASSED BY B BENCH OF KOLKATA TRIB UNAL AND SUBMITS THAT THE HONBLE JURISDICTIONAL HIGH COURT PASSED ORDER IN FAVOUR OF ASSESSEE BY FOLLOWING THE ILLUSTRATION FORMULATED BY THE HONBLE SUPREME COURT IN THE CASE OF DOOM DOOMA INDIA LTD AND PLACED ON RECORD THE JUDGMENT DT:03-07-2014 OF HONBLE HIGH COURT OF CALCUTTA IN GA NO.3135 OF 2013 IN ITA T 165 OF 2013. THE LD. DR RELIED ON THE ORDERS OF AUTHORITIE S BELOW. 7. HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. AS RIGHTLY POINTED OUT BY THE LD.AR THE HON BLE JURISDICTIONAL HIGH COURT OF CALCUTTA HELD THAT THE NET PROFIT AND LOSS OF THE BUSINESS HAS TO BE ARRIVED AT AFTER DED UCTING ALL THE EXPENSES AS FORMULATED BY THE HONBLE SUPREME COURT IN THE CASE OF DOOM DOOMA INDIA LTD THAT 40% WOULD REMAIN AS NET PROFIT AND LOSS TO BE CHARGEABLE TO TAX AND THE EX PENDITURE ON ACCOUNT OF FRINGE BENEFIT TAX CAN BE COMPUTED OUT O F SUCH 40% NET PROFIT AND LOSS, THE RELEVANT PORTION OF WHICH REPRODUCED HEREIN BELOW: THE QUESTION FOR CONSIDERATION BEFORE THEIR LORDSHI PS WAS WHETHER DEDUCTION ON ACCOUNT OF DEPRECATION IS ALLO WABLE FROM THE BUSINESS INCOME ARRIVED AT AFTER APPLYING RULE 8. THIS QUESTION WAS ANSWERED BY THEIR LORDSHIPS IN THE AFF IRMATIVE. FROM ILLUSTRATION (A) IT WOULD APPEAR THAT BUSINESS PROFIT AFTER TAKING INTO ACCOUNT THE EXPENSES WAS COMPUTED AT RS .600/-. APPLYING THE RULE 8 TAXABLE INCOME ON ACCOUNT OF BU SINESS WAS COMPUTED AT RS.240/-, THAT IS TO SAY, 40% OF RS.600 /-. FROM ILLUSTRATION (B) IT WOULD APPEAR THAT 40% OF THE TO TAL INCOME FROM SALE OF TEA WAS TAKEN INTO ACCOUNT. FROM ILLUSTRATI ON (A) IT WOULD APPEAR THAT TOTAL DEPRECIATION IS RS.100/-. FOR THE PURPOSE OF COMPUTING BUSINESS PROFIT & LOSS OF 40% OF THE TOTA L DEPRECIATION WAS TAKEN INTO ACCOUNT. FROM ILLUSTRATION (A) IT WO ULD APPEAR THAT OTHER EXPENSES WERE COMPUTED AT RS.300/- AND ILLUST RATION (B) WOULD SHOW THAT OTHER EXPENSES WERE COMPUTED AT RS. 120/-, IN OTHER WORDS, 40% OF RS.300/- HAD BEEN TAKEN INTO AC COUNT. WE SHALL TAKE ASSISTANCE OF THE ILLUSTRATION TO RES OLVE THE ISSUE. LET US ASSUME THAT THE OTHER EXPENSES IN ILL USTRATION (A) AMOUNTING TO RS.300/- INCLUDE RS.I00/- SPENT BY THE EMPLOYER ON ACCOUNT OF FRINGE BENEFITS MADE AVAILABLE TO ITS EM PLOYEES. IN ITA NO. 2481/KOL/13 M/S. APEEJAY TEA LIMITED 5 THAT CASE, 40% OF THE AFORESAID SUM OF RS.I00/- WOU LD ALSO BE INCLUDIBLE IN ILLUSTRATION (B). THEREFORE, THE QUES TION POSED BEFORE US HAS REALLY BEEN ANSWERED BY THE ILLUSTRAT ION GIVEN BY THE APEX COURT IN THE AFORESAID JUDGMENT. IT CANNOT BE DISPUTED THAT THE AMOUNT OF EXPENDITURE INCURRED BY THE ASSE SSEE IN EXTENDING FRINGE BENEFITS TO ITS EMPLOYEES WAS NOT SOLELY FOR THE PURPOSE OF BUSINESS. THE EXPENDITURE INCURRED IS BO TH FOR THE PURPOSE OF BUSINESS AND