DCIT, CIR-4(1), KOLKATA, Kolkata V. M/s Chengmari Tea Co. Ltd., Kolkata

ITA 252/KOL/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1477 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 16-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DAVID Z CHAWNGTHU
• Assessee Lawyers: S M SURANA
• Section: 43B; 139

Judgement Text

ITA NO.252/KOL/2015 M/S. CHENGMARI TEA CO. LTD. A.Y .2008-09 1 IN THE INCOME TAX APPELLATE TRIBUNAL C B ENCH : KOLKATA [BEFORE HONBLE SRI N.V.VASUDEVAN, JM & SHRI WASEEM AHMED, AM] I.T.A NO.252/KOL/2015 ASSESSMENT YEAR : 200 8-09 D.C.I.T., CIRCLE-4(1), -VS.- M/S. CHENGMAR I TEA CO.LTD. KOLKATA KOLKATA [PAN : AABCC 0672 Q] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI DAVID Z.CHAWNGTHU, ADDL. CIT, SR.DR FOR THE RESPONDENT : SHRI. S.M.SURANA , ADVOCATE DATE OF HEARING : 28.08.2017. DATE OF PRONOUNCEMENT : 31.08.2017. ORDER PER N.V.VASUDEVAN, JM THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER DA TED 31.12.2014 OF CIT(A)- 2, KOLKATA RELATING TO A.Y.2008-09. 2. GR.NO.1 RAISED BY THE REVENUE READS AS FOLLOWS: 1 THAT ON THE FACTS AND IN CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) ERRED ON IN LAW AS WELL AS ON FACTS IN HOLDING THAT CESS ON GRE EN LEAF OF RS.24,84,372/- IS AN ALLOWABLE EXPENDITURE, IGNORING THE FACT THAT IT IS DIRECTLY ATTRIBUTABLE TO CORE AGRICULTURE ACTIVITIES WHICH IS TAXABLE UNDER STATE AGRICULTURE INCOME TAX, BEYOND THE PURVIEW OF CENTRAL INCOME TAX AND ON THE SAME I SSUE SLP IS PENDING IN THE CASE OF AFT INDUSTRIES. 3. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINE SS OF GROWING AND MANUFACTURING OF TEA. INCOME FROM GROWING, MANUFACTURING AND SAL E OF TEA WOULD BE COMPOSITE INCOME, WHICH MEANS IT COMPRISES AGRICULTURAL INCOM E TO THE EXTENT OF GROWING TEA, WHICH IS NOT CHARGEABLE TO TAX AND NON-AGRICULTURAL INCOME TO THE EXTENT IT COMPRISES OF INCOME FROM MANUFACTURE AND SALE OF TEA, WHICH I NCOME IS CHARGEABLE TO TAX. RULE 8 OF THE INCOME TAX RULES, 1962 PROVIDES METHOD OF COMPUTATION FOR COMPOSITE INCOME FROM MANUFACTURE OF TEA. UNDER RULE 8 (1) O F THE INCOME TAX RULES, 1962 ITA NO.252/KOL/2015 M/S. CHENGMARI TEA CO. LTD. A.Y .2008-09 2 (RULES) INCOME DERIVED FROM SALE OF TEA GROWN AND M ANUFACTURED BY THE SELLER IN INDIA SHALL BE COMPUTED AS IF IT WERE INCOME DERIVE D FROM BUSINESS, AND FORTY PER CENT OF SUCH INCOME SHALL BE DEEMED TO BE INCOME LIABLE TO TAX. ACCORDING TO THE AO CESS ON GREEN LEAF WAS AN EXPENDITURE WHICH WAS ATTRIBUT ABLE TO THE ACTIVITY OF GROWING OF TEA AND WOULD THEREFORE BE NOT ALLOWABLE AS DEDUCTI ON WHILE COMPUTING INCOME FROM MANUFACTURE AND SALE OF TEA. THE PLEA OF THE ASSES SEE WAS THAT THE ENTIRE GREEN LEAF CESS HAD TO BE ALLOWED AS DEDUCTION FIRST AND ONLY ON THE LOSS OR PROFIT ARRIVED AT AFTER SUCH DEDUCTION RULE 8(1) OF THE RULES HAVE TO BE AP PLIED AND 40% OF SUCH SUM HAS TO BE CONSIDERED AS INCOME OR LOSS FROM THE BUSINESS O F MANUFACTURE AND SALE OF TEA. 4. ON APPEAL BY THE ASSESSEE, THE CIT(A) DELETED THE DISALLOWANCE MADE BY THE AO BY FOLLOWING THE ORDER OF THE HON'BLE CALCUTTA HIGH COURT 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 AND ONLY THEREAFTER 40% OF SUCH INCOME HAS TO BE BROUGHT TO TAX. 5. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REV ENUE HAS RAISED GR.NO.1 BEFORE THE TRIBUNAL. THE LEARNED DR APPEARING ON BEHALF OF TH E REVENUE RELIED ON THE ORDER OF THE AO. ON THE OTHER HAND, THE LD.COUNSEL FOR THE A SSESSEE RELIED ON THE ORDERS OF THE LD. CIT(A). 6. AFTER HEARING THE RIVAL SUBMISSIONS AND ON C AREFUL PERUSAL OF THE MATERIALS AVAILABLE ON RECORD, KEEPING IN VIEW OF THE FACT TH AT THE ISSUE IS CONCLUDED BY THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT I N THE CASE OF CIT VS AFT INDUSTRIES LTD . 270 ITR 167 (CAL) WHERE THE AMOUNT PAID AS CESS W AS HELD AS ELIGIBLE FOR DEDUCTION IN COMPUTING THE COMPOSITE INCOME UNDER R ULE 8 OF I.T. RULES. THIS ISSUE IS, THEREFORE, DECIDED IN FAVOUR OF THE ASSESSEE AN D AGAINST THE REVENUE BY UPHOLDING THE ORDER OF THE C.I.T.(A) WHO HAS ALLOWED THE DEDU CTION OF PAYMENT OF CESS ON GREEN LEAVES IN COMPUTING THE COMPOSITE INCOME FROM TEA B USINESS 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 ITA NO.252/KOL/2015 M/S. CHENGMARI TEA CO. LTD. A.Y .2008-09 3 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 CALCU TTA HIGH COURT NOR GRANTED ANY STAY. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO BROUGHT T O OUR NOTICE THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. M/S.AP EEJAY TEA CO. LTD. CIVIL APPEAL NO.3168 OF 2006 DATED 6.8.2015 WHEREIN THE HONBLE SUPREME COURT HAS UPHELD VIEW AS WAS TAKEN IN THE CASE OF AFT INDUSTRIES LTD. (SU PRA). IN VIEW OF THE ABOVE, THE APPEAL BY THE REVENUE IS DISMISSED. 7. THE LD. COUNSEL FOR THE ASSESSEE ALSO DREW OUR ATTENTION TO THE FACT THAT RELIANCE PLACED BY THE AO ON THE DECISION OF THE HONBLE GAU HATI HIGH COURT IN THE CASE OF JOREHAUT GROUP LTD. 226 ITR 622 (GAU) WAS NOT CORR ECT AND IN THIS REGARD BROUGHT TO OUR NOTICE THAT THE HONBLE GAUHATI HIGH COURT IN T HE CASE OF ASSAM COMPANY LTD 275 ITR 609 (GAU) AFTER REFERRING TO ITS DECISION I N THE CASE OF JOREHAUT GROUP LTD. (SUPRA) CLARIFIED THAT CESS ON GREEN LEAF PAID HAD TO BE ALLOWED AS DEDUCTION WHILE COMPUTING THE COMPOSITE INCOME. THE AFORESAID DECIS ION ALSO SUPPORTS THE CONCLUSION OF CIT(A). IT IS ALSO BROUGHT TO OUR NOTICE THAT IN ASSESSEES OWN CASE ON AN IDENTICAL ISSUE THIS TRIBUNAL IN ITA NOS. 513 AND 514/KOL/200 4 FOR A.Y.1999-2000 AND 2000- 2001 BY ITS ORDER DATED 13.08.2004 HAS ALSO HELD TH AT CESS ON GREEN LEAVE HAS TO BE ALLOWED AS DEDUCTION WHILE COMPUTING THE COMPOSITE INCOME UNDER RULE 8 OF THE RULES. IN VIEW OF THE ABOVE WE DO NOT FIND ANY MERI TS IN GROUND NO.1. 