D.C.I.T.-Circle-4, Kolkata, Kolkata V. M/s Chengmari Tea co. Ltd., Kolkata

ITA 2850/KOL/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4482 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2016
• Appeal Filed By: Department
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 24-12-2013
• Court: TRIBUNAL
• Department Lawyers: SUDIPTA GUHA
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KOLKATA [BEFORE HONBLE SRI N.V.VASUDEVAN, JM & SHRI WASE EM AHMED, AM] I.T.A NO. 2850/KOL/20 13 ASSESSMENT YEAR : 2006-0 7 D.C.I.T., CIRCLE-4, -VS.- M/S. CHENGMAR I TEA CO.LTD. KOLKATA KOLKATA [PAN : AABCC 0672 Q] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI SUDIPTA GUHA, JCIT, SR.DR FOR THE RESPONDENT : SHRI SUNIL SURANA, A.R. DATE OF HEARING : 18.07.2016. DATE OF PRONOUNCEMENT : 20.07.2016. ORDER PER N.V.VASUDEVAN, JM THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDER DATED 25.9.2013 OF CIT(A)- IV, KOLKATA RELATING TO AY 2006-07. 2. GROUND OF APPEAL RAISED BY THE REVENUE READS AS FOLLOWS :- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) ERRED IN LAW AS WELL IN HOLDING THAT CESS ON GREEN LEAF OF RS.60,71,704/- I S AN ALLOWABLE EXPENDITURE, IGNORING THE FACT THAT IT IS DIRECTLY ATTRIBUTABLE TO CORE AGRIC ULTURE ACTIVITIES WHICH IS TAXABLE UNDER STATE AGRICULTURE INCOME TAX, BEYOND THE PURVIEW OF CENTRAL INCOME TAX AND ON THE SAME ISSUE 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.60,71,740/- TOWARD GREEN LEAF CESS AS THE SAME WERE PAID DURING THIS Y EAR AND WERE NOT CLAIMED IN RESPECTIVE RELEVANT YEARS UNDER THE PROVISIONS OF S ECTION 43B OF THE INCOME TAX ACT, 1961 (ACT) AS DEDUCTION IN COMPUTING TOTAL INCOME. 3.1. IN THE COMPUTATION FILED 40% OF THESE PAYMEN TS WERE CLAIMED AS DEDUCTION IN INCOME TAX COMPUTATION AND BALANCE 60% CLAIMED IN A GRICULTURAL INCOME 2 ITA NO.2850/KOL/2013 M/S. CHENGMARI TEA CO.LTD. A.YR.2006-07 2 COMPUTATIONS. WHILE MAKING ASSESSMENT THE LEARNED A SSESSING OFFICER HAS TREATED THESE EXPENSES AS 100% RELATING TO AGRICULTURAL INC OME AND HENCE DISALLOWED 40% OF THESE EXPENSES CLAIMED IN COMPUTING TOTAL INCOME UN DER ACT CALCULATION. DURING THE COURSE OF HEARING IT WAS EXPLAINED THAT THE ADDITIO N IS BEING MADE AS SIMILAR ISSUE IS STILL PENDING WITH SUPREME COURT ALTHOUGH THE ISSUE HAS B EEN DECIDED AGAINST THE REVENUE BY JURISDICTIONAL HONBLE KOLKATA HIGH COURT CIT VS AFT INDUSTRIES LTD. 270 ITR 167 (CAL). 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.60,21,704/- SHOULD BE DELETED. 5. AGGRIEVED BY THE ORDER OF CIT(A) THE REVENUE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 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 3 ITA NO.2850/KOL/2013 M/S. CHENGMARI TEA CO.LTD. A.YR.2006-07 3 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 AND KEEPING IN VIEW OF THE FACT THAT 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 RULE 8 OF I .T. RULES, WE DO NOT FIND ANY MERITS IN THIS APPEAL BY THE REVENUE. THIS ISSUE IS , THEREFORE, DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY UPHOLDING THE O RDER OF THE C.I.T.(A) WHO HAS 4 ITA NO.2850/KOL/2013 M/S. CHENGMARI TEA CO.LTD. A.YR.2006-07 4 ALLOWED THE DEDUCTION OF PAYMENT OF CESS ON GREEN L EAVES 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 AGA INST 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'BLE APEX COURT HAS NE ITHER SET ASIDE THE ORDERS OF THE CALCUTTA HIGH COURT NOR GRANTED ANY STAY. THE LEAR NED COUNSEL FOR THE ASSESSEE ALSO BROUGHT TO OUR NOTICE THE DECISION OF THE HONBLE S UPREME COURT IN THE CASE OF CIT VS. M/S.APEEJAY TEA CO. LTD. CIVIL APPEAL NO.3168 OF 20 06 DATED 6.8.2015 WHEREIN THE HONBLE SUPREME COURT HAS UPHELD VIEW AS WAS TAKEN IN THE CASE OF AFT INDUSTRIES LTD. (SUPRA). WE THEREFORE DISMISS THE APPEAL OF THE RE VENUE. 9. IN THE RESULT THE APPEAL OF THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE COURT ON 20.07.2016. SD/- SD/- [WASEEM AHMED] [ N.V.VASUDEVAN ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 20.07.2016. [RG PS] COPY OF THE ORDER FORWARDED TO: 1. M/S. CHENGMARI TEA CO. LTD., 37, SHAKESPEARE SAR ANI, 2 ND FLOOR, KOLKATA-700017. 2. D.C.I.T., CIRCLE-4, KOLKATA. 3. CIT(A)-IV, KOLKATA. 4. CIT-II, KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER ASSTT.REGISTRAR, ITAT, KOLKATA BENCHES 5 ITA NO.2850/KOL/2013 M/S. CHENGMARI TEA CO.LTD. A.YR.2006-07 5