M/s Chanakya Agro Products Pvt Ltd, Patna V. ITO, Ward-2(1), Patna

ITA 55/PAT/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 7849 (ITAT-PATNA)
• Duration Of Justice: 11 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: TM
• Assessment Year: 2013-2014
• Appeal Filed On: 17-07-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: A K RASTOGI; RAKESH KUMAR AR S
• Keywords: Rule 8D
• Section: 56

Judgement Text

P A G E 1 | 8 IN THE INCOME TAX APPELLATE TRIBUNAL, PATNA BENCH, PATNA BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER AND LAXMI PRASAD SAHU, ACCOUNTANT MEMBER ITA NO S . 55 & 56 /PAT /2018 ASSESSMENT YEAR S : 2013 - 14 M/S. CHANAKYA AGROPRODUCTS PVT LTD., HOTEL SAMRAT INTERNATIONAL, FRASER ROAD, PATNA. VS. ITO, WARD 2(1), PATNA PAN/GIR NO. AABCC 4973 A (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI A.K.RASTOGI & RAKESH KUMAR , AR S REVENUE BY : SHRI AJAY KUMAR , DR DATE OF HEARING : 1 8 /06/ 2019 DATE OF PRONOUNCEMENT : 18 /06/ 2019 O R D E R PER BENCH THESE ARE APPEAL S FILED BY THE ASSESSEE AGAINST THE SEPARATE ORDER S OF THE CIT(A) - PATNA BOTH DATED 4.1 .2018 FOR THE ASSESSMENT YEAR S 201 3 - 14 AND 2014 - 15. 2. THE ONLY COMMON ISSUE INVOLVED IN BOTH THE APPEALS IS THAT THE CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE ADDITION OF RS.11,50,000/ - AND RS.6,41,950/ - FOR THE ASSESSMENT YEARS 2013 - 14 AND 2014 - 15 TREATING THE INCOME AS NON - AGRICULTURAL INCOME. ITA NOS. 55 & 56 /PAT/2018 ASSESSMENT YEARS : 2013 - 14 P A G E 2 | 8 3 . SINCE, THE ISSUE IS COMMON TO BOTH THE ASSESSMENT YEARS, WE PROCEED TO ADJUDICATE THE APPEAL FOR THE ASSESSMENT YEAR 2013 - 14 AND THE DECISION WILL APPLY MUTATIS - MUTANDIS TO THE ASSESSMENT YEAR 2014 - 15. 4. THE FACTS AS EMANATED FROM THE CIT(A) ORDER THAT THE ASSESSEE HAS FILED RETURN OF INCOME DECLARING NIL INCOME TREATING THE AGRICULTURAL INCOME AS EXEMPT. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE IS ENGAGED IN GROWING OF GREEN TEA LEAVES AND SHOWN INCOME OF RS.1,07,76,534/ - OUT OF THIS ACTIVITY. THE ASSESSEE HAS RELIED ON VARIOUS JUDICIAL PRONOUNCEMENTS IN SUPPORT OF THE CLAIM THAT THE INCOME IS EXEMPT. HOWEVER, THE ASSESSING OFFICER FIND THAT THOSE DECISIONS ARE DISTINGUISHABLE ON FACTS AND CONSIDERING THE RU LE 8 OF THE INCOME TAX RULES, 1 962, W HEREIN, IT IS STATED THAT INCOME DERIVED FROM THE SALE OF TEA GROWN AND MANUFACTURED BY THE SELLER IN INDIA SHALL BE COMPUTED AS IF IT WERE INCOME DERIVED FROM BUSINESS AND FORTY PER CENT OF SUCH INCOME SHALL BE DEEMED TO BE INCOME LIABLE TO TAX, DISALLOWE D 40% OF TOTAL INCOME SHOWN BY THE ASSESSEE OUT OF AGRICULTURAL INCOME AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. 