JCIT(OSD), Circle - 4, Kolkata, Kolkata V. M/s Tongani Tea Co. Ltd., Kolkata

ITA 429/KOL/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70433 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 8 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2013
• Appeal Filed By: Department
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 19-03-2012
• Court: TRIBUNAL
• Department Lawyers: SUCHETA CHATTOPADHYAY
• Assessee Lawyers: D S DAMLE ACA
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH C , KOLKATA [BEFORE HONBLE SRI R.C.SHARMA, AM & HONBLE SRI GEORGE MATHAN, JM] ITA NO.429/KOL/2012 ASSESSMENT YEAR : 2007-08 ( APPELLANT ) (RESPONDENT) J.C.I.T.(OSD),CIRCLE-4, -VS- . M/S.TONGANI TEA CO ..LTD. KOLKATA KOLKATA (PAN:AAACD 9238 Q) FOR THE APPELLANT: SMT.SUCHETA CHATTOPADHYAY, JCIT, SR.DR FOR THE RESPONDENT: SHRI D.S.DAMLE, ACA DATE OF HEARING : 05.12.2013 DATE OF PRONOUNCEMENT : 05. 12.2013. ORDER PER SHRI GEORGE MATHAN, JM THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD. C.I.T.(A)- IV, KOLKATA IN APPEAL NO.97/CIT(A)-IV/09-10 DATED 08.12 .2011 FOR ASSESSMENT YEAR 2007-08. 2. SMT.SUCHETA CHATTOPADHYAY, JCIT,SR.DR REPRESENT ED ON BEHALF OF THE REVENUE AND SHRI D.S.DAMLE, ACA APPEARED ON BEHALF OF THE ASSESSEE. 3. IN THIS APPEAL THE REVENUE HAS RAISED THE FOLLO WING GROUNDS :- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS.5,23,094/-ON ACCOUNT OF CESS ON GREEN LEAF WITHOUT CONSIDERING THE FACT THAT EXPENSES ON ACCOUNT OF CE SS ON GREEN LEAF IS RELATED TO 100% AGRICULTURAL OPERATION AND SLP IS PENDING BEFORE TH E HONBLE SUPREME COURT AGAINST THE DECISION OF CALCUTTA HIGH COURT IN THE CASE OF AFT INDUSTRIES LTD. VS- CIT (270 ITR 167) IN THE LIGHT OF WHICH LD.CIT(A) DECIDED TH E ISSUE IN FAVOUR OF THE ASSESSEE. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW IN DIRECTING THE A.O. TO ALLOW RS.65,508/- & RS.41,166 /- ON ACCOUNT OF EMPLOYEES CONTRIBUTION TO P.F. SINCE THE DECISION OF THE LD. CIT(A) IS IN CONTRAVENTION WITH SECTION 36(1)(VA). 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW IN ALLOWING THE CLAIM OF THE ASSESSEE REGARDING INTERE ST INCOME FOR RS.24,35,797/- AS INCOME UNDER THE HEAD PROFIT & GAINS OF BUSINESS WITHOUT APPRECIATING THE FACT THAT ITA NO.429/KOL/2012 J.C.I.T (OSD),CIRCLE-4,KOLKATA VS M/S.TONGANI TEA CO.LTD. A.YR.2007-08 2 INTEREST INCOME IS NOT AGRICULTURAL INCOME AS PER S ECTION 2(1A) AND THE ASSESSEE OBTAINED SECURED LOAN FROM BANK FOR THE PURPOSE OF GROWING AND MANUFACTURING OF TEA BUT NOT FOR THE MONEY LENDING TO EARN INTEREST. 4. 