ITO, WD-4(4), KOLKATA, Kolkata V. M/s Bhaskar Tea & Industries Ltd., Kolkata

ITA 451/KOL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9420 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2017
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 17-01-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 18-03-2014
• Court: TRIBUNAL
• Assessee Lawyers: P K SANGHAI

Judgement Text

ITA NO.451/KOL/2014-M/S. BHASKAR TEA & INDS. LTD. A .Y.2009-10 1 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : KOLKATA [BEFORE HONBLE SRI N.V.VASUDEVAN, JM & SHRI WASE EM AHMED, AM ] I.T.A NO. 451/KOL/2014 ASSESSMENT YEAR : 200 9-10 I.T.O., WARD-4(4), -VS.- M/S. BHASKAR TE A & INDUSTRIES LTD. KOLKATA KOLKATA [PAN:AABCB 4084 F] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI SALLONG YADEN, ADDL. CIT, SR.DR FOR THE RESPONDENT : SHRI P.K.SANGHAI, FCA DATE OF HEARING : 17.01.2017. DATE OF PRONOUNCEMENT : 03.02.2017. ORDER PER N.V.VASUDEVAN, JM THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDER DATED 12.12.2013 OF CIT(A)-IV, KOLKATA RELATING TO A.Y.2009-10. 2. GROUNDS OF APPEAL RAISED BY THE REVENUE READS AS FOLLOWS :- THE LD. CIT(A) ERRED IN LAW AS WELL AS ON THE FACT S IN HOLDING THAT CESS ON GREEN LEAF OF RS.42,64,792/- IS AN ALLOWABLE EXPENDITURE IGNOR ING THE FACT THAT IT IS DIRECTLY ATTRIBUTABLE TO CORE AGRICULTURE ACTIVITIES WHICH I S TAXABLE UNDER STATE AGRICULTURE INCOME TAX, BEYOND THE PURVIEW OF CENTRAL INCOME TA X AND ON THE SAME ISSUE SLP IS PENDING IN THE CASE OF AFT INDUSTRIES. 3. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUS INESS OF GROWING AND MANUFACTURING OF TEA. INCOME FROM GROWING, MANUFAC TURING AND SALE OF TEA WOULD BE COMPOSITE INCOME, WHICH MEANS IT COMPRISES AGRICULT URAL INCOME TO THE EXTENT OF GROWING TEA, WHICH IS NOT CHARGEABLE TO TAX AND NON -AGRICULTURAL INCOME TO THE EXTENT IT COMPRISES OF INCOME FROM MANUFACTURE AND SALE OF TEA, WHICH INCOME IS CHARGEABLE TO TAX. RULE 8 OF THE INCOME TAX RULES, 1962 PROVID ES METHOD OF COMPUTATION FOR COMPOSITE INCOME FROM MANUFACTURE OF TEA. UNDER RU LE 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 COMPUTED AS IF IT WERE INC OME DERIVED FROM BUSINESS, AND FORTY ITA NO.451/KOL/2014-M/S. BHASKAR TEA & INDS. LTD. A .Y.2009-10 2 PER CENT OF SUCH INCOME SHALL BE DEEMED TO BE INCOM E LIABLE TO TAX. ACCORDING TO THE AO CESS ON GREEN LEAF WAS AN EXPENDITURE 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. THE PLEA OF THE ASSESSEE WAS THAT THE ENTIRE GREEN LEAF CESS HAD TO BE ALLOWED AS DEDUCTION FIRS T AND ONLY ON THE LOSS OR PROFIT ARRIVED AT AFTER SUCH DEDUCTION RULE 8(1) OF THE RU LES HAVE TO BE APPLIED AND 40% OF SUCH SUM HAS TO BE CONSIDERED AS INCOME OR LOSS FRO M THE BUSINESS OF MANUFACTURE AND SALE OF TEA. 4. 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 AND ONLY THEREAFTER 40% OF SUCH INCOME HAS TO BE BROUGHT TO TAX. 5. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REV ENUE HAS RAISED GR.NO.1 BEFORE THE TRIBUNAL. THE LEARNED DR APPEARING ON BEHALF OF TH E REVENUE RELIED ON THE ORDER OF THE AO. ON THE OTHER HAND, THE LD.COUNSEL FOR THE A SSESSEE RELIED ON THE ORDERS OF THE LD. CIT(A). 6. AFTER HEARING THE RIVAL SUBMISSIONS AND ON C AREFUL 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 IN COMPUTING THE COMPOSITE INCOME UNDER R ULE 8 OF I.T. RULES. THIS ISSUE IS, THEREFORE, DECIDED IN FAVOUR OF THE ASSESSEE AN D AGAINST THE REVENUE BY UPHOLDING THE ORDER OF THE C.I.T.(A) WHO HAS ALLOWED THE DEDU CTION OF PAYMENT OF CESS ON GREEN LEAVES IN COMPUTING THE COMPOSITE INCOME FROM TEA B USINESS 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 ITA NO.451/KOL/2014-M/S. BHASKAR TEA & INDS. LTD. A .Y.2009-10 3 COURT HAS NEITHER SET ASIDE THE ORDERS OF THE CALCU TTA HIGH COURT NOR GRANTED ANY STAY. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO BROUGHT T O OUR NOTICE THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. M/S.AP EEJAY TEA CO. LTD. CIVIL APPEAL NO.3168 OF 2006 DATED 6.8.2015 WHEREIN THE HONBLE SUPREME COURT HAS UPHELD VIEW AS WAS TAKEN IN THE CASE OF AFT INDUSTRIES LTD. (SU PRA). IN VIEW OF THE ABOVE, THE APPEAL BY THE REVENUE IS DISMISSED. 7. IN THE RESULT APPEAL BY THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE COURT O N 03.02.2017. SD/- SD/- [WASEEM AHMED] [ N.V.VASUDEVAN ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 03.02.2017. [RG PS] COPY OF THE ORDER FORWARDED TO: 1. M/S. BHASKAR TEA & INDUSTRIES LTD., 2, BRABOURNE ROAD, 2 ND FLOOR, KOLKATA- 7000001. 2. I.T.O., WARD-4(4), KOLKATA. 3. CIT(A)-IV, KOLKATA 4. CIT II, KOLKATA. 5..CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDE R ASSTT. REGISTRAR KOLKATA BENCHES ITA NO.451/KOL/2014-M/S. BHASKAR TEA & INDS. LTD. A .Y.2009-10 4