D.C.I.T., Circle-4, Kolkata, Kolkata V. M/s Nahorjan Tea Co. Pvt. Ltd, Kolkata

ITA 2769/KOL/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4575 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 6 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2016
• Appeal Filed By: Department
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 13-12-2013
• Court: TRIBUNAL
• Department Lawyers: K K TRIPATHI
• Assessee Lawyers: S K SHAH
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : KOLKATA [BEFORE HONBLE SRI N.V.VASUDEVAN, JM & SHRI M.BA LAGANESH, AM ] I.T.A NO. 2769/KOL/20 13 ASSESSMENT YEAR : 2005-0 6 D.C.I.T., CIRCLE-4, -VS.- M/S. NAHORJA N TEA CO.PVT. LTD. KOLKATA KOLKATA [PAN : AABCN 7690 R] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI K.K.TRIPATHI, JCIT, SR.DR FOR THE RESPONDENT : SHRI S.K.SHAH, FCA DATE OF HEARING : 10.06.2016. DATE OF PRONOUNCEMENT : 08.07.2016. ORDER PER N.V.VASUDEVAN, JM THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDER DATED 27.08.2013 OF CIT(A)- IV, KOLKATA RELATING TO AY 2005-06. 2. GROUNDS OF APPEAL RAISED BY THE REVENUE READ AS FOLLOWS :- 1. THE LD. CIT(A) ERRED IN LAW AS WELL AS ON FACTS IN HOLDING THAT CESS ON GREEN LEAF OF RS.4056453/- IS AN ALLOWABLE EXPENDITURE, IGNORING THE FACT THAT IT IS DIRECTLY ATTRIBUTABLE TO CORE AGRICULTURE ACTIVITIES WHICH IS TAXABLE UND ER 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 PRIVATE LIMITED COMPANY ENGAGE D IN MANUFACTURING & SALE OF TEA. DURING THE RELEVANT YEAR THE ASSESSEE HAD CLAI MED A SUM OF RS.16,64,092/- RELEVANT TO ASSESSMENT YEAR 2004-2005 AND A SUM OF RS.7,76,6 77/- RELEVANT TO ASSESSMENT YEAR 2003-2004 AND TOWARD GREEN LEAF CESS AS THE SAME WE RE PAID DURING THIS YEAR AND WERE NOT CLAIMED IN RESPECTIVE RELEVANT YEARS UNDER THE PROVISIONS OF SECTION 43B AS DEDUCTION IN COMPUTING TOTAL INCOME. 3.1. THE COMPANY FURTHER CLAIMED A SUM OF RS.16,1 5,684/- BEING CESS OF CURRENT ASSESSMENT YEAR AS THE SAME WAS PAID WITHIN THE YEA R AS DEDUCTION IN COMPUTING TOTAL INCOME. 2 ITA NO.2769/KOL/2013 M/S. NAHORJAN TEA CO.PVT. LTD. A.YR.2005-06 2 3.2. IN THE COMPUTATION FILED 40% OF THESE PAYMEN TS WERE CLAIMED IN INCOME TAX COMPUTATION AS BALANCE 60% CLAIMED IN AGRICULTURAL TAX COMPUTATIONS. WHILE MAKING ASSESSMENT THE LEARNED ASSESSING OFFICER HAS TREATE D THESE EXPENSES AS 100% RELATING TO AGRICULTURAL TAX CALCULATION AND HENCE DISALLOWED 4 0% OF THESE EXPENSES CLAIMED UNDER INCOME TAX CALCULATION. DURING THE COURSE OF HEARING IT WAS EXPLAINED THAT THE ADDITION IS BEING MADE AS SIMILAR ISSUE IS STILL PE NDING WITH SUPREME COURT ALTHOUGH THE ISSUE HAS BEEN DECIDED AGAINST THE REVENUE BY JURIS DICTIONAL HONBLE KOLKATA HIGH COURT. HENCE THIS APPEAL IS BEING FILED. 4. AGGRIEVED BY THE ORDER OF AO THE ASSESSEE PRE FERRED APPEAL BEFORE CIT(A). CIT(A) HELD AS FOLLOWS :- 3. I HAVE EXAMINED THE ASSESSMENT ORDER AS WELL AS THE SUBMISSIONS OF. THE A.R. OF THE APPELLANT. WHILE DECIDING THIS ISSUE IN THE FAVOUR OF THE APPELLANT, IN THE CASE OF M K JOKAI INDIA LTD. VS. THE DEPTT. OF INCOME-TAX AT IT A NOS. L06/125/370/KO1/2011, THE HON'BLE 'A' BENCH OF ITAT, KOLKATA, HAD HELD AS BEL OW :- '14. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CAR EFUL PERUSAL OF THE MATERIALS AVAILABLE ON RECORD, KEEPING IN VIEW OF THE FACT T HAT THE ISSUE IS CONCLUDED BY THE DECISION OF THE 'HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS AFT INDUSTRIES LTD. 270 ITR 167 (CAL) WHERE THE AMOUNT PAID AS CES S WAS 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 AND AG AINST THE REVENUE BY UPHOLDING THE ORDER OF THE CJT(A) WHO HAS ALLOWED THE DEDUCTION O F 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. 