DCIT, Circle-4(2), Kol., Kolkata V. M/s The Bormah Jan Tea Co.(1936) Limited, Kolkata

ITA 365/KOL/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6489 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-05-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 22-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SOUMYAJIT DASGUPTA ADD CIT LD
• Assessee Lawyers: RAM KISHAN NOWAL LD

Judgement Text

INCOME TAX APPELLATE TRIBUNAL D BENCH : KOLKATA BEFORE SHRI WASEEM AHMED, AM & SHRI S.S.VISWA NETHRA RAVI, JM ITA NO. 365/KOL /2017 A.Y : 2012-13 D.C.I.T, CIR-4(2), KOLKATA VS. M/S. THE BORMAH J AN TEA CO. (1936) LTD. PAN: AABCT 2010K [ APPELLANT ] [ RESPONDENT ] APPELLANT BY : SHRI SOUMYAJIT DASGUPTA, ADD.CIT, LD.SR.DR RESPONDENT BY : SHRI RAM KISHAN NOWAL, LD .AR DATE OF HEARING : 19-03-2018 DATE OF PRONOUNCEMENT : 0 4-05-2018 ORDER SHRI S.S.VISWANETHRA RAVI, JM THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER DT . 07-12-2016 OF THE CIT-A, 2, KOLKATA FOR THE A.Y 2012-13. 2. THE ONLY ISSUE IS TO BE DECIDED AS TO WHETHER TH E CIT-A IS JUSTIFIED IN HOLDING THAT THE ASSESSEE IS ENTITLED TO CLAIM DEDU CTION U/S. 80IE OF THE ACT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE A.Y UNDER CONSIDERATION THE AO HELD THAT THE ASSESSEE IS NOT ENTITLED TO SEEK BENEFIT U/S.80IE OF THE ACT TAKING INTO CONSIDERATION THE ASSESSMENT ORDER FOR A.Y 2010-11 BEING INITIAL ASSESSMENT YEAR, WHEREIN IT WAS HELD NO SUBSTANTIAL EXPANSION HAS BEEN TAKEN AS PER SECTION 80IE OF THE ACT AND DENIED THE CLAIM OF DEDUCTION U/S. 80IE OF THE ACT. 4. THE CIT-A FOLLOWING THE EARLIER ORDER OF HIS PRE DECESSOR IN ASSESSEES OWN CASE PASSED FOR THE A.Y 2010-11 ALLO WED THE CLAIM OF DEDUCTION BY STATING AS UNDER :- ITA NO. 365/KOL/2017 2 I HAVE CONSIDERED THE SUBMISSIONS OF THE AUTHORIZED REPRESENTATIVE OF THE APPELLANT AS WELL AS THE ASSESSMENT ORDER FRAMED IN THE LIGHT OF THE MATERIALS AVAILABLE ON RECORD BEFORE THE ASSESSING OFFICER DURING THE ASSE SSMENT PROCEEDINGS. THE APPELLANT HAS BEEN CARRYING ON THE BUSINESS OF GROWING AND MANUFA CTURING OF TEA AT ITS GARDENS SITUATED IN THE STATE OF ASSAM AND WAS ENTITLED TO DEDUCTION U/S 80-IE(1) @100% OF ITS PROFITS FROM TEA BUSINESS. THE APPELLANT UNDERTOOK SUBSTANT IAL EXPANSION FOR MANUFACTURING TEA DURING THE FINANCIAL YEAR 2009-10(RELEVANT FOR THE ASSESSMENT YEAR 2010-11). THE AO IN ASSESSMENT YEAR 2010-11 HAD NOT BEEN ALLOWED AFTER HOLDING THAT SUBSTANTIAL EXPANSION AS PER SECTION 80-IE(7)(III) DURING THE FINANCIAL Y EAR 2009-10 (ASSESSMENT YEAR 2010- 11) HAD ALLEGEDLY NOT BEEN UNDERTAKEN BUT THE (IT (APPE ALS)-2, KOLKATA VIDE HIS APPELLATE ORDER DATED 29/01/2015 HELD THAT THE APPELLANT SHOU LD BE TREATED AS ELIGIBLE FOR DEDUCTION U/S 80-IE AND HE DIRECTED THE ASSESSING OFFICER TO CONSIDER THAT THE APPELLANT HAD DULY COMPLIED WITH THE REQUIREMENTS OF THE SUBSTANTIAL E XPANSION AS SPECIFIED IN SECTION 80- IE(2)(III)/(7)(II) AND THEREFORE THE APPELLANT SHOU LD BE ALLOWED DEDUCTION U/S 80-IE. KEEPING IN VIEW OF ABOVE AND BY FOLLOWING THE PREDE CESSOR'S ORDER, THE AO IS DIRECTED TO DELETE THE ADDITION AND THIS GROUND OF APPEAL IS AL LOWED. 