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. 3. AT THE TIME OF HEARING IT WAS SUBMITTED BY THE L D. DR THAT GROUND NO.1 WAS IN RELATION TO THE ISSUE OF CESS OF GREEN LEAF WHICH W AS DISALLOWED BY THE AO AS RELATING TO 100% AGRICULTURAL OPERATION. IT WAS THE SUBMISSI ON THAT SLP AGAINST THE DECISION FOLLOWED BY THE LD. CIT(A) WAS PENDING BEFORE THE H ONBLE SUPREME COURT. IT WAS THE SUBMISSION THAT ORDER OF THE LD. CIT(A) MAY BE REVE RSED. 4. IN REPLY THE LD. AR SUBMITTED THAT ADMITTEDLY S LP IS PENDING, HOWEVER THE ISSUE WAS SQUARELY COVERED BY THE DECISION OF THE J URISDICTIONAL HIGH COURT IN THE CASE OF CIT VS AFT INDUSTRIES LTD. REPORTED IN 270 ITR 1 67 (2004). 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AS IT IS NOTICED THAT THE LD. CIT(A) HAS DECIDED THE ISSUE AND DELETED THE ADDITION BY F OLLOWING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CI T VS AFT INDUSTRIES LTD. REFERRED TO SUPRA WE ARE OF THE VIEW THAT THE DECISION OF TH E LD. CIT(A)IS ON THE RIGHT FOOTING AND DOES NOT CALL FOR ANY INTERFERENCE. GROUND NO.1 OF THE REVENUES APPEAL STANDS DISMISSED. 6. IN REGARD TO GROUND NO.2 THE LD. DR VEHEMENTLY SUPPORTED THE ORDER OF THE AO. IN REPLY THE LD. AR SUBMITTED THAT THE ISSUE WAS SQ UARELY COVERED BY THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS M/S.VIJAY SHREE LIMITED IN G.A.NO.2607 OF 2011 DATED 6 TH SEPTEMBER, 2011 WHERE THE HONBLE JURISDICTIONAL HIGH COURT HAS FOLLOWED THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS ALOM EXTRUSION LTD. REPORTED IN 390 ITR 306 TO HOLD THAT THE AMOUNT PAID BY THE EMPLOYEES CONTRIBUTION BEYOND THE DUE DATE WAS DEDUCTIBLE. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AS IT IS NOTICED THAT THE ISSUE IN GROUND NO.2 OF THE REVENUES APPEAL IS SQUARELY COV ERED BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CI T VS M./S VIJAY SHREE LIMITED ITA NO.429/KOL/2012 J.C.I.T (OSD),CIRCLE-4,KOLKATA VS M/S.TONGANI TEA CO.LTD. A.YR.2007-08 3 REFERRED TO SUPRA WE ARE OF THE VIEW THAT THE DECIS ION OF THE LD. CIT(A) ON THIS ISSUE IS ON THE RIGHT FOOTING AND DOES NOT CALL FOR ANY INTE RFERENCE. 8. IN THE RESULT GROUND NO.2 OF THE REVENUES APPEA L IS DISMISSED. 9. IN REGARD TO GROUND NO.3 IT WAS SUBMITTED BY THE LD. DR THAT THE LD. CIT(A) HAS TREATED THE CLAIM OF THE ASSESSEE REGARDING INTERES T INCOME AS INCOME UNDER THE HEAD PROFIT AND GAINS OF BUSINESS. IT WAS THE SUBMISSI ON THAT THE SAME WAS LIABLE TO BE TAXED ONLY UNDER THE HEAD INCOME FROM OTHER SOURCE S. SHE VEHEMENTLY SUPPORTED THE ORDER OF AO. 10. IN REPLY THE LD. AR DREW OUR ATTENTION TO