FOR THE PURPOSE OF AGRICULT URE. THE SUBMISSION MADE BY MRS. GUTGUTIA THAT THE EXPENDITU RE ON ACCOUNT OF FRINGE BENEFITS HAS ALREADY BEEN TAKEN I NTO ACCOUNT IS NOT CORRECT. THE NET PROFIT AND LOSS OF THE BUSINES S HAS TO BE ARRIVED AT AFTER DEDUCTING ALL THE EXPENSES AS INDI CATED IN ILLUSTRATION 'A' IN THE CASE OF DOOM DOOMA (SUPRA). ONCE THAT IS DONE 40% OF THE NET PROFIT AND LOSS HAS TO BE WORK ED OUT WHICH SHALL BE CHARGEABLE TO TAX. ONCE THIS IS DONE THE E XPENDITURE ON ACCOUNT OF FRINGE BENEFITS WOULD AUTOMATICALLY STAN D REDUCED TO 40% AS WOULD APPEAR FROM ILLUSTRATION B IN THE C ASE OF DOOM DOOMA [ SUPRA] . THE REVENUE IS INTERESTED IN CONTENDING AS WOULD APPEAR FROM THE IMPUGNED ORDERS THAT THE EXPE NDITURE ON ACCOUNT OF FRINGE BENEFIT CANNOT BE REDUCED TO 40% FOR THE PURPOSE OF COMPUTING FRINGE BENEFIT TAX. IF THAT IS DONE, THE RESULT WOULD BE THAT THE AGRICULTURAL INCOME ITSELF WOULD BECOME LIABLE TO TAX, WHICH IS NOT PERMISSIBLE UNDER SUB-S ECTION 1 OF SECTION 10 OF THE INCOME TAX ACT. THE PROVISIONS CO NTAINED IN CHAPTER XII H OF THE INCOME TAX ACT HAVE TO BE REA D SUBJECT TO SECTION 10 OF THE INCOME TAX ACT. 8. IN THE AFOREMENTIONED PARA, THE HONBLE HIGH COU RT WAS PLEASED TO OBSERVE THAT THE AMOUNT OF EXPENDITURE I NCURRED BY THE ASSESSEE IN EXTENDING FRINGE BENEFITS TO ITS EM PLOYEES WAS INCURRED FOR BOTH PURPOSES I.E BUSINESS AND FOR THE PURPOSE OF AGRICULTURE. IN THE PRESENT CASE, THE AO DETERMINED THE VALUE OF FRINGE BENEFIT AT RS.51,85,190/- WHICH ADMITTEDLY I NCLUDES THE FRINGE BENEFIT INCURRED FOR THE PURPOSE OF AGRICULT URE. ACCORDING TO US THE DETERMINATION OF VALUE OF FRINGE BENEFIT AND THE NET TAX PAYABLE THEREON IS NOT IN CONSONANCE WITH THE ORDER OF HONBLE JURISDICTIONAL HIGH COURT. ACCORDING TO HONBLE HIG H COURT, THE AO HAS TO DETERMINE THE NET PROFIT AND LOSS BY DEDU CTING ALL EXPENDITURE AND 40% ON SUCH AMOUNT TAX SHALL BE CHA RGEABLE. ITA NO. 2481/KOL/13 M/S. APEEJAY TEA LIMITED 6 9. RESPECTFULLY FOLLOWING THE OBSERVATIONS OF HONB LE HIGH COURT, WE HOLD THAT THE 40% COULD BE COMPUTED AS FR INGE BENEFIT AS INDICATED ABOVE. GROUND NOS 1 TO 3 OF THE ASSES SEE ARE ALLOWED. GROUND NO-4 BEING GENERAL NEEDS NO ADJUDIC ATION. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST SEPTEMBER, 2016 SD/- SD/- WASEEM AHMED S.S.VISWANETHRA RAVI ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 21 /09/2016 1. THE APPELLANT/ASSESSEE: M/S. APEEJAY TEA LIMITED 1 5 PARK STREET, KOLKATA-16. 2 . THE RESPONDENT/DEPARTMENT: THE DCIT, CEN. CIR-III, AAYKAR BHAWAN POORVA, 110 SHANTI PALLY, KOLKATA-107. 3. CIT 4. CIT(A) 5. THE DEPARTMENTAL REPRESENTATIVE 6. GUARD FILE BY ORDER ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCHES, KOLKATA ** PRADIP SPS COPY OF THE ORDER FORWARDED TO:-