M/s. Oil Palm India Ltd, Kottayam V. ACIT, Kottayam

ITA 559/COCH/2006

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 4343 (ITAT-COCHIN)
• Duration Of Justice: 3 year(s) 7 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-06-2010
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 14-06-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 02-11-2006
• Court: TRIBUNAL
• Department Lawyers: DR BABU JOSEPHSR
• Assessee Lawyers: JAYASANKAR NAMBIAR
• Section: 43B; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.VIJAYAKUMARAN & SHRI SANJAY ARORA I.T.A.NOS.521, 522, 523 & 1197/COCH/2005 ASS T .YS. : 1997 - 98,1998 - 99,1999 - 2000& 200 2 - 03 M/S. OIL PALM INDIA LTD., KOTTAYAM. PA NO. AAACU 3695 C VS. THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-1, KOTTAYAM. (APPELLANT) ( RESPONDENT ) I.T.A.NOS. 558 & 559 /COCH/200 6 A SS T . YEARS: 2000 - 01 & 200 3 - 04 M/S. OIL PALM INDIA LTD., KOTTAYAM. PA NO. AAACU 3695 C VS. THE ASST. COMMISSIO NER OF INCOME-TAX, CIRCLE-1, KOTTAYAM. (APPELLANT) (RESPONDENT) I.T.A.NOS. 795 & 796 /COCH/200 7 ASST. Y EARS : 2001 - 02 & 200 4 - 05 M/S. OIL PALM INDIA LTD., KOTTAYAM. PA NO. AAACU 3695 C VS. THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-1, KOTTAYAM. (APPELLANT) (RESPONDENT) I.T.A.NOS. 1019 /COCH/200 8 & 435/COCH/2009 ASSESSMENT YEARS : 2005 - 06 & 200 6 - 07 M/S. OIL PALM INDIA LTD., KOTTAYAM. PA NO. AAACU 3695 C VS. THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-1, KOTTAYAM. (APPELLANT) (RESPONDENT) I.T.A.NOS . 811 & 1124 /COCH/200 7 ASST. Y EARS : 2004 - 05 & 200 2 - 03 THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-1, KOTTAYAM. VS. M/S. OIL PALM INDIA LTD., KOTTAYAM. PA NO. AAACU 3695 C (APPELLANT) (RESPONDENT) ITA NO. 521/COCH/2005 & OTHER 13 APPEALS M/S. OIL PALM INDIA LTD., KOTTAYAM. 2 & I.T.A.NO S. 22 & 466 /COCH/200 9 ASS T. Y EARS : 2005 - 06 & 2006 - 07 THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-1, KOTTAYAM. VS. M/S. OIL PALM INDIA LTD., KOTTAYAM. PA NO. AAACU 3695 C (APPELLANT) (RESPONDENT) ASSES SEE BY SHRI JAYASANKAR NAMBIAR REVENUE BY DR. BABU JOSEPH,SR.DR O R D E R PER BENCH: THESE ARE APPEALS FILED BY THE ASSESSEE AND THE DEPARTMENT. THE ASSESSMENT YEARS INVOLVED ARE 1997 -98 TO 2006-07. 2. IN THE ASSESSEES APPEAL THE GRIEVANCE OF THE AS SESSEE WOULD BE THAT THE INCOME FROM EXTRACTING OIL FROM P ALM FRUITS OWNED BY THE ASSESSEES PALM ESTATES AT YENO OR, CHITHARA AND KULATHUPUZHA TO THE EXTENT OF 3645.64 HECTARES AMOUNTS TO AGRICULTURAL INCOME. THE ASSESSEE RETU RNED THE INCOME UNDER THE HEAD CLAIMING IT AS AGRICULTURAL I NCOME. THE SUBMISSIONS OF THE ASSESSEE IS SUMMARIZED AS B ELOW: ITA NO. 521/COCH/2005 & OTHER 13 APPEALS M/S. OIL PALM INDIA LTD., KOTTAYAM. 