ITO, Wd-4(4), Kolkata, Kolkata V. Ganeshka Kanoi Tea Co Pvt. Ltd., Kolkata

ITA 503/KOL/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0983 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 8 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 15-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Tax effect
• Section: 143(3); 115JB

Judgement Text

ITA NO. 503/KOL/2017 A.Y. 2013-2014 GANESHKA KANOI TEA CO. PVT. LIMITED 1 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA A BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, VICE-PRESIDENT (KZ) AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER I.T.A. NO. 503/KOL/2017 ASSESSMENT YEAR: 2013-2014 INCOME TAX OFFICER,................................ ....................................APPELLANT WARD-4(4), KOLKATA, AAYAKAR BHAWAN, 8 TH FLOOR, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 -VS.- M/S. GANESHKA KANOI TEA CO. PVT. LIMITED,.......... ......................RESPONDENT COMMERCE HOUSE, 6 TH FLOOR, 2, GANESH CHANDRA AVENUE, ROOM NO. 11, KOLKATA-700 013 [PAN: AAACG 9821 E] APPEARANCES BY: SHRI SANKAR HALDER, ADDL. CIT, SR. D.R., FOR THE AP PELLAN T NONE, FOR THE RESPONDE NT DATE OF CONCLUDING THE HEARING : NOVEMBER 28, 2018 DATE OF PRONOUNCING THE ORDER : NOVEMBER 28, 2018 O R D E R PER SHRI P.M. JAGTAP, VICE-PRESIDENT (KZ):- THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST TH E ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-2, KOLKATA DAT ED 09.01.2017 AND THE GROUNDS RAISED BY THE REVENUE THEREIN READ AS U NDER:- 1. THAT THE LD. CIT(A) HAS ERRED IN INTERPRETING T HE ESSENCE OF CBDT'S CIRCULAR NO. 495 DATED 22 ND SEPTEMBER 1987 IN RESPECT OF PROCEDURE FOR DETERMINING THE BOOKS PROFIT U/S 1 15JB IN THE CASE OF TEA COMPANIES. 2. THAT THE LD. CIT(A) HAS ERRED IN APPRECIATING TH E FACT OF CORRECTNESS OF BOOK PROFIT U/S 115JB AS DETERMINED BY THE AO IN THE LINE OF CBDT'S CIRCULAR NO. 495 DATED 22 ND SEPTEMBER, 1987. 3. THAT THE LD. CIT(A) HAS ERRED IN LAW IN EXPRESSI NG HIS VIEW THAT 40% OF THE COMPOSITE INCOME TO BE DETERMINED A S BOOK PROFIT U/S. 115JB BY VIOLATING THE CBDT'S CIRCULAR. ITA NO. 503/KOL/2017 A.Y. 2013-2014 GANESHKA KANOI TEA CO. PVT. LIMITED 2 4. THAT THE LD. CIT(A) HAS ERRED IN LAW IN APPRECIA TING THE ESSENCE OF RULE 8 OF I.T. RULES 1962. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY, W HICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF TEA/COFFEE. THE RE TURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 30.09.2 013 DECLARING TOTAL INCOME OF RS.1,35,700/- AND BOOK PROFIT OF RS.26,52 ,930/- UNDER SECTION 115JB OF THE INCOME TAX ACT, 1961. IN THE ASSESSMEN T COMPLETED UNDER SECTION 143(3) OF THE ACT VIDE AN ORDER DATED 23.02 .2016, THE BOOK PROFIT OF THE ASSESSEE-COMPANY UNDER SECTION 115JB WAS DET ERMINED BY THE ASSESSING OFFICER AT RS.91,07,628/- AFTER RESTRICTI NG THE DEDUCTION CLAIMED BY THE ASSESSEE AMOUNTING TO RS.1,04,68,967 /- FOR EXEMPTION ON ACCOUNT OF COMPOSITE INCOME TO RS.40,14,269/-. 3. AGAINST THE ORDER PASSED BY THE ASSESSING OFFICE R UNDER SECTION 143(3), AN APPEAL WAS PREFERRED BY THE ASSESSEE BEF ORE THE LD. CIT(APPEALS) CHALLENGING THE COMPUTATION OF BOOK PR OFIT UNDER SECTION 115JB AS MADE BY THE ASSESSING OFFICER AND AFTER CO NSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE AS WELL AS THE MAT ERIAL AVAILABLE ON RECORD, THE LD. CIT(APPEALS) DECIDED THIS ISSUE VID E HIS IMPUGNED ORDER AS UNDER:- L HAVE CONSIDERED THE SUBMISSIONS OF THE AUTHORIZE D REPRESENTATIVE OF THE APPELLANT AS WELL AS THE ASSE SSMENT ORDER FRAMED IN THE LIGHT OF THE MATERIALS AVAILABLE ON R ECORD BEFORE THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEED INGS. THE AR HAS SUBMITTED THAT THE A.O WHILE COMPUTING B OOK PROFIT U/S 115JB HAS ALLOWED DEDUCTION AS AGRICULTURAL PRO FIT AS 60% ON COMPOSITE INCOME CALCULATED UNDER THE NORMAL PRO VISION OF THE INCOME TAX ACT, 1961 AND NOT AS 60% OF THE PROF IT AS PER PROFIT AND LOSS ACCOUNT AS PER RETURN FILED BY THE ASSESSEE. THE CIRCULAR ISSUED BY CBDT IN RESPECT OF TEA COMPANIES AS TO THE PROCEDURE FOR ASCERTAINING THE BOOK PROFIT UNDER MA T IN RESPECT OF COMPUTATION UNDER 115JB SAYS AS UNDER:- 'IN THE CASE OF A TEA COMPANY WHERE INCOME IS DERIV ED FROM THE SALE OF TEA GROWN AND MANUFACTURED BY THE SELLER, O NLY 40 PER CENT OF SUCH INCOME IS LIABLE TO TAX UNDER RULE 8 O F THE INCOME- TAX RULES, 1962. 