THE O RDER OF CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF JCIT, SPECIAL RANGE-12, KOL VS M/S.DUNCANS AGRO INDUSTRIES LTD. IN ITA NO.255 & 256/CAL/1999 DATED 17 TH APRIL, 2002 WHEREIN PARAS 30 TO 37 HAS CONSIDERED THIS ISSUE AND HAS HELD IN FAVOUR OF THE ASSESSEE. THE RELEVANT PORTIONS IN THE ORDER OF THE COORDINATE BENCH OF THIS TRIBU NAL IN THE CASE OF M/S. DUNCANS AGRO INDUSTRIES LTD ARE REPRODUCED AS UNDER : 30. THE LD. D.R. RELIES ON THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF TUTOCORIN ALKALI & CHEMICALS LIMITED (SUPRA) IS OF NO HELP TO THE REVENUE IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. IN THA T CASE, THE ASSESSEE-COMPANY HAD NOT STARTED ANY BUSINESS ACTIVITY AND DURING THE RELEVA NT YEAR IT WAS IN THE PROCESS OF SETTING UP OF ITS BUSINESS. THE SURPLUS AMOUNT RECE IVED ON SUBSCRIPTION OF SHARE CAPITAL WAS INVESTED BY THE ASSESSEE IN MAKING DEPOSITS WIT H BANK, ON WHICH THE INTEREST WAS EARNED. IN THIS FACTUAL BACKGROUND, THE HONBLE SUP REME COURT HELD THAT AS NO BUSINESS WAS ADMITTEDLY COMMENCED AND THE ASSESSEE EARNED IN TEREST ON BANK DEPOSITS MET OUT OF SURPLUS CAPITAL SUBSCRIPTION AND SUCH INCOME NOT H AVING ANY CONNECTION WITH THE SETTING UP OF THE BUSINESS WAS LIABLE TO BE ASSESSE D AS REVENUE RECEIPTS UNDER THE HEAD OTHER SOURCES. THE POSITION WAS MORE OR LESS SAME IN THE CASE OF CIT VS- SOUTH INDIAN SHIPPING CORPORATION LIMITED (SUPRA). BUT IN THE INSTANT CASE, THE ASSESSEE IS CARRYING ON THE BUSINESS FOR PAST SEVERAL YEARS. IN THE COURSE OF CARRYING ON OF ITS BUSINESS, THE ASSESSEE BORROWED FUNDS ON WHICH INTE REST IS PAID. SIMILARLY ON OCCASIONS, THE COMPANY LEFT WITH SURPLUS BUSINESS FUNDS, WHICH WERE DEPLOYED IN MAKING SHORT-TERM INTER-CORPORATE DEPOSITS AND LOANS AND ADVANCES. IN VIEW OF THE ABOVE, WE FIND SUBSTANTIAL FORCE IN THE CONTENTION OF THE LD. SENIOR A.R. THAT SUCH ACTIVITY OF LENDING MONEY IS CARRIED ON SYSTEMATICALLY AND IN AN ORGANIZED MANNER WITH A VIEW TO COMMERCIALLY EXPLOIT THE BUSI NESS FUNDS OF THE ASSESSEE COMPANY. 31. FROM THE ASSESSMENT ORDER, WE FIND THAT THE A.O . HAS NOT DISCUSSED ANY REASON FOR ASSESSING INTEREST INCOME UNDER THE HEAD OTHER SOURCES. HOWEVER, THE LD. CIT(A) HAS DISCUSSED THE REASONS IN DETAIL FOR ASSESSABILI TY OF INTEREST INCOME UNDER THE HEAD ITA NO.429/KOL/2012 J.C.I.T (OSD),CIRCLE-4,KOLKATA VS M/S.TONGANI TEA CO.LTD. A.YR.2007-08 4 BUSINESS. IT WAS ALSO POINTED OUT BY THE LD. SR.A .R. THAT IN THE EARLIER YEAR ALSO, THE ASSESSEE ENTERED INTO WITH SUCH TRANSACTION FOR GRA NTING OF SUCH TYPE OF LOANS. THEREFORE, IT