3 (A) THE ACTIVITIES OF THE ASSESSEE COMPANY IS FULLY AGRICULTURAL ORIENTED AND THE INCOME DERIVED THEREON FALLS WITHIN THE DEFINITION OF SECTION 2(1A ). (B) THE PALM FRUIT BUNCHES DO NOT HAVE A MARKET IN THE NATIVE FORM. THE OPERATIONS CARRIED OUT ARE ONLY PROCESSES TO RENDER THE AGRICULTURAL PRODUCT MARKETABLE OR SALEABLE. THE GAIN IN THE VALUE OF PRODUCE BY SUCH MARKETING PROCESS IS ALSO TO BE CLASSIFIED AS AGRICULTURAL INCOME. (C) APPLICATION OF RULE 7 IS NOT CORRECT IN LAW SINCE T HE ENTIRE INCOME IS AGRICULTURAL AND NO PORTION OF INCOME IS FROM BUSINESS. (D) THE INCOME EARNED IS NOT PARTIALLY AGRICULTURAL OR PARTIALLY INCOME FROM BUSINESS. (E) THE ASSESSING OFFICER HAS NO LOGIC OR BASIS FOR APPORTIONING THE INCOME AS 60% AGRICULTURAL AND 40% BUSINESS. (F) THE ENTIRE INCOME IS ALREADY TAXED UNDER AGRICULTURAL INCOME-TAX AND AS PART OF THE INCOME ITA NO. 521/COCH/2005 & OTHER 13 APPEALS M/S. OIL PALM INDIA LTD., KOTTAYAM. 4 SO ASSESSED IS BROUGHT TO TAX BY THE DEPARTMENT, THIS WOULD AMOUNT TO DOUBLE TAXATION. (G) TO SUPPORT THE ABOVE CONTENTIONS, RELIANCE IS PLACED ON THE FOLLOWING CASE LAWS: (I) CONSOLIDATED COFFEE ESTATES VS. CAIT- 76 ITR 29 (MYSORE); (II) DOORAS TEA CO. LTD. CAIT 44 ITR 6(SC); (III) CIT VS.STANES AMALGAMATED ESTATES 232 ITR 443 (MAD); AND (IV) K.LAKSHMAN & CO. VS. CIT 239 ITR 597 (SC) 3. HOWEVER, THE AUTHORITIES BELOW WERE OF THE VIEW THAT AGRICULTURAL INCOME WOULD MEAN ONLY THE INCOME DERI VED FROM SUCH LAND BY THE PERFORMANCE BY A CULTIVATOR A ND THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F K.LAKSHMAN & CO. VS. CIT -239 ITR 597 IS DIRECTLY AGAINST THE ASSESSEE. AGAINST THE FINDING THAT IT IS NOT AGRICULTURAL INCOME, THE ASSESSEE IS IN APPEALS. 4. THE GRIEVANCE OF THE REVENUE WOULD BE AS PROJECT ED IN THEIR APPEALS ARE AS FOLLOWS: ITA NO. 521/COCH/2005 & OTHER 13 APPEALS M/S. OIL PALM INDIA LTD., KOTTAYAM. 5 2. THE LD. CIT(APPEALS) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO COMPUTE THE INCOME RELATING TO THE MANUFACTURING ACTIVITY BY DEDUCTING EXPENSES INCLUDING AGRICULTURAL INCOME TAX PAID DURING THE YEAR AS PER 43B FROM THE TOTAL RECEIPTS. 3. THE LD. CIT(APPEALS) OUGHT TO HAVE FOUND THAT RULE 7(2)(B) MAKES IT CLEAR THAT MARKET VALUE WHERE AGRIUCLUTRAL PRODUCE IS NOT ORDINARILY SOLD IN THE MARKET IN ITS RAW STATE OR AFTER APPLICATION TO IT OF ANY PROCESS AFORESAID, SHALL BE DEEMED TO BE THE AGGREGATE OF ONLY THE THREE FACTORS, VIZ. (I) THE EXPENSES OF CULTIVATION, (II) THE LAND REVENUE OR RENT PAID FOR THE AREA IN WHICH IT WAS GROWN; AND (III) SUCH AMOUNT AS THE ASSESSING OFFICER FINDS, HAVING REGARD TO ALL