14.1 THE FACT THAT THE SLP IS PENDING BEFORE THE HO N'BLE SUPREME COURT THE DECISION OF THE HON'BLE CALCUTTA HIGH COURT IN. RESPECT OF AFT INDUSTRIES LTD. VS CIT(270 ITR 167) WILL NOT HAVE ANY EFFECT SINCE THE HON'BTE APE X COURT HAS NEITHER SET ASIDE THE ORDERS OF THE CALCUTTA HIGH COURT NOR GRANTED ANY S TAY. 3.3 HUMBLY, FOLLOWING THE JURISDICTIONAL HIGH COURT AND ALSO THE FACT THAT THE HONBLE APEX COURT HAS NEITHER SET ASIDE THE ORDER OF KOLKA TA HIGH COURT IN THE CASE OF AFT INDUSTRIES LTD NOR GRANTED ANY STAY., I AM OF THE V IEW THAT ADDITION ON ACCOUNT OF CESS ON GREEN LEAVES FOR RS.40,56,453/- SHOULD BE DELETED. 5. AGGRIEVED BY THE ORDER OF CIT(A) THE REVENUE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 3 ITA NO.2769/KOL/2013 M/S. NAHORJAN TEA CO.PVT. LTD. A.YR.2005-06 3 6. WE HAVE HEARD THE RIVAL SUBMISSIONS. INCOME F ROM GROWING, MANUFACTURING AND SALE OF TEA WOULD BE COMPOSITE INCOME, WHICH MEANS IT COMPRISES AGRICULTURAL INCOME TO THE EXTENT OF GROWING TEA, WHICH IS NOT CHARGEAB LE TO TAX AND NON-AGRICULTURAL INCOME TO THE EXTENT IT COMPRISES OF INCOME FROM MANUFACTU RE AND SALE OF TEA, WHICH INCOME IS CHARGEABLE TO TAX. RULE 8 OF THE INCOME TAX RULES, 1062 PROVIDES METHOD OF COMPUTATION FOR COMPOSITE INCOME FROM MANUFACTURE O F TEA. UNDER RULE 8 (1) OF THE INCOME TAX RULES, 1962 (RULES) INCOME DERIVED FROM SALE OF TEA GROWN AND MANUFACTURED BY THE SELLER IN INDIA SHALL BE COMPUT ED AS IF IT WERE INCOME DERIVED FROM BUSINESS, AND FORTY PER CENT OF SUCH INCOME SHALL B E DEEMED TO BE INCOME LIABLE TO TAX. ACCORDING TO THE AO CESS ON GREEN LEAF WAS AN EXPEN DITURE WHICH WAS ATTRIBUTABLE TO THE ACTIVITY OF GROWING OF TEA AND WOULD THEREFORE BE NOT ALLOWABLE AS DEDUCTION WHILE COMPUTING INCOME FROM MANUFACTURE AND SALE OF TEA. HE ACCORDINGLY ADDED THE SAME TO THE LOSS DECLARED IN THE RETURN OF INCOME AND LATER ON HELD THAT 40% OF SUCH LOSS ALONE WAS LOSS FROM BUSINESS OF MANUFACTURE AND SALE OF T EA. THE PLEA OF THE ASSESSEE WAS THAT THE ENTIRE GREEN LEAF CESS HAD TO BE ALLOWED A S DEDUCTION FIRST AND ONLY ON THE LOSS OR PROFIT ARRIVED AT AFTER SUCH DEDUCTION RULE 8(1) OF THE RULES HAVE TO BE APPLIED AND 40% OF SUCH SUM HAS TO BE CONSIDERED AS INCOME OR LOSS FROM THE BUSINESS OF MANUFACTURE AND SALE OF TEA. 7. 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 A ND ONLY THEREAFTER 40% OF SUCH INCOME HAS TO BE BROUGHT TO TAX. 8. AFTER HEARING THE RIVAL SUBMISSIONS AND ON 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 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 4 ITA NO.2769/KOL/2013 M/S. NAHORJAN TEA CO.PVT. LTD. A.YR.2005-06 4 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. 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 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 CALCUTTA HIGH COURT NOR GRA NTED ANY STAY. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO BROUGHT TO OUR NOTICE THE DEC ISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. M/S.APEEJAY TEA CO. LTD. CIV IL APPEAL NO.3168 OF 2006 DATED 6.8.2015 WHEREIN THE HONBLE SUPREME COURT HAS UPHE LD VIEW AS WAS TAKEN IN THE CASE OF AFT INDUSTRIES LTD. (SUPRA). WE THEREFORE DISMI SS THE APPEAL OF THE REVENUE. 9. IN THE RESULT THE APPEAL OF THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE COURT ON 08.07.2016. SD/- SD/- [M.BALAGANESH] [ N.V.VASUDEVAN ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 08.07.2016. [RG PS] COPY OF THE ORDER FORWARDED TO: 1.M/S. NAHORJAN TEA CO.PVT. LTD., 33A, CHOWRINGHEE ROAD, KOLKATA-700071. 2. D.C.I.T., CIRCLE-4, KOLKATA. 3.. CIT(A)-IV, KOLKATA 4. CIT-II, K OLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER ASSTT.REGISTRAR, ITAT, KOLKATA BENCHES 5 ITA NO.2769/KOL/2013 M/S. NAHORJAN TEA CO.PVT. LTD. A.YR.2005-06 5