DCIT, Circle - 4, Kolkata, Kolkata V. M/s. Jhoonktollee Tea & Industries Ltd., Kolkata

ITA 765/KOL/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54471 (ITAT-KOLKATA)
• Duration Of Justice: 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 18-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K PRAMANICK
• Assessee Lawyers: B B PAYRA
• Keywords: Earning of tax free income; Capital receipt
• Section: 14A

Judgement Text

, , , , , , ,, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : KOLKATA [ . . . . . .. . , , !' !' !' !' , ] [BEFORE HONBLE SHRI S.V. MEHROTRA, AM & HONBLE SHRI MAHAVIR SINGH, JM] '# '# '# '# / I.T.A NO. 765/KOL/2011 !$% &'/ ASSESSMENT YEAR : 2006-07 DY. COMMISSIONER OF INCOME TAX -VS.- M/S. JHOONKTOLLEE TEA & INDUSTRIES LIMITE D CIRCLE-4, KOLKATA. KOLKATA. [PAN : AAACJ 6577 G] [ )* )* )* )* /APPELLANT ] ]] ] [ ,-)* ,-)* ,-)* ,-)*/ // / RESPONDENT ] ]] ] )* )* )* )* / FOR THE APPELLANT : SHRI A. K. PRAMANICK ,-)* ,-)* ,-)* ,-)* / FOR THE RESPONDENT : SHRI B. B. PAYRA . /ORDER . . . . . .. . , PER S. V. MEHROTRA, A. M. THE ASSESSEE HAS PREFERRED THIS APPEAL FOR ASSESSM ENT YEAR 2006-07 AGAINST ORDER OF LD. CIT(A)-IV, KOLKATA DATED 02.11.2010. 2. THE ASSESSEE-COMPANY, IN THE RELEVANT ASSESSMENT YEAR, WAS ENGAGED IN THE BUSINESS MANUFACTURING OF TEA AND COFFEE. IT HAD FILED ITS R ETURN OF INCOME SHOWING TOTAL INCOME OF RS.43,04,232/-. THE ASSESSMENT WAS COMPLETED AT A T OTAL INCOME OF RS.23,08,328/-, INTER ALIA, MAKING FOLLOWING ADDITIONS :- (I) CESS ON GREEN LEAVES : RS.26,13,541/- (II) UNDER SECTION 14A : RS.11,82,997/- LD. CIT(A) HAS PARTLY ALLOWED THE ASSESSEES APPEAL . 3. BEING AGGRIEVED DEPARTMENT IS IN APPEAL BEFORE U S. [I TA NO. 765/KOL/2011] 2 4. THE FIRST GROUND RAISED BY THE DEPARTMENT IS AS UNDER :- THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, L D. CIT(A) HAS ERRED IN LAW IN DELETING THE ADDITION OF 26,13,541/- 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 BEFO RE THE HONBLE SUPREME COURT AGAINST THE DECISION OF CALCUTTA HIGH COURT I N THE CASE OF AFT INDUSTRIES LTD. -VS- CIT (270 ITR 167) AND ADMITTED BY THE SUP REME COURT VIDE SLP (CIVIL) CC 9153 OF 2005 / CIVIL 1105 OF 2006, IN TH E LIGHT OF WHICH LD. CIT(A) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. 5. BRIEF FACTS APROPOS THIS ISSUE ARE THAT THE ASSE SSING OFFICER NOTICED THAT ASSESSEE HAD DEBITED CESS ON GREEN LEAVES FOR RS.26,13,541/- WHI CH HE DISALLOWED OBSERVING THAT THE SAME WAS RELATED TO 100% AGRICULTURAL ACTIVITY BEING PAYABLE ON PRODUCTION OF GREEN LEAVES WHICH INCOME WAS EXEMPT FROM TAX. ASSESSEE CLAIMED THAT THIS WAS ALLOWABLE IN VIEW OF DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. AFT INDU STRIES LIMITED 270 ITR 167 (CAL.). HOWEVER, ASSESSING OFFICER IN ORDER TO MAINTAIN JUDICIAL CON SISTENCY, DISALLOWED OBSERVING THAT SLP IS PENDING BEFORE THE HONBLE SUPREME COURT. LD. CIT(A ) FOLLOWING THE DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF AFT INDUSTRIES L IMITED (SUPRA) ALLOWED THE ASSESSEES APPEAL. 6. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND HAVE PERUSED THE RECORDS OF THE CASE. DURING APPELLATE PROCEEDINGS, IT WAS CONT ENDED BY THE ASSESSEE THAT IT HAD PAID CESS ON THE QUANTITY OF GREEN LEAVES PLUCKED FROM ITS PLANT ATION AND CONSUMED IN THE MANUFACTURING OF TEA. IT WAS FURTHER POINTED OUT THAT WHILE DETERMINING I TS COMPOSITE INCOME FROM THE INCOME OF CULTIVATION AND MANUFACTURING OF TEA, DEDUCTION OF RS.26,13,541/- WAS CLAIMED IN RESPECT OF CESS PAID BY THE ASSESSEE. ACCORDINGLY, 40% OF EXPENDITU RE WAS CONSIDERED AS DEDUCTION FOR CENTRAL INCOME TAX AND 60% FOR AGRICULTURAL INCOME TAX. IT WAS POINTED OUT THAT ASSESSING OFFICER HAD DISALLOWED 40% OF CLAIM OF THE ASSESSEE. THESE FACT S ARE NOT DISPUTED AND, THEREFORE, THE DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF AFT I NDUSTRIES LIMITED (SUPRA) IS SQUARELY APPLICABLE TO THE FACTS OF THE PRESENT CASE. HENCE, THIS GROUND OF THE DEPARTMENT IS DISMISSED. 7. GROUND NO.2 READS AS UNDER :- THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, L D. CIT(A) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS.11,82,997/- U/S.14A SI NCE LD. CIT(A) DID NOT ACCEPT THE DISALLOWANCE U/S. 14A ON EXEMPT INCOME. [I TA NO. 765/KOL/2011] 3 8. ASSESSING OFFICER NOTICED THAT IN THE KALASA TEA ESTATE ACCOUNT, ASSESSEE CLAIMED EXEMPT PROFIT ON PEPPER FOR RS.5,42,194/- AND ARECA FOR RS .2,26,626/-. ASSESSING OFFICER OBSERVED THAT THIS AMOUNT HAD BEEN REDUCED FROM THE PROFIT BUT WH ILE DOING SO, EXPENSES ON THIS ACCOUNT FOR RS.6,43,196/- AND RS.4,48,751/- HAD NOT BEEN CONSID ERED. HE, THEREFORE, ADDED BACK THE SAME UNDER SECTION 14A OF THE ACT. HE FURTHER OBSERVED T HAT ASSESSEE HAD SHOWN EXEMPT PROFIT OF RS.3,03,500/- BEING SALE OF TEA. SINCE PROPORTIONAT E COST WAS NOT SEGREGATED, 30% OF SALE VALUE WAS TAKEN AS COST WHICH CAME TO RS.91,050/- WHICH H E ADDED UNDER SECTION 14A OF THE ACT. THUS, EXPENSES UNDER SECTION 14A WERE COMPUTED AT RS.11,8 2,997/-. BEFORE LD. CIT(A) ASSESSEE HAD, INTER ALIA, SUBMITTED AS UNDER :- 5. GROUND NOS. 5, 6 & 7 ARE AGAINST THE ADDITION O F RS.11,82,997 MADE BY THE A.O. U/S.14A OF THE ACT ON THE GROUND THAT THE SAME HAS BEEN INCURRED BY THE APPELLANT FOR EARNING EXEMPTED INCOME AT KALASA TEA ESTATE. REFERENCE WAS MADE BY THE LD. A/R. TO ANNEXURE B-6 BEING COMPUTATION O F INCOME TAX FOR THE RELEVANT YEAR FOR KALASA TEA ESTATE AND TO THE DETERMINATION OF INCOME FROM PEPPER AND INCOME FROM ARECA BOTH EXEMPTED. THE SAME READS AS FOLLOWS: INCOME FROM PEPPER (NET) (643196 101002) EXEMPT 5 42,194 INCOME FROM ARECA (NET) (448751 222125) EXEMPT 226, 626 IT WAS FURTHER SUBMITTED THAT THE EXEMPTION WAS CLA IMED IN RESPECT OF THE NET INCOME I.E. THE SALE