THE CIRCUMSTANCES IN EACH CASE, TO REPRESENT A REASONABLE PROFIT AND IT DOES NOT PERMIT THE ASSESSING OFFICER TO ADD EXPENSE ON ACCOUNT OF AGRICULTURAL INCOME TAX PAID DURING THE YEAR AS PER 43B. 4. THE LD. CIT(APPEALS) HAS DIRECTED THE ASSESSING OFFICER TO DEDUCT THE ENTIRE AGRICULTURAL INCOME-TA X PAID BY THE ASSESSEE WHILE COMPUTING INCOME FROM BUSINESS. THE LD. CIT(APPEALS) OUGHT TO HAVE REALIZED THAT THE AGRICULTURAL INCOME-TAX PAID DURING THE YEAR REPRESENTED THE TAX ON THE ENTIRE INCOME AS THE ASSESSEE CLAIMED THE ENTIRE INCOME TO BE AGRICULTURAL INCOME. NOTWITHSTANDING WHAT IS STATED IN GROUND NO.3 ABOVE, EVEN IF THE CIT(APPEALS) IS RIGHT IN ALLOWING THE AGRICULTURAL INCOME-TAX WHILE COMPUTING THE INCOME FROM BUSINESS, HE OUGHT TO HAVE RESTRICTED IT TO THE TAX ITA NO. 521/COCH/2005 & OTHER 13 APPEALS M/S. OIL PALM INDIA LTD., KOTTAYAM. 6 ON THE AGRICULTURAL INCOME COMPUTED AS PER HIS DIRECTION. 5. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD INCLUDING THE PRECEDE NTS. THE LD. COUNSEL FOR THE ASSESSEE RELIED ON THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. WOODLAND ESTATES LTD. REPORTED IN 58 ITR 612. ON THE OTHER HAND, THE LD. SR. DEPARTMENTAL REPRESENTATIVE RELIED ON T HE ORDER OF THE TRIBUNAL, WHICH WAS AT THE INSTANCE OF THE R EVENUE, IN ASSESSEES OWN CASE IN ITA NOS. 649 TO 651/COCH/200 5 DATED 30-11-2007. THE GROUNDS URGED BY THE DEPARTMENT H AS BEEN DULY CONSIDERED, WHICH IS THE IDENTICAL GROUND S, WHICH ARE RAISED BY THE REVENUE IN THESE APPEALS, AND ULT IMATELY UPHELD THE RESTORATION OF THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR RE-CONSIDERATION WITH CERTAIN DIRECTIONS AS PER RULE 7 OF THE I.T.RULES. THAT BEING THE CASE , THE DEPARTMENTAL APPEALS ARE TO BE PARTLY ALLOWED, IN V IEW OF THE AFORESAID FINDINGS OF THE TRIBUNAL IN THE EARLIER Y EARS. 6. COMING TO THE ASSESSEES APPEALS, WE HEARD SHRI JAYASANKAR NAMBIAR, LD. COUNSEL FOR THE ASSESSEE AN D DR. BABU JOSEPH, LD. SR. D.R. AND CONSIDERED THEIR SUBM ISSIONS CAREFULLY. THE PROCESS OF OIL PALM IS UNDER VARIOU S ITA NO. 521/COCH/2005 & OTHER 13 APPEALS M/S. OIL PALM INDIA LTD., KOTTAYAM. 7 PROCESSES. THE DETAILS OF THIS PROCESS IS GIVEN I N ANNEXURE A1 TO ANNEXURE A5 OF THE ORDER OF THE CIT(APPEALS). THE AUTHORITIES FOUND THAT THE CLAIM OF THE ASSESSEE TH AT THE FRESH FRUIT BUNCH IS NOT A SALEABLE COMMODITY AND I S PERISHABLE IN NATURE, THAT THE ASSESSEE IS THE ONLY AGENCY IN KERALA WHICH HAS A MODERN PROCESSING FACILITY TO EX TRACT CRUDE PALM OIL AND THAT THERE ARE MANY SMALL CULTIV ATORS WHO ARE PRODUCING OIL PALM AND WHEN THEY SELL THE FRESH FRUIT BUNCHES THIS WOULD BE SALE OF AN AGRICULTURAL PRODU CE ARE NOT