60 PER CENT OF THE INCOME, WHICH I S DISREGARDED FOR THE PURPOSES OF TAXATION IS CONSIDERED TO BE AG RICULTURAL ITA NO. 503/KOL/2017 A.Y. 2013-2014 GANESHKA KANOI TEA CO. PVT. LIMITED 3 INCOME AND IS, THEREFORE, EXEMPT UNDER THE PROVISIO NS OF CHAPTER JII. THE NET PROFIT DETERMINED IN ACCORDANC E WITH SCHEDULE VI TO THE COMPANIES ACT, 1956, HAS TO BE A DJUSTED, INTER ALIA, IN ACCORDANCE WITH CLAUSE UJ AND SUB-CL AUSE (II) OF THE EXPLANATION TO SECTION 115J(1). IN THE CASE OF THE TEA COMPANIES, THE BOOK PROFIT S HOULD BE COMPUTED BY MAKING ALL THE ADJUSTMENTS REFERRED TO IN THE EXPLANATION. HOWEVER, NO ADJUSTMENT IN RESPECT OF C LAUSE (F) AND SUB-CLAUSE (II) OF THE EXPLANATION IS TO BE MAD E FOR THE AGRICULTURAL INCOME EARNED BY TEA COMPANIES FROM TE A BUSINESS. 40 PER CENT OF THE ADJUSTED AMOUNT ARRIVED AT IN TH IS MANNER WILL BE THE BOOK PROFIT OF THE TEA COMPANY IN ACCOR DANCE WITH RULE 8 OF THE INCOME-TAX RULES. ' THE CIRCULAR VERY CLEARLY AND SPECIFICALLY EXPLAINS THE MODUS IN WHICH EXEMPT INCOME I.E. AGRICULTURAL INCOME IN CAS E OF TEA MANUFACTURING COMPANIES NEEDS TO BE DEALT WITH IN P REPARING COMPUTATION FOR MAT. LAST PARA CLEARLY EXPLAINS THA T NO ADJUSTMENT IN RESPECT OF CLAUSE (F) AND SUB-CLAUSE (II) OF THE EXPLANATION IS TO BE MADE FOR THE AGRICULTURAL INCO ME EARNED BY TEA COMPANIES FROM TEA BUSINESS AND FLAT 40 % OF THE ADJUSTED AMOUNT ARRIVED IN THIS MANNER WILL BE BOOK PROFIT OF THE TEA COMPANY IN ACCORDANCE WITH RULE 8 OF THE IN COME TAX RULES. KEEPING IN VIEW OF ABOVE, THE AO IS DIRECTED TO COMPUTE THE BOOK PROFIT CORRECTLY IN ACCORDANCE WITH THE AB OVE CIRCULAR. THIS GROUND IS THEREFORE ALLOWED FOR STATISTICAL PU RPOSES. AGGRIEVED BY THE ORDER OF THE LD. CIT(APPEALS), THE REVENUE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 4. AT THE TIME OF HEARING FIXED TODAY, NONE HAS APP EARED ON BEHALF OF THE ASSESSEE. THIS APPEAL OF THE ASSESSEE IS, THERE FORE, BEING DISPOSED OF EX-PARTE QUA THE RESPONDENT-ASSESSEE AFTER HEARING THE ARGUMENT S OF THE LD. D.R. AND PERUSING THE RELEVANT MATERIAL AVAILAB LE ON RECORD. IT IS OBSERVED THAT THE LD. CIT(APPEALS) VIDE HIS IMPUGNE D ORDER HAS ONLY DIRECTED THE ASSESSING OFFICER TO COMPUTE THE BOOK PROFIT OF THE ASSESSEE CORRECTLY IN ACCORDANCE WITH THE RELEVANT CBDT CIRC ULAR AND REVENUE, THEREFORE, CANNOT BE SAID TO HAVE ANY MATERIAL GRIE VANCE FROM THE DECISION RENDERED BY THE LD. CIT(APPEALS) ON THIS I SSUE. IT IS ALSO OBSERVED THAT THE TAX EFFECT INVOLVED IN THIS APPEA L OF THE REVENUE IS LESS THAN THE MONETARY LIMIT OF RS.20 LAKHS FIXED BY THE CBDT VIDE CIRCULAR NO. 3/2018 DATED 11.07.2018 FOR FILING THE APPEAL OF TH E REVENUE BEFORE THE ITA NO. 503/KOL/2017 A.Y. 2013-2014 GANESHKA KANOI TEA CO. PVT. LIMITED 4 TRIBUNAL. WE, THEREFORE, FIND NO MERIT IN THIS APPE AL OF THE REVENUE AND DISMISS THE SAME. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON NOVEMBER 28, 2018. SD/- SD/- (S.S. VISWANETHRA RAVI) (P.M. JAGTAP) JUDICIAL MEMBER VICE -PRESIDENT (KZ) KOLKATA, THE 28 TH DAY OF NOVEMBER, 2018 COPIES TO : (1) M/S. GANESHKA KANOI TEA CO. PVT. LIMITED, COMMERCE HOUSE, 6 TH FLOOR, 2, GANESH CHANDRA AVENUE, ROOM NO. 11, KOLKATA-700 013 (2) INCOME TAX OFFICER, WARD-4(4), KOLKATA, AAYAKAR BHAWAN, 8 TH FLOOR, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 (3) COMMISSIONER OF INCOME TAX (APPEALS)-2, KOLKA TA, (4) COMMISSIONER OF INCOME TAX- , (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.