PROCEEDS MINUS THE EXPENDITURE INCURRED FOR EARNING THE SAID INCOME. IT IS SUBMITTED THAT THE A.O. FOR DETERMINI NG SUCH EXPENDITURE DISALLOWABLE U/S.14A HAS ADOPTED THE FIGURE OF GROS S SALES I.E. RS.6,43,196 + RS.4,48,751. FURTHER THE A.O. HAS DISALLOWED RS.91, 050 BEING EXPENDITURE ESTIMATED AT 30% OF THE SALE VALUE OF RS.3,03,500 R EALIZED BY THE APPELLANT AND CLAIMED AS CAPITAL RECEIPT. THE A.O. HAS GRANTED SU CH EXEMPTION BUT HELD THAT 30% OF THE SALE VALUE MUST HAVE BEEN INCURRED BY THE AP PELLANT TO EARN SUCH EXEMPTED INCOME. THUS THE TOTAL DISALLOWANCE HAS BEEN WORKED OUT TO RS.11,82,997. 5.1. IT IS SUBMITTED THAT IN THE COMPUTATION THE A PPELLANT HAS CONSIDERED SEPARATELY AND CLAIMED EXEMPTION ONLY IN RESPECT OF THE NET IN COME REALIZED FROM BUSINESS OF CULTIVATION OF PEPPER AND ARECA. THERE WAS THEREFOR E NO SCOPE FOR ANY DISALLOWANCE U/S.14A OF THE ACT. IT IS ALSO SUBMITTED THAT THE A PPELLANT AT ITS ESTATE SOLD REDUNDANT AND UNWANTED TREES BY ONLY CONTRACTOR WHO WAS REQUIRED TO UPROOT THE TREES AND TAKE AWAY THE SAME. ALL UPROOTING COSTS W ERE INCURRED BY THE CONTRACTOR AND THE APPELLANT WAS ENTITLED TO AND RECEIVED NET PRICE OF RS.3,03,500. THEREFORE IT IS SUBMITTED THAT EXPENDITURE INCURRED BY THE APPEL LANT FOR SALE OF TREES WAS NIL. THERE WAS THEREFORE NO JUSTIFICATION IN DISALLOWING EXPENDITURE TO THE EXTENT OF 30% AS MADE BY THE A.O. AFTER CONSIDERING THE AFORE-MENTIONED SUBMISSIONS, LD. CIT(A) DELETED THE ADDITION OBSERVING AS UNDER :- 5 2 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS M ADE BY THE APPELLANT. I FIND [I TA NO. 765/KOL/2011] 4 CONSIDERABLE FORCE THEREIN THE QUANTUM OF DISALLOWA NCE DETERMINED BY THE A.O. IS ALSO INCORRECT. THE ADDITION IS THEREFORE DELETED. RELIEF RS 1,82,997 9. LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT T HE MATTER MAY BE RESTORED BACK TO THE FILE OF ASSESSING OFFICER. LD. COUNSEL SUBMITTED THAT FR OM THE ABOVE FINDINGS OF LD. CIT(A), IT IS EVIDENT THAT ASSESSING OFFICER HAD NOT CORRECTLY AP PRECIATED THE FACTS. 10. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND HAVE PERUSED THE RECORDS OF THE CASE. SINCE IT IS NOT DISPUTED THAT ASSESSEE HI MSELF HAD MADE DISALLOWANCE OF THE EXPENDITURE RELATABLE TO INCOME CLAIMED EXEMPT, THEREFORE, WITH OUT DISPUTING THE COMPUTATION MADE BY THE ASSESSEE, NO DISALLOWANCE WAS CALLED FOR. WE, THERE FORE, CONFIRM THE ORDER OF LD. CIT(A). THIS GROUND OF THE DEPARTMENT IS ALSO DISMISSED. 