5. BEFORE US THE LD. DR RELIED ON THE ORDER OF THE AO. ON THE OTHER HAND, THE LD. AR SUBMITS THAT THE ORDER DT. 29-01- 2015 PASSED BY THE CIT(A)-2, KOLKATA WAS CHALLENGED BY THE REVENUE BEF ORE THIS TRIBUNAL AND THE TRIBUNAL UPHELD THE ORDER OF THE CIT-A IN HOLDI NG THAT THE ASSESSEE IS ENTITLED TO CLAIM DEDUCTION U/S. 80IE OF THE ACT, C OPY OF THE SAME IS ON RECORD AND REFERRED TO PARAS 9,10 & 11 OF THE SAID ORDER AND ARGUED THAT THE ISSUE IN HAND IS COVERED IN FAVOR OF ASSESSEE BY THE ORDER DT. 19-11- 2018 IN ASSESSEES OWN CASE FOR THE A.Y 2010-11 IN ITA NO. 665/KOL/2015 AND SUBMITS THE ASSESSEE IS ALSO ENTITLED TO CLAIM DEDUCTION U/S. 80IE OF THE ACT FOR THE SUBSEQUENT A.YS AND PRAYED TO DISMI SS THE GROUNDS OF APPEAL RAISED BY THE REVENUE. 6. HEARD BOTH THE PARTIES AND PERUSED THE RECORD. WE FIND THAT THE A.Y 2010-11 IS HELD TO BE INITIAL ASSESSMENT YEAR AND THE CO-ORDINATE BENCH OF THIS TRIBUNAL HELD THAT THE ASSESSEE IS ENTITLED TO GET DEDUCTION AT 100% U/S. 80IE OF THE ACT. RELEVANT PORTION OF THE ORDE R DT. 19-01-2018 IN ASSESSEES OWN CASE FOR THE A.Y 2010-11 IS REPRODUC ED HEREIN BELOW:- 9. AGGRIEVED, THE ASSESSEE CHALLENGED THE SAME BEF ORE THE CIT(A), CONTENDING THAT THE OPENING VALUATION OF TWO I.E. WATER SUPPLY SYSTEM A ND IRRIGATION SYSTEM SHOULD NOT BE TAKEN INTO ACCOUNT FOR THE PURPOSE OF TESTING THE C OMPLIANCE OF THE CONDITIONS IN CLAUSE (II) OF SECTION 80IE(2) READ WITH CLAUSE (III) OF SECTION 80IE(7) OF THE ACT. THE ASSESSEE ALSO CONTENDED SUBSTANTIAL EXPANSIONS SHOULD BE CON SIDERED AFTER TAKING INTO ACCOUNT ONLY THOSE MACHINERIES WHICH ARE ACTUALLY BEING UTI LIZED BY THE ASSESSEE FOR THE PURPOSE OF ITS MANUFACTURING BUSINESS AND NOT OTHERWISE. TH E CIT(A) CONSIDERING THE SUBMISSIONS OF ASSESSEE, SOUGHT REMAND REPORT FROM THE AO TO FI ND OUT WHETHER THE VALUE OF PLANT AND MACHINERY SHOULD INCLUDE THE VALUE OF FIXED ASS ET PERTAINING TO FARM AND IRRIGATION OR WHETHER PLANT AND MACHINERY SHOULD BE RELATABLE ONL Y TO THOSE PROCESS OF MANUFACTURING. THE AO IN ITS REMAND REPORT STATED T HAT THE IRRIGATION AND WATER SUPPLY SYSTEM IS THE PRIME REQUIREMENT FOR GROWING TEA AS NO PLANT CAN GROW WITHOUT WATER AND PROPER IRRIGATION AND ALSO IRRIGATION AND WATER SUP PLY SYSTEM ALSO FORMS PLANT AND ITA NO. 365/KOL/2017 3 MACHINERY. THE CIT(A) CONSIDERING THE SUBMISSIONS A S WELL AS REMAND REPORT OF THE AO DELETED THE ADDITION MADE BY THE AO BY OBSERVING AS