DCIT, Circle - 4, Kolkata, Kolkata V. M/s. Lallamookh Tea Co. (P) Ltd., Kolkata

ITA 320/KOL/2011

• Counselvise Citation: 32023514 RSA 2011
• Duration Of Justice: 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-05-2011
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 19-05-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 22-02-2011
• Court: TRIBUNAL
• Department Lawyers: G MONDAL
• Assessee Lawyers: SUBASH AGARWAL

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL, BEN CH A, KOLKATA () BEFORE . .. . . .. . , , , , , SHRI B.R.MITTAL, JUDICIAL MEMBER. /AND . .. .!' !'!' !'. .. . , #$ SHRI C.D.RAO, ACCOUNTANT MEMBER %& %& %& %& ' ' ' ' / ITA NO . 320 /KOL/2011 () *+/ ASSESSMENT YEAR : 2002-03 (-. / APPELLANT ) D.C.I.T., CIRCLE-4, KOLKATA - ( - - VERSUS - . (01-./ RESPONDENT ) M/S.LALLAMOOKH TEA CO.(P) LTD., KOLKATA (PAN: AAACL 4623 R) -. 2 3 #/ FOR THE APPELLANT: SHRI G.MONDAL 01-. 2 3 #/ FOR THE RESPONDENT: SHRI SUBASH AGARWAL #4 / ORDER ( (( ( . .. .!' !'!' !'. .. . ) )) ), , , , #$ PER SHRI C.D.RAO, AM THIS APPEAL IS FILED BY THE REVENUE AGAINST THE OR DER DATED 09.11.2010 OF THE CIT(A)-XIX, KOLKATA PERTAINING TO A.YR. 2002-03. 2. THERE IS A DELAY OF 10 DAYS IN FILING OF THE APPEAL BY THE REVENUE FOR WHICH THE REVENUE HAS FILED A CONDONATION PETITION EXPLAINING THE REASONS FOR SUCH DELAY. AFTER CONSIDERING THE SUBMISSIONS BY THE REVENUE THE DELA Y IS CONDONED. 3. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E, LD. CIT(A)-XIX, KOLKATA HAS ERRED IN LAW IN DELETING CESS ON GREEN LEAF FOR AN AMOUNT OF RS.16,23,323/- WITHOUT APPRECIATING THE FACT THAT CESS IS PAYABLE ON PRODUCTION OF GREEN LEAF WHICH IS FULLY AGRICULTURAL EXPENSES AND THEREFORE, NOT ALLOWABLE AS DEDUCTION FROM COMPOSITE INCOME. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A)-XIX, KOLKATA HAS ERRED IN LAW IN DIRECTING THE A.O. TO DELETE TH E DISALLOWANCE OF RS.4,32,251/- ON ACCOUNT OF NURSERY AND EXTENSION E XPENSES WITHOUT 2 APPRECIATING THE FACT THAT THESE EXPENDITURES ARE G IVING ENDURING BENEFIT TO THE TEA GARDENS OVER A NUMBER OF YEARS BEING CAPITAL IN NATURE. 3. THAT THE APPELLANT CRAVES FOR LEAVE TO ADD, DELE TE OR MODIFY ANY OF THE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING. 4. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE AO W HILE DOING THE SCRUTINY ASSESSMENT DISALLOWED AN AMOUNT OF RS.16,23,323/- ON ACCOUNT O F CESS ON GREEN LEAF BY OBSERVING AS UNDER :- THE ASSESSEE IS A MANUFACTURER OF TEA AND CULTIVAT ES ITS OWN GREEN LEAVES FROM WHICH TEA IS MANUFACTURED. IN THE PROFIT AND LOSS A CCOUNT THE ASSESSEE DEBITED AN EXPENDITURE OF RS.16,23,323/- ON ACCOUNT OF CESS ON GREEN LEAF. SINCE CESS ON GREEN LEAVES IS AN EXPENSE THAT IS TOTALLY AGRIC ULTURAL IN NATURE IT CANNOT BE ALLOWED. FROM THE GUWAHATI HIGH COURT IN JOREHAUT G ROUP OF CASES IN 226 ITR 622 HAS HELD THAT THIS EXPENDITURE IS TOTALLY AGRIC ULTURAL IN NATURE AND THAT IT SHOULD BE ALLOWED AS DEDUCTION @100% UNDER THE AGRI CULTURAL INCOME TAX. THE ASSESSEE SUBMITTED THAT THE DISALLOWANCE IN EAR LIER YEARS ON THE SAME ISSUE HAS BEEN DELETED BY ITAT. IN SUPPORT OF HIS CLAIM T HE AR CITED THE DECISIONS OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF AFT INDU STRIES LTD. VS CIT. THE CONTENTION OF THE ASSESSEE IS NOT ACCEPTED BY THE A O. THEREFORE EXPENSES ON GREEN LEAF CESS FOR RS.16,23,323/- IS DISALLOWED AN D ADDED BACK. 4.1. ON APPEAL THE LD. CIT(A) DISALLOWED AN AMOUNT OF RS.16,23,323/- ON ACCOUNT OF CESS ON GREEN LEAF BY RESPECTFULLY FOLLOWING THE OR DER OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF AFT INDUSTRIES LTD. VS CIT (270 ITR 167) AND THE DECISIONS OF THE ITAT, KOLKATA FOR THE EARLIER YEARS. 5. THE LD. DR APPEARING ON BEHALF OF THE REVENUE RE LIED ON THE ORDER OF THE AO. ON THE OTHER HAND, THE LD.COUNSEL FOR THE ASSESSEE REL IED ON THE ORDERS OF THE LD. CIT(A). 6. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CAREF UL PERUSAL OF THE MATERIALS AVAILABLE ON RECORD, KEEPING IN VIEW OF THE FACT TH AT THE ISSUE IS CONCLUDED BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CAS E OF CIT VS AFT INDUSTRIES LTD. 270 ITR 167 (CAL) WHERE THE AMOUNT PAID AS CESS WAS HEL D AS ELIGIBLE FOR DEDUCTION 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. 3 6.1. THE FACT THAT THE SLP IS PENDING BEFORE THE HONBLE SUPREME COURT AGAINST THE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN RESPECT OF AFT INDUSTRIES LTD. VS CIT (270 ITR 167) WILL NOT HAVE ANY EFFECT SINCE TH E HONBLE APEX COURT HAS NEITHER SET ASIDE THE ORDERS OF THE CALCUTTA HIGH COURT NOR GRANTED ANY STAY. 6.2. WE MAY FURTHER MENTION THAT IDENTICAL ISSUE WA S THE SUBJECT MATTER OF APPEAL BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE VIDE ORD ER DATED 15.12.2004 IN I.T.A.NOS.1253 & 1254 (KOL)/2004 FOR A.YRS. 1996-97 AND 1997-98 HA S ALLOWED THE CLAIM OF THE ASSESSEE. THE LD. CIT(A) HAS DELETED THE ADDITION BY RESPECTFULLY FOLLOWING THE DECISIONS OF THE ITAT, KOLKATA IN THE ASSESSEES OWN CASE FOR THE A.YRS. 2003-04& 2004-05. RESPECTFULLY FOLLOWING THE SAME WE DELETE THE ADDIT ION OF RS.16,23,323/- ON ACCOUNT OF CESS ON GREEN LEAF AND DISMISS GROUND NO.1 OF THE R EVENUE. 