5. ON APPEAL, THE CIT(A) UPHELD THE ACTION OF THE ASSESSING OFFICER, INTER ALIA, OBSERVING THAT THE SALE OF SHADE TREE S CANNOT BE ITA NOS. 55 & 56 /PAT/2018 ASSESSMENT YEARS : 2013 - 14 P A G E 3 | 8 TREATED AS AGRICULTURAL INCOME AS THERE IS NO PROCESS OF CULTIVATION OR NO ELEMENT OF RENT AND ALSO DOES NOT FULFIL THE CRITERIA UNDER THE DEFINITION OF AGRICULTURAL INCOME. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIA LS PLACED ON RECORD OF THE TRIBUNAL. THE AGRICULTURAL INCOME REFERS TO INCOME EARNED OR REVENUE DERIVED FROM SOURCES THAT INCLUDE FARMING LAND, BUILDINGS ON OR IDENTIFIED WITH AN AGRICULTURAL LAND AND COMMERCIAL PRODUCE FROM A HORTICULTURAL LAND. AGRICULTU RAL INCOME IS DEFINED UNDER SECTION 2( 1A) OF THE INCOME TAX ACT, 1961 AS UNDER: (A) . (B) ANY INCOME DERIVED FROM SUCH LAND BY AGRICULTURE OPERATIONS INCLUDING PROCESSING OF AGRICULTURAL PRODUCE SO AS TO RENDER IT FIT FOR THE MARKET OR SALE OF SUCH PRO DUCE. (I).. (II) THE PERFORMANCE BY A CULTIVATOR OR RECEIVER OF RENT - IN - KIND OF ANY PROCESS ORDINARILY EMPLOYED BY A CULTIVATOR OR RECEIVER OF RENT - IN - KIND TO RENDER THE PRODUCE RAISED OR RECEIVED BY HIM FIT TO BE TAKEN TO MARKET; OR (III) THE SALE BY A CULTIVATOR OR RECEIVER OF RENT - IN - KIND OF THE PRODUCE RAISED OR RECEIVED BY HIM, IN RESPECT OF WHICH NO PROCESS HAS BEEN PERFORMED OTHER THAN A PROCESS OF THE NATURE DESCRIBED IN PARAGRAPH (II) OF THIS SUB - CLAUSE ; 7. BEFORE US, LEARNED A.R. CONTENDED THAT THE ASSESSING OFFICER HAS ERRONEOUSLY APPLIED THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF TATA TEA LTD & ANOTHER VS STATE OF WEST BENGAL & ORS ITA NOS. 55 & 56 /PAT/2018 ASSESSMENT YEARS : 2013 - 14 P A G E 4 | 8 1988 (SUPP) SCC 316 , WHICH WAS RENDERED UNDER INCOME TAX ACT, 1 922 AND THE PROVISIONS OF RULE 8D AS IT EXISTED AT THAT POINT OF TIME. LEARNED A.R. ALSO SUBMITTED THAT UNDER INCOME TAX RULES, 1962, THERE IS NO CORRESPONDING RULE PERMITTING TAXATION OF 40% OF AGRICULTURAL INCOME. THEREFORE, THE CASE LAWS RELIED BY THE ASSESSING OFFICER IS IRRELEVANT AND NOT APPLICABLE TO THE PRESENT CASE. LEARNED A.R. SUBMITTED THAT THE IMPUGNED AMOUNT WAS RECEIVED BY THE ASSESSEE ON ACCOUNT OF SALE OF SHED TREES PLANTS WHICH ARE PART AND PARCEL OF TEA GARDEN AND WITHOUT THE EXISTENCE OF SHED TREES, THE TEA PLANT CANNOT BE GROWN AS