IS EVIDENT THAT THE ASSESSEE CARRIED ON A REGULAR ACTIVITY IN AN ORGANIZED MANNER AND WITH A DEFINITE VIEW TO EARN HIGHER INTE REST FROM SURPLUS BUSINESS FUNDS, THE SAME WAS DEPLOYED AS INTER-CORPORATE DEPOSITS/LOANS , AND, THEREFORE, THE INTEREST INCOME IS ASSESSABLE AS BUSINESS INCOME, MORE SO WH EN ADMITTEDLY, THE RETURN FROM THESE LOANS WAS MUCH HIGHER THAN YIELD FORM THE BAN K DEPOSITS. 32. THE HONBLE MADRAS HIGH COURT IN THE CASE OF CI T VS TAMILNADU DAIRY DEVELOPMENT CORPORAITON LTD. (216 ITR 535) OBSERVED THAT THE TERM BUSINESS IS A WORD OF WIDE CONNOTATION AND BY NO MEANS DETERMINAT E IN ITS SCOPE AND HAS TO BE CONSIDERED WITH REFERENCE TO EACH PARTICULAR KIND O F ACTIVITY AND OCCUPATION OF THE PERSON CONCERNED. UPON THE PECULIAR FACTS OF THIS C ASE, THE INTEREST ACCRUED ON SHORT- TERM DEPOSITS OF THE ASSESSEE COMPANY WHICH WAS MET OUT OF BUSINESS FUNDS AVAILABLE WITH THE ASSESSEE-COMPANY, BEFORE THE SAME WERE UTI LIZED FOR ACTUAL BUSINESS, AND AS SUCH THE SAME IS INCIDENTAL TO THE BUSINESS ACTIVIT Y OF THE ASSESSEE-COMPANY AND AS SUCH, THE INTEREST ON SHORT-TERM DEPOSITS SHALL BE TREATE D AS BUSINESS INCOME. 33. THE HONBLE JURISDICTIONAL KOLKATA HIGH COURT I N THE CASE OF CIT VS- TIRUPATI WOOLLENS MILLS LIMITED (193 ITR 252) OBSERVED THAT WHERE AN ASSESSEE CARRYING ON BUSINESS, INVESTS SURPLUS CASH LYING WITH HIM TEMPO RARILY IN THE BANK DEPOSITS, THE INTEREST EARNED ON SUCH DEPOSITS IS OUT OF THE COMM ERCIAL ASSETS OF HIS BUSINESS AND, THEREFORE, IS ASSESSABLE AS BUSINESS INCOME AND N OT AS INCOME FORM OTHER SOURCES. 34. IN THE CASE OF CIT VS MADRAS REFINERIES LIMIT ED (228 ITR 354), THE HONBLE MADRAS HIGH COURT HELD THAT ON THE FACTS THAT THE A SSESSEE-COMPANY IN THE COURSE OF BUSINESS RECEIVED MONEY ON SEVERAL ACCOUNTS AND SUR PLUS MONEY NOT IMMEDIATELY REQUIRED DEPOSITED IN SHORT-TERM DEPOSITS, THE INTE REST INCOME TO BE ASSESSED AS BUSINESS INCOME WITH THE FOLLOWING OBSERVATION :- HELD THAT IF THE DEPOSIT MADE BY THE ASSESSEE IN T HE BANK WAS CAPITAL EMPLOYED, THAT WOULD BECOME PART OF THE CAPITAL OF THE NEW INDUSTR IAL UNDERTAKING. ANY INCOME EARNED BY THE CAPITAL EMPLOYED WOULD AUTOMATICALLY BECOME THE BUSINESS INCOME OF THE ASSESSEE AND IT WOULD NOT BE TREATED AS INCOME EARN ED FROM OTHER SOURCES. THEREFORE, THE TRIBUNAL WAS RIGHT IN HOLDING THAT THE INTEREST INCOME ON BANK DEPOSITS HAD TO BE ASSESSED UNDER THE HEAD BUSINESS INCOME. 