7. THE SECOND ISSUE IS RELATING TO THE DISALLOWANCE IN RESPECT OF NURSERY AND EXTENSION EXPENSES AMOUNTING TO RS.4,32,251/-. THE LD. AO HAS DISALLOWED THE SAME BY OBSERVING AS UNDER :- THE ASSESSEE HAS DEBITED THE FOLLOWING EXPENSES IN TO THE PROFIT AND LOSS ACCOUNT : NURSERY 4,30,943 EXTENSION 1,308 FURTHER NO EVIDENCE HAS BEEN FILED BY THE ASSESSEE TO SUGGEST THAT THERE HAS BEEN NO EXTENSION PLANTING. THUS APPLYING THE RATIO OF THE DECISION OF KOLKATA HIGH COURT IN THE CASE OF TASATI TEA CO.LTD. REPORT ED IN 262 ITR 388 THESE EXPENSES ARE ADDED BACK TO THE COMPOSITE INCOME TRE ATING THE SAME AS CAPITAL IN NATURE. 7.1. ON APPEAL THE LD. CIT(A) HAS DELETED THE SAME BY OBSERVING AS UNDER :- (8) I HAVE CONSIDERED THE SUBMISSION OF THE APPE LLANT AND PERUSED THE ASSESSMENT ORDER. I HAVE ALSO GONE THROUGH THE REPO RT SUBMITTED BY THE APPELLANT TO THE TEA BOARD FOR THE RELEVANT PERIOD. ON PERUSAL OF TEA BOARD REPORTS IT IS AN APPARENT THAT DURING THE YEAR UNDE R CONSIDERATION THE APPELLANT HAS NOT CARRIED OUT ANY EXTENSION PLANTATION ON THE VIRGIN SOIL. THE EXPENDITURE INCURRED BY THE APPELLANT UNDER THE HEAD NURSERY AN D EXTENSION RELATES TO EXPENDITURE INCURRED FOR MAINTENANCE OF EXISTING PL ANTS. IN VIEW OF ABOVE, THE EXPENDITURE OF RS.4,32,251/- CANNOT BE TREATED AS C APITAL IN NATURE AND SAME IS DIRECTED TO BE DELETED. THE GROUND NO.2 IS ALLOWED. 7.2. AGGRIEVED BY THIS THE REVENUE IS IN APPEAL BEF ORE US. 4 8. THE LD. DR ON BEHALF OF THE REVENUE THOUGH RELIE D ON THE ORDERS OF THE AO COULD NOT CONTRACT THE FINDINGS OF THE LD. CIT(A). ON THE OTHER HAND, THE LD. AR HEAVILY RELIED ON THE ORDERS OF THE LD. CIT(A). 9. AFTER HEARING THE RIVAL SUBMISSIONS AND ON PERUS AL OF MATERIALS AVAILABLE ON RECORD, KEEPING IN VIEW OF THE FACT THAT THE ASSESS EE HAS NOT INCURRED ANY EXPENDITURE ON ACCOUNT OF EXTENSION OF PLANTATION ON THE VIRGIN SOIL AS POINTED OUT BY THE LD. CIT(A). WE FIND NO INFIRMITY IN THE ORDERS OF THE L D. CIT(A) TO BE INTERFERED WITH AND WE CONFIRM THE SAME. 10. IN THE RESULT THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19.05.2011. SD/- SD/- . .. . . .. . , , , , B.R.MITTAL, JUDICIAL MEMBER . .. .!' !'!' !'. .. . , ,, , #$ #$ #$ #$ , C.D.RAO, ACCOUNTANT MEMBER. ( (( ('$ '$ '$ '$) )) ) DATE: 19.05.2011 #4 2 0& 5#&*6- COPY OF THE ORDER FORWARDED TO: 1. M/S.LALLAMOOKH TEA CO.(P) LTD., AZIMGANJ HOUSE, 5 TH FLOOR, 7-CAMAC STREET, KOLKATA-700017. 2 THE DCIT, CIRCLE-4, KOLKATA 3. THE CIT, 4. THE CIT(A)-XIX, KOLKATA 5. DR, KOLKATA BENCHES, KOLKATA 1& 0/ TRUE COPY, #4(;/ BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES R.G.(.P.S.) 5