8. GR.NO.2 RAISED BY THE REVENUE READS AS FOLLOWS: 2 THAT ON THE FACTS AND IN CIRCUMSTANCES OF THE CA SE, THE CIT(A) ERRED IN LAW AS WELL AS ON FACTS IN HOLDING THAT DISALLOWANCE OF EM PLOYEES CONTRIBUTION TO PF OF RS.52,57,942/- WAS NOT WARRANTED AS IT WAS DEPOSITE D BEFORE FILING OF RETURN, RELIED ON THE DECISION OF CIT VS. VIJAY CEMENTS LTD . (213 CRT 268) AND CIT VS. ALOM INDUSTRIES LTD. (319 ITR 306) IGNORING THE FAC T THAT THE ABOVE DECISION IS RELATED TO EMPLOYER'S CONTRIBUTION WHICH IS GOVERNM ENT BY THE PROVISIONS OF SECTION 438 ALLOWED ON ACTUAL PAYMENT BASIS WHEREAS EMPLOYEE'S CONTRIBUTION IS GOVERNED BY SECTION 36(1) (VA) READ WITH SECTION 2( 24)(X) WHICH PROVIDES THAT DEPOSIT OF EMPLOYEE'S CONTRIBUTION SHOULD BE MADE W ITHIN SPECIFIED TIME AS PROVIDED IN RESPECTIVE RULE I.E. PF RULE IN THIS CA SE. ITA NO.252/KOL/2015 M/S. CHENGMARI TEA CO. LTD. A.Y .2008-09 4 9. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINE SS OF MANUFACTURING AND TRADING. THE ASSESSEE AS AN EMPLOYER WITHHELD THE PROVIDENT FUND CONTRIBUTION PAYABLE BY ITS EMPLOYEES FROM THEIR SALARIES PAYABLE, AS THEIR SHA RE OF CONTRIBUTION TO PROVIDENT FUND (PF) AND EMPLOYEES STATE INSURANCE (ESI). AS PER S ECTION 36(1)(VA) OF THE ACT, THE SUM SO WITHHELD AS EMPLOYEES CONTRIBUTION TO PF & E SI, IF IT IS NOT PAID ON OR BEFORE THE DUE DATE AS PROVIDED UNDER THE RELEVANT LAW GOV ERNING THE PROVIDENT FUND, WILL NOT BE ALLOWED AS DEDUCTION. IT IS THE PLEA OF THE ASSE SSEE THAT THE EMPLOYEES CONTRIBUTION TO PF & ESI HAD BEEN PAID BY THE ASSESSEE ON OR BEF ORE THE DUE DATE OF FILING THE RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR U /S 139(1) OF THE ACT AND THEREFORE DEDUCTION CLAIMED SHOULD BE ALLOWED AS PROVIDED UND ER THE PROVISO TO SECTION 43B OF THE ACT. THE SAID PLEA OF THE ASSESSEE WAS REJECTED BY THE AO FOR THE REASON THAT THE PROVISO TO SECTION 43B OF THE ACT CANNOT BE READ IN TO THE PROVISION OF SECTION 36(1)(VA) OF THE ACT. ON APPEAL BY THE ASSESSEE, T HE CIT(A) DELETED THE ADDITION MADE BY THE AO BY PLACING RELIANCE ON DECISION OF THE HO NBLE SUPREME COURT IN THE CASE OF CIT VS. VIJAYASHREE CEMENT 213 CTR 268 (SC) AND THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS AIMIL LTD. & ORS. 229 CTR 418 (DEL) WHEREIN IT WAS HELD THAT EMPLOYEES CONTRIBUTION TO PF SHOULD BE ALLOWED AS DEDUCTION WHICH IS PAID ON OR BEFORE THE DUE DATE O F FILING THE RETURN OF INCOME U/S 139 OF THE ACT. 10. AGGRIEVED BY THE ORDER OF CIT(A) THE ASSESSEE HAS RAISED GROUND NO.1 BEFORE THE TRIBUNAL. 11. AT THE TIME OF HEARING IT WAS BROUGHT TO OUR N OTICE THAT THE HONBLE CALCUTTA HIGH COURT HAS ALSO TAKEN THE VIEW THAT EMPLOYEES CONTR IBUTION TO PF PAID ON OR BEFORE THE DUE DATE OF FILING THE RETURN OF INCOME U/S 139(1) OF THE ACT SHOULD BE ALLOWED AS DEDUCTION. IN THIS REGARD THE DECISION OF THE HONB LE CALCUTTA HIGH COURT IN THE CASE OF M/S. AKZO NOBEL INDIA LTD. VS CIT IN ITA 110 OF 2011 ORDER DATED 14.06.2016 AND IN THE CASE OF CIT VS VIJAYSHREE