35. THE ITAT, MADRAS BENCH IN PONDS EXPORT LIMITED VS- ITO (58 ITD 417) OBSERVED THAT, DEPOSITS IN THE BANKS WERE MADE WITH THE MONE Y RECEIVED IN THE EXPORT BUSINESS, AND IN THAT SENSE THE INTEREST INCOME SPRINGS FROM THE BUSINESS ACTIVITY OF THE ASSESSEE. IT DID NOT ARISE OUT OF ANY INDEPENDENT ACTIVITY. HAVI NG REGARD TO THE FACTS, THE LD. CIT(A) WAS JUSTIFIED IN HOLDING THAT INTEREST ON BANK DEPO SITS WAS ASSESSABLE UNDER THE HEAD BUSINESS INCOME. 36. SIMILAR VIEW HAS BEEN TAKEN BY THE ITAT, B BE NCH, KOLKATA IN ITA NODS. 70,71 & 72/CAL. OF 1997 IN THE CASE OF EVEREADY INDUSTRIES INDIA LIMITED VS- DCIT, VIDE ITS ORDER DATED 24 TH DECEMBER, 2001. 37. IN VIEW OF THE ABOVE DISCUSSION, WE DO NOT FIN D ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) IN HOLDING THAT ON THE PECULIAR FACTS AND CI RCUMSTANCES OF THE PRESENT CASE, THE INTEREST INCOME WAS BUSINESS INCOME AND THE A.O. WA S NOT JUSTIFIED IN TREATING THE SAME AS INCOME FROM OTHER SOURCES. HE VEHEMENTLY SUPPORTED THE ORDER OF LD. CIT(A). ITA NO.429/KOL/2012 J.C.I.T (OSD),CIRCLE-4,KOLKATA VS M/S.TONGANI TEA CO.LTD. A.YR.2007-08 5 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PER USAL OF ORDER OF THE CO- ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF JCIT VS M/S. DUNCAN AGRO INDUSTRIES LTD. IN PARAS 30 TO 37 AS EXTRACTED CLEARLY SHOW TH AT UNDER SIMILAR CIRCUMSTANCES THE CO-ORDINATE BENCH OF THIS TRIBUNAL HAS HELD THE INT EREST INCOME AS LIABLE TO BE ASSESSED ONLY UNDER THE HEAD PROFITS AND GAINS OF BUSINESS AND THAT TOO ONLY THE NET OF THE INTEREST. FURTHER, THE DECISION IN THE CASE OF M/S. DUNCAN AGRO INDUSTRIES LTD. REFERRED TO SUPRA IS BY A CORUM IN WHICH ONE OF US IS A PARTY. IN THE CIRCUMSTANCES AS IT IS NOTICED THAT THE LD. CIT(A) HAS ONLY FOLLOWED TH E DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF M/S.DUNCAN AGRO IND USTRIES LTD. REFERRED TO SUPRA WE ARE OF THE VIEW THAT THE FINDINGS OF LD. CIT(A) IS ON THE RIGHT FOOTING AND NO INTERFERENCE IS CALLED FOR. 12. IN THE RESULT GROUND NO.3 OF THE REVENUES APPE AL IS DISMISSED. 13. GROUND NO.4 OF THE REVENUES APPEAL IS GENERAL IN NATURE. 14. IN THE RESULT THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 05.12.2013. SD/- SD/- [R.C.SHARMA] [ GEORGE MATHAN ] ACCOUNTANT MEMBER JUDICIAL MEMBER ( (( ( ) )) ) DATE: 05.12.2013. R.G.(.P.S.) - COPY OF THE ORDER FORWARDED TO: 1. M/S.TONGANI TEA CO.LTD., 15B, HEMANTA BASU SARANI, KOLKATA-700001. 2 J.C.I.T., (OSD),CIRCLE-4, KOLKATA 3 . CIT(A)-IV, KOLKATA 4. CIT - KOLKATA. 5. CIT(A)DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, !/ BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES ITA NO.429/KOL/2012 J.C.I.T (OSD),CIRCLE-4,KOLKATA VS M/S.TONGANI TEA CO.LTD. A.YR.2007-08 6