UNDER: '9.6. THE DEDUCTION U/S. 80LE IS IN RELATION TO PRO DUCE OR MANUFACTURE A THING OR ARTICLE. IN THE CASE OF THE APPELLANT THERE WERE TWO STAGES, THE FIRST BEING THE GROWING OF THE GREEN TEA LEAVES FOR WHICH THE MACHINERIES SHOWN UN DER THE HEAD 'FARM ACCOUNT' WERE RELEVANT AND THE SECOND STAGE WAS THE MANUFACTURING OF TEA FROM THE GROWN GREEN TEA LEAVES WHERE THE MACHINERIES OTHER THAN THOSE SHOWN UNDER THE HEAD 'FARM ACCOUNT' HAD BEEN UTILIZED. THE AR'S SUBMISSION, THAT IF ONE ASSESSEE MANUFACTURES TEA FROM GREEN TEA LEAVES PURCHASED FROM THE MARKET AND ANOT HER ASSESSEE MANUFACTURES TEA FROM ITS OWN GREEN TEA LEAVES, BOTH THE ASSESSEES A RE ELIGIBLE FOR DEDUCTION U S. T IN RE A ION TO THE PROFIT ARISING FROM THE MANUFACTURING PROCESS, LENDS SUPPORT TO T E APPELLANT'S CLAIM THAT GROWING AND MANUFACTURING AR E TWO DIFFERENT INDEPENDENT PROCESSES. FURTHER THE PROVISIONS OF RULE 8 OF INCO ME TAX RULES, 1962 PROVIDING THE BIFURCATION OF INCOMES ARISING FROM GROWING AND MAN UFACTURING TEA FOR THE PURPOSE OF STATE TAXATION AND CENTRAL INCOME-TAX, POINT TOWARD S THE CONCEPT OF SEPARATE PROCESSES OF GROWING AND MANUFACTURING. HENCE, THE MACHINERIE S RELEVANT FOR THESE TWO INDEPENDENT PROCESSES, VIZ. GROWING AND MANUFACTURI NG, SHOULD BE CONSIDERED SEPARATELY AS REGARDS THEIR UTILIZATION. FURTHER, A S EXPLAINED BY THE AR THAT OUT OF TWO DIFFERENT PROCESSES - PRODUCTION I. E. GROWING AND MANUFACTURING, THE APPELLANT CLAIMED DEDUCTION ONLY IN RELATION TO THE MANUFACTURING PRO CESS, IT APPEARS THAT FOR THE PURPOSE OF SECTION 80LE, ONLY THE MACHINERIES RELEVANT FOR THE MANUFACTURING PROCESS, SHOULD BE CONSIDERED AS RELEVANT. 9N THE BASIS OF THIS UNDERS TANDING, THE APPELLANT'S CLAIM FOR NOT TAKING INTO ACCOUNT THE MACHINERIES VIZ., WATER SUP PLY SYSTEM RS. 97,777) AND IRRIGATION (RS. 14,35,49 SHOWN UNDER 'FARM ACCOUNT' , APPEARS TO BE JUSTIFIABLE. ACCORDINGLY,' I AM INCLINED TO ACCEPT THE APPELLANT 'S CLAIM THAT TO DETERMINE AS TO WHETHER THERE HAD OCCURRED SUBSTANTIAL EXPANSION, A S REQUIRED U/S. 80LE(2)(II)/(7)(II), THE ABOVE MENTIONED TWO MACHINERIES VIZ., WATER SUP PLY SYSTEM (RS. 97,777) AND IRRIGATION (RS. 14,35,499), SHOULD NOT BE CONSIDERE D AND CONSEQUENTLY, THE APPELLANT SHOULD BE TREATED AS ELIGIBLE FOR DEDUCTION U/S. 8 0LE. HENCE, THE ASSESSING OFFICER IS DIRECTED TO CONSIDER THAT THE APPELLANT HAD DULY CO MPLIED WITH THE REQUIREMENT OF SUBSTANTIAL EXPANSION AS SPECIFIED IN SECTION 80LE (2)(II)/(7)(II) AND THEREFORE THE APPELLANT SHOULD BE ALLOWED DEDUCTION OF RS. 26,10, 851 U/S. 80LE. GROUND NO. 8 OF THE APPEAL, IN VIEW OF THE DISCUSSION AT PARA 9.4, 9.5 & 9.6 IS ALLOWED.' 