11. GROUND NO.3 READS AS UNDER :- THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, L D. CIT(A) HAS ERRED IN LAW IN DIRECTING THE A.O. TO ASSESS MISCELLANEOUS RECEIPTS OF L,74,18L/- AND 2,20,290/- WITHIN COMPOSITE INCOME INSTEAD OF 100% TAXATION WI THOUT APPRECIATING THE FACT THAT 40% TAXATION IS HELD ONLY FOR INCOME ARISING F ROM THE BUSINESS FROM GROWING AND MANUFACTURING OF TEA BUT MISCELLANEOUS RECEIPTS DOES FALL UNDER THE PURVIEW OF GROWING AND MANUFACTURING OF TEA. 12. BRIEF FACTS APROPOS THIS ISSUE ARE THAT ASSESSI NG OFFICER HAD TREATED SUM OF RS.1,74,181/- BEING OTHER INCOME RETURNED BY ASSESSEE AS 100% TAXABLE. BEFORE LD. CIT(A) ASSESSEE HAD TAKEN FOLLOWING GROUNDS :- 8. THAT THE ASSESSING OFFICER ERRED IN TAXING THE 100% OF THE MISC. RECEIPTS OF RS.1,74,181 AND RS.2,20,290 RESPECTIVELY RECEIVED B Y THE APPELLANT AT ITS JOONKTOLLEE AND KALASH TEA ESTATES. 9. THAT THE ASSESSING OFFICER OUGHT TO HAVE ASSESSE D 40% OF AFORESAID MISC. RECEIPTS REPRESENTING SALE PROCEEDS OF SCRAP ARISIN G FROM STORES CONSUMED AND THE COST OF WHICH WAS ALLOWED WHILE DETERMINING THE APP ELLANTS INCOME FROM TEA. LD. CIT(A) HAS HELD AS UNDER :- 6.1. THE A.O. HAS CONSIDERED THE ENTIRE RECEIPTS A S INCOME TAXABLE AT 100%. THE AFORESAID RECEIPTS REPRESENT SALE OF SCRAP ARISING FROM THE TEA BUSINESS CARRIED OUT BY THE APPELLANT AT ITS ABOVE TEA ESTATES. A DEDUCTION IN RESPECT OF MATERIAL WHICH HAS BEEN SCRAPED HAS BEEN ALLOWED IN DETERMINING THE CO MPOSITE INCOME OF THE APPELLANT AT BOTH THE TEA ESTATES. LOGICALLY THEREFORE THE SA LE PROCEEDS OF SCRAP SHOULD HAVE ALSO BEEN CONSIDERED AS INCOME ARISING FROM COMPOSITE BU SINESS AND ON 40% THEREOF ARE THEREFORE LIABLE TO TAX. THE APPELLANTS CLAIM IS C ORRECT AND HENCE ALLOWED. [I TA NO. 765/KOL/2011] 5 13. HAVING HEARD BOTH THE PARTIES, WE FIND THAT AS SESSING OFFICER HAS MADE ADDITION OF RS.1,74,181/- ONLY AND NO SEPARATE ADDITION HAS BEEN MADE FOR RS. 2,20,290/-. THIS BEING FACTUAL ASPECT, ASSESSING OF FICER WHILE GIVING EFFECT TO THIS ORDER WILL EXAMINE THE CORREC T POSITION IN THIS REGARD. HOWEVER, AS FAR AS FINDI NG OF LD. CIT(A) IS CONCERNED, WE DO NOT FIND ANY REASON TO I NTERFERE WITH THE SAME BECAUSE IT IS NOT DISPUTED T HAT SALE OF SCRAP AROSE FROM THE TEA BUSINESS CARRIED ON BY THE ASSESSEE. THEREFORE, SALE PROCEEDS OF SCRAP SHOULD HAVE BEEN CONSIDERED AS INCOME ARISING FROM COMPOSITE BUSINES S AND ON 40% THEREOF TAX WAS TO BE LEVIED. THIS GRO UND OF THE DEPARTMENT IS DISMISSED SUBJECT TO AFOREMENTION ED OBSERVATIONS. 14. IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISM ISSED. . . . . / / / / 0 /$ 1 2 0 /$ 1 2 0 /$ 1 2 0 /$ 1 2 3 3 3 3 ORDER PRO NOUNCED IN THE COURT ON 19. 08. 2011. SD/- SD/- [ !' !' !' !' , ] [ . .. . . .. . , ] [MAHAVIR SINGH] [S.V. MEHROTRA] JUDIC IAL MEMBER ACCOUNTANT MEMBER ( (( (3 3 3 3) )) ) DATED : 19TH AUGUST, 2011. . 6 ,!!7 87&/ COPY OF THE ORDER FORWARDED TO: 1. )* /APPELLANT : DY. COMMISSIONER OF INCOME TAX, CIRCL E-4, P-7, CHOWRINGHEE SQUARE, 8 TH FLOOR, KOLKATA-700 069. 2 ,-)* / RESPONDENT : M/S. JHOONKTOLLEE TEA & INDUSTRIES LTD., 21, STRAND ROAD KOLKATA-700 001 . 3. !.$ / CIT, 4. !.$ ()/ CIT(A), KOLKATA. 5. !1 ,!$/ DR, KOLKATA BENCHES, KOLKATA [-7 ,!/ TRUE COPY] .$// BY ORDER, '? /ASSTT REGISTRAR [KKC @A !$B? !C /SR.PS]