IT S PLANT DO NOT SURVIVE AND GROW IN THE DIRECT SUNLIGHT AND SHED TRESS ARE PLANTED AND CULTIVATED IN A PLANNED MANNER WHILE DEVELOPING TEA GARDEN FOR TEA CULTIVATION. LEARNED A.R. VEHEMENTLY POINT ED OUT THAT THE AUTHORITIES BELOW HAVE GROSSLY ERRED IN TREATING THE INCOME EARNED ON OF SALE OF SHED TREES AS MISCELLANEOUS INCOME OF THE ASSESSEE BECAUSE SHED TREES ARE ALSO CULTIVATED AND GROWN BY THE TEA GARDEN OWNER FOR THE PURPOSE OF KEEPING SHED ON THE TEA PLANTS WHICH CANNOT SURVIVE AND GROW UNDER DIRECT SUN - LIGHT LEARNED A.R. POINTED OUT THAT AS THE INCOME OUT OF TEA LEAVES IS EXEMPT FROM TAX, THE INCOME OUT OF SALE OF SHED TREES IS ALSO EXEMPT FROM TAX. ITA NOS. 55 & 56 /PAT/2018 ASSESSMENT YEARS : 2013 - 14 P A G E 5 | 8 8. REPLY TO ABOVE, LEARNED D.R. SUBMITTED THAT IN THE PRESENT CASE NEITHER ANY RENT HAS BEEN RECEIVED NOR ANY TYPE OF AGRICULTURAL OPERATIONS HAVE BEEN CONDUCTED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION AND THE ASSESSEE HAD GROWN SHED TREES NOT FOR THE PURPOSE OF ARRIVING ANY INCOME BUT SOLELY FOR THE PURPOSE OF PROVIDING SHEDS FOR THE TEA PLANTS. LEARNED D.R. FURTHER CONTENDED THAT THE SALE OF SHED TREES CANNOT BE TREATED AS AGRICULTURAL INCOME AS THERE IS NO PROCESS OF CULTIVATION OR NO ELEMENT OF RENT AND ALSO DOES NOT FULFIL THE CRI TERIA FOR TREATING THE INCOME AS EXEMPT U/S.2(1A) OF THE ACT UNDER THE DEFINITION OF AGRICULTURAL INCOME. FINALLY, LEARNED D.,R. SUBMITTED THAT THE CONCLUSION ARRIVED AT BY THE AUTHORITIES BELOW IS QUITE JUSTIFIED AND SAME MAY BE UPHELD. 9. PLACING REJOIN DER TO ABOVE CONTENTION OF LEARNED D.R, LEARNED A.R. SUBMITTED THAT IF DURING THE COURSE OF CULTIVATION OF MAIN CROP ANY OTHER PLANTS ARE GROWN AND THE ASSESSEE RECEIVED AMOUNT ON SALE OF SUCH CROP , THEN THE INCOME EARNED THEREFROM HAS TO BE TREATED AS PAR T AND PARCEL OF AGRICULTURAL PRODUCE AND INCOME ON SALE OF SUCH ADDITIONAL PRODUCT OR CROP SHOULD BE TREATED AS AGRICULTURAL INCOME AND IS EXEMPT U/S.2(1A) OF THE ACT. ITA NOS. 55 & 56 /PAT/2018 ASSESSMENT YEARS : 2013 - 14 P A G E 6 | 8 10. ON CAREFUL CONSIDERATION OF RIVAL SUBMISSIONS, WE ARE OF THE VIEW THAT UNDISPUTEDLY , SHED TREES ARE GROWN AT THE TIME OF INITIAL DEVELOPMENT OF TEA GARDEN FOR THE PURPOSE OF KEEPING SHED ON THE TEA PLANTS WHICH DO NOT GROW UNDER DIRECT SUN - LIGHT AND CULTIVATION OF THESE SHED TREES IS DONE BY THE OWNER OR DEVELOPER OF THE TEA GARDEN IN A PLANNED AND SYSTEMATIC MANNER. THIS FACTUM HAS NOT BEEN DISPUTED BY THE ASSESSING OFFICER OR LEARNED