10. BEFORE US, THE LD. DR SUBMITS THAT THE WATER SU PPLY SYSTEM AND IRRIGATION SYSTEM IS THE PRIME REQUIREMENT WITHOUT THERE BEING ANY SUCH SYSTEM THE ASSESSEE CANNOT GROW TEA IN ITS GARDENS. THE SAID IRRIGATION AND WATER S UPPLY SYSTEM ALSO FORMS PART OF PLANT AND MACHINERY. THE VALUE OF SAID SYSTEMS SHOULD BE CONSIDERED FOR THE PURPOSE VALUATIONS OF THE MACHINERIES UTILIZED FOR MANUFACT URING OF TEA. THE LD. DR SUPPORTED THE VIEW TAKEN BY THE AO AND PRAYED TO ALLOW THE GROUND RAISED IN THIS REGARD. THE LD. AR SUBMITS THAT THERE ARE TWO PROCESSES IN TEA BUSINES S I.E ONE IS GROWING AND OTHER ONE IS MANUFACTURING. THE ASSESSEE CLAIMED DEDUCTION ONLY IN RELATION TO MANUFACTURING PROCESSES AND ONLY MACHINERIES RELEVANT FOR THE MAN UFACTURING PROCESSES SHOULD BE CONSIDERED FOR THE PURPOSE OF OPENING BOOK VALUE. T HE LD. AR SUPPORTED THE ORDER OF CIT(A). 11. HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MAT ERIAL AVAILABLE ON RECORD. IT IS OBSERVED THAT THE ASSESSEE HAS TWO PROCESSES IN TEA BUSINESS I.E. GROWING OF TEA AND MANUFACTURING OF TEA. THE ASSESSEE GROWS TEA IN ITS OWN GARDENS AND MANUFACTURES TEA FROM SUCH PRODUCE. THE CASE OF THE ASSESSEE IS THAT THIS DEDUCTION IS AVAILABLE IN CASE A ASSESSEE MANUFACTURING OF TEA AND HENCE ONLY PLANT AND MACHINERY OF MANUFACTURING IS TO BE CONSIDERED. WHETHER THE OPENING VALUATIONS OF PLANT AND MACHINERIES OF WATER SUPPLY SYSTEM AND IRRIGATION SYSTEM AS SHOWN UNDER FARM ACCOUNT IS TO BE CONSIDERED THE PART AND PARCEL OF THE VALUE OF PLANT AND MACHI NERY AS ON 01.04.2009 FOR CALCULATING THE PERCENTAGE OF ADDITION TO PLANT AND MACHINERY F OR CLAIMING DEDUCTION U/S 80IE OR NOT IS THE ISSUE BEFORE US. WE FIND THAT THE WATER SUP PLY SYSTEM AND IRRIGATION SYSTEM ADMITTEDLY ARE NOT PART OF TEA MANUFACTURING PROCES SES. THEREFORE, THE SAID OPENING VALUATION OF SAID MACHINERIES SHOULD NOT BE CONSIDE RED FOR THE PURPOSE OF CLAIMING DEDUCTION U/S 80IE OF THE ACT. THEREFORE, WE FIND N O INFIRMITY IN THE ORDER OF CIT(A) AND THUS, THE GROUND RAISED BY THE REVENUE IN THIS REGA RD IS DISMISSED. 7. IN VIEW OF ABOVE, WE UPHOLD THE ORDER OF THE CI T-A AND IT IS JUSTIFIED. THE GROUNDS RAISED BY THE REVENUE ARE DI SMISSED. ITA NO. 365/KOL/2017 4 8. IN THE RESULT, THE APPEAL OF REVENUE-ITA NO. 365 /K/2017 FOR THE A.Y 2012-13 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 04- 05-2018 SD/- SD/- WASEEM AHMED S.S.VISWANETHRA RAVI ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 04-05-2018 COPY OF THE ORDER FORWARDED TO: 1 . APPLICANT/DEPARTMENT : THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-4(2), AAYKAR BHAWAN, 4 TH FLOOR, ROOM NO. 11B,P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069. 2 RESPONDENT/ASSESSEE: M/S. THE BORMAH JAN TEA CO. (1 936) LIMITED. MCLEOD HOUSE, 3 N.S ROAD, KOLKATA-700 001. 3 . CIT, 4 . CIT(A), 5 . DR, KOLKATA BENCHES, KOLKATA **PP/SPS TRUE COPY BY ORDER, SR.PS, H.O.O ITAT,KOL