DISPUTED. THE OBJECTION OF THE DEPARTMENT WOULD BE THAT THE PRODUCT MANUFACTURED BY THE ASSESSEE COMPANY VI Z. CRUDE PALM OIL AND THE NUTS EXTRACTED DURING PROCES SING IS CLEARLY NOT AGRICULTURAL PRODUCE. THE FACT THAT ST ATE AGRICULTURAL INCOME-TAX AUTHORITIES ASSESSED THIS I NCOME AS AGRICULTURAL INCOME WILL NOT HAVE ANY IMPLICATION W HILE THE ASSESSMENT COMES UNDER THE CENTRAL INCOME-TAX MEREL Y ON THE FACT SIMPLICITOR THAT THE ACTIVITY OF THE ASSES SEE COMPANY CANNOT BE CONSIDERED AS AN ACTIVITY OF AN AGRICULTU RIST TO RENDER THE PRODUCE FIT FOR THE MARKET. THEREFORE, THE INCOME IS PARTLY AGRICULTURAL AND PARTLY BUSINESS. THIS VIEW OF THE DEPARTMENT IS FOUND FULLY ACCEPTABLE AND IN LINE WITH THE DECISION OF THE HONBLE SUPREME COURT IN THE CA SE OF LAKSHMAN & CO., CITED SUPRA. THEREFORE, WE REJECT THE ITA NO. 521/COCH/2005 & OTHER 13 APPEALS M/S. OIL PALM INDIA LTD., KOTTAYAM. 8 ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE THAT I T IS AKIN TO RAW RUBBER PROCESS AS ORDINARILY EMPLOYED. 7. WE ALSO REJECT THE CONTENTION OF THE LD. COUNSEL THAT RULE 7 DOES NOT APPLY AND THAT THERE IS NO MARKET I N THE CASE OF THE ASSESSEE COMPANY WHEN ITS OIL PALM ALON E WAS SOLD WITHOUT CRUSHING IT TO OIL. THE LD. COUNSEL FURTHER SUBMITTED THAT THE PRESSING OF KERNEL SO AS TO TAKE CRUDE PALM OIL FROM THAT ALONE HAVE A MARKET AND THERE IS NO MARKET FOR THE FRUIT AS SUCH, IS TO BE REJECTED AS IT WILL NOT AMOUNT TO AGRICULTURAL OPERATION. FURTHER, THAT ARGUMENT OF THE LD. COUNSEL IS TAKEN AS A VALID POINT FOR CO NSIDERATION, THEN ALL THE SUGAR FACTORIES, RICE MILLS, WHEAT FLO UR MILLS MAY ALSO COME UNDER THE AGRICULTURAL INCOME, WHICH IS N OT THE OBJECT OF THE ACT ITSELF. THE SUBMISSION WHICH W ILL DEFEAT THE OBJECT OF THE ACT IS TO BE REJECTED AND ACCORDI NGLY REJECTED. 8. UNDER THE ABOVE CIRCUMSTANCES, WE AGREE WITH THE FINDINGS OF THE LD. CIT(APPEALS) THAT IT IS NOT AGR ICULTURAL INCOME BUT AT THE SAME TIME THE PROPORTIONATE AGRIC ULTURAL INCOME HAS TO BE TAKEN AS CONSIDERED FOR THE PURPOS E OF ARRIVING AT THE DEDUCTION U/S.43B IN RESPECT OF AGR ICULTURAL ITA NO. 521/COCH/2005 & OTHER 13 APPEALS M/S. OIL PALM INDIA LTD., KOTTAYAM. 9 INCOME-TAX PAID. TO THAT EXTENT, THE APPEALS OF T HE REVENUE ARE PARTLY ALLOWED AND THE APPEALS OF THE A SSESSEE ARE DISMISSED. SD/- SD/- (SANJAY ARORA) (N.VIJAYKUMARAN) ACCOUNTANT MEMBER JUDICIAL M EMBER ERNAKULAM, DATED THE 16 TH JUNE,2010. PM. COPY FORWARDED TO: 1. M/S. OIL PALM INDIA LTD., XIII/354, OLD STAR THEATR E ROAD, P.B.NO.1715, KOTTAYAM. 2. THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-1, KOT TAYAM. 3. CIT(A)-IV, KOCHI. 4. CIT, KOTTAYAM. 5. D.R. BY ORDER SD/- ASSISTANT REGISTRAR