D.R. BEFORE US DURING THE ARGUMENTS ESPECIALLY ON BEING ASKED BY THE BENCH. IN THIS SITUATION, IT IS EVIDENT THAT FOR GROWING OF A TEA PLANT, SHED TREES ARE NECESSARY, WHICH DOES NOT GROW AUTOMATICALLY BUT ARE CULTIVATED AND GROWN BY THE TEA GARDEN OWNER OR DEVELOPER IN A SYSTEMATIC AND SCIENTIFIC MANNER AT THE TIME OF INITIAL DEVELOPMENT OF TEA GARDEN AND SUBSEQUENTLY FROM TIME TO TIME AS PER REQUIREMENT OF PUTTING SHED IN THE TEA PLANTS. 11. IN VIEW OF ABOVE FACTUAL SITUATION, THE INCOME FROM SALE OF SHED TREES IS PART AND PARCEL OF AGRICULTURAL INCOME ACCRUED TO THE ASSESSEE AND SAME CANNOT BE TREATED AS MISCELLANEOUS INCOME OF THE ASSESSEE. 12. SO FAR AS THE RELIANCE PLACED BY THE ASSESSING OFFICER ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF TATA TEA LTD ITA NOS. 55 & 56 /PAT/2018 ASSESSMENT YEARS : 2013 - 14 P A G E 7 | 8 (SUPRA), IS CONCERNED, WE ARE OF THE VIEW THAT THE SAID DECISION IS RELATED TO A CASE OF OLD INCOME TAX OF 1922. FURTHER, AS PER RULE 8D, AS IT EXISTED AT THAT POINT OF TIME, TAXATION OF 40% AGRICULTURAL INCOME WAS PERMITT ED AND SAID RULE DOES NOT EXIST IN THE INCOME TAX RULE 1962 MADE UNDER THE INCOME TAX ACT, 1961. THEREFORE, IN OUR HUMBLE OPINION, THE PROPOSITION LAID DOWN BY HONBLE AP EX COURT IN THE CASE OF TATA T EA LTD (SUPRA) , WHICH PERTAIN TO OLD ACT, 1922, IS NOT APPLICABLE TO THE PRESENT CASE AS IT PERTAIN TO INCOME TAX ACT, 1961 AND RULES, 1962, IN WHICH THERE IS NO PROVISION PERMITTING OF TAXATION OF 40% OF AGRICULTURAL INCOME IN VIEW OF FOREGOING DISCUSSION, WE HAVE NO HESITATION TO HOLD THAT THE SALE PROCEEDS FROM SALE OF SHED TREES IS AN AGRICULTURAL INCOME OF THE ASSESSEE, WHICH IS EXEMPT U/S.2(1A) OF THE ACT AND SAME CANNOT BE TREATED AS MISCELLANEOUS INCOME OF THE ASSES SEE FOR THE PURPOSE OF TAXATION. ACCORDINGLY, THE SOLE GROUND OF ASSESSEE IS ALLOWED FOR BOTH THE ASSESSMENT YEARS. 13. IN THE RESULT, APPEALS FILED BY THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED ON 18 /06/2019. SD/ - SD/ - (LAXMI PRASAD SAHU ) ( CHANDRA MOHAN GARG ) ACCOUNTANT MEMBER JUDICIALMEMBER ITA NOS. 55 & 56 /PAT/2018 ASSESSMENT YEARS : 2013 - 14 P A G E 8 | 8 PATNA ; DATED 18 /0 6 /209 B.K.PARIDA, SPS COPY OF THE ORDER FORWARDED TO : BY ORDER SR. PVT. S ECRETARY ITAT, PATNA 1. THE APPELLANT : M/S. CHANAKYA AGROPRODUCTS PVT LTD., HOTEL SAMRAT INTERNATIONAL, FRASER ROAD, PATNA. 2. THE RESPONDENT. ITO, WARD 2(1), PATNA 3. THE CIT(A) - 1 , PATNA 4. PR.CIT - 1, PATNA 5. DR, ITAT, PATNA 6. GUARD FILE. //TRUE COPY//