LTD., OF THE HONB LE CALCUTTA HIGH COURT IN GA ITA NO.252/KOL/2015 M/S. CHENGMARI TEA CO. LTD. A.Y .2008-09 5 NO.2607 OF 2011 ORDER DATED 06.09.2011 WAS FILED BE FORE US. IN THE ORDER IN THE CASE OF VIJAYSHREE LTD., (SUPRA), THE HONBLE CALCUTTA H IGH COURT HELD AS FOLLOWS : THE ONLY ISSUE INVOLVED IN THIS APPEAL IS AS TO WH ETHER THE DELETION OF THE ADDITION BY THE ASSESSING OFFICER ON ACCOUNT OF EMP LOYEESCONTRIBUTION TO ESI AND PF BY INVOKING THE PROVISION OF SECTION 36(1)(V A) READ WITH SECTION 2(24)(X) OF THE ACT WAS CORRECT OR NOT. IT APPEARS THAT THE TRIBUNAL BELOW, IN VIEW OF THE DECISION OF THE SUPREME COURT IN THE CASE OF COMMIS SIONER OF INCOME TAX VS. ALOM EXTRUSION LTD., REPORTED IN 2009 VOL.390 ITR 3 06, HELD THAT THE DELETION WAS JUSTIFIED. BEING DISSATISFIED, THE REVENUE HAS COME UP WI TH THE PRESENT APPEAL. AFTER HEARING MR. SINHA, LEARNED ADVOCATE, APPEARIN G ON BEHALF OF THE APPELLANT AND AFTER GOING THROUGH THE DECISION OF T HE SUPREME COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. ALOM EXTRUSION LT D., WE FIND THAT THE SUPREME COURT IN THE AFORESAID CASE HAS HELD THAT T HE AMENDMENT TO THE SECOND PROVISO TO THE SEC. 43(B) OF THE INCOME TAX ACT, AS INTRODUCED BY FINANCE ACT, 2003, WAS CURATIVE IN NAT.URE AND IS REQUIRED TO BE APPLIED RETROSPECTIVELY WITH EFFECT FROM 1 ST APRIL, 1988. SUCH BEING THE POSITION, THE DELETION OF T HE AMOUNT PAID BY THE EMPLOYEES' CONTRIBUTION BEYOND DUE DATE WAS DEDUCTIBLE BY INVO KING THE AFORESAID AMENDED PROVISIONS OF SECTION 43(B) OF THE ACT. WE, THEREFORE, FIND THAT NO SUBSTANTIAL QU ESTION OF LAW IS INVOLVED IN THIS APPEAL AND CONSEQUENTLY, WE DISMISS THIS APPEAL. 12. IN VIEW OF THE AFORESAID DECISION OF THE HONB LE CALCUTTA HIGH COURT, WE ARE OF THE VIEW THAT THE DEDUCTION CLAIMED SHOULD BE ALLOW ED AS THE EMPLOYEES CONTRIBUTION TO THE PROVIDENT FUND HAD ADMITTEDLY BEEN PAID ON O R BEFORE THE DUE DATE FOR FILING RETURN OF INCOME U/S.139(1) OF THE ACT. THE LEARNE D DR ATTEMPTED TO ARGUE THAT THE DECISION OF THE HONBLE CALCUTTA HIGH COURT IS NOT CORRECT AND THAT SOME OF THE OTHER HIGH COURTS HAVE TAKEN A DIFFERENT VIEW ON THE ISSU E. WE ARE OF THE VIEW THAT THE DECISION OF THE JURISDICTIONAL HIGH COURT IS BINDIN G ON US AND THEREFORE, RESPECTFULLY FOLLOWING THE SAME, WE DISMISS GR.NO.2 RAISED BY TH E REVENUE. ITA NO.252/KOL/2015 M/S. CHENGMARI TEA CO. LTD. A.Y .2008-09 6 13. IN THE RESULT, APPEAL BY THE REVENUE IS DISMIS SED. ORDER PRONOUNCED IN THE COURT ON 31.08.2017. SD/- SD/- [WASEEM AHMED] [ N.V.VASU DEVAN ] ACCOUNTANT MEMBER JUDICI AL MEMBER DATED : 31.08.2017. [RG PS] COPY OF THE ORDER FORWARDED TO: 1. M/S. CHENGMARI TEA CO.LTD., 37, SHAKESPEARE SARA NI, 2 ND FLOOR, KOLKATA-700017. 2. D.C.I.T., CIRCLE-4(1), KOLKATA. 3. C.I.T.(A)-2, KOLKATA. 4. C.I.T.- 2, KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVATE SECRETARY HEAD OF OFFIC E/D.D.O., ITAT KOLKATA BENCHES