ITO, Mysore V. M/s Lab Land Bio Tech Pvt. Ltd., Mysore

ITA 879/BANG/2015

• Counselvise Citation: 87921114 RSA 2015
• Duration Of Justice: 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 14-12-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 09-06-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Depreciation

Judgement Text

ITA.879 & CO.185/BANG/2015 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH 'B', BANGALORE SHRI. ABRAHAM P. GEORGE, ACCOUNTANT MEMBER I.T.A NO.879/BANG/2015 (ASSESSMENT YEAR : 2009-10) INCOME-TAX OFFICER, WARD -1 (1), MYSORE .. APPELLANT V. M/S. LAB LAND BIO TECH P. LTD, 8 TH KM, KRS MAIN ROAD, MYSORE .. RESPONDENT PAN : AAACL2892A CROSS OBJECTION NO.185/BANG/2015 I.T.A NO.879/BANG/2015 (ASSESSMENT YEAR : 2009-10) (BY THE ASSESSEE) ASSESSEE BY : SHRI. S. VENKATESAN, CA REVENUE BY : DR. P. K. SRIHARI, ADDL. CIT HEARD ON : 16.12.2015 PRONOUNCED ON : .12.2015 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY REVENUE, ITS GRIEVANCE IS THAT CIT (A) DIRECTED THE AO TO ADOPT INCOME AS PER THE PROFIT A ND LOSS ACCOUNT WHILE COMPUTING THE BOOK PROFIT U/S.115 JB OF THE INCOME- TAX ACT, 1961 (THE ACT IN SHORT). ITA.879 & CO.185/BANG/2015 PAGE - 2 02. AS PER THE REVENUE, AO HAD CORRECTLY ADOPTED TH E PROFIT AS PER THE PROFIT AND LOSS ACCOUNT APPROPRIATION ACCOUNT. AS AGAINST THIS, ASSESSEE IN ITS CROSS OBJECTION STATES THAT ITS INCOME WAS AGRI CULTURAL IN NATURE AND EXEMPT U/S.10(1) OF THE ACT. 03. IN THE CROSS OBJECTION, ASSESSEE HAS TAKEN CERT AIN OTHER GROUNDS ALSO RELATING TO DISALLOWANCE OF CLAIM OF DEPRECIATION A ND DISALLOWANCE OF ITS CLAIM U/S.35 OF THE ACT. 04. THE CLAIM OF ASSESSEE THAT ITS INCOME WAS EXEMP T U/S.10(1) OF THE ACT IF ACCEPTED, WOULD RENDER THE OTHER GROUNDS RAI SED BY BOTH THE REVENUE AND THE ASSESSEE INSIGNIFICANT. THEREFORE THIS GRO UND APPEARING IN ASSESSEES CROSS OBJECTION IS CONSIDERED FIRST FOR DISPOSAL. 05. ASSESSEE A BIOTECHNOLOGY COMPANY HAD FILED ITS RETURN DECLARING NIL INCOME. IN THE PROFIT AND LOSS ACCOUNT FILED ALONG WITH THE RETURN, ASSESSEE HAD SHOWN A SUBSIDY RECEIPT OF RS.20,03,000/-, R & D EXPENDITURE OF RS.11,48,049/-. AO WAS OF THE OPINION THAT THE SUB SIDY AMOUNT RECEIVED HAD TO BE REDUCED FROM THE COST OF THE ASSETS. ACC ORDINGLY AFTER SUCH REDUCTION, AO CURTAILED THE CLAIM OF DEPRECIATION. AGAINST THE DEPRECIATION CLAIMED OF RS.15,86,647/-, AO ALLOWED ONLY RS.12,86 ,197/- AND THE ITA.879 & CO.185/BANG/2015 PAGE - 3 BALANCE WAS ADDED TO ASSESSEES INCOME. IN SO FAR AS R & D EXPENDITURE WAS CONCERNED, AO WAS OF THE OPINION THAT THE SAID EXPENDITURE PERTAINED TO A. Y. 2008-09 AND COULD NOT BE ALLOWED FOR THE I MPUGNED ASSESSMENT YEAR. 06. DURING THE COURSE OF ASSESSMENT PROCEEDINGS ASS ESSEE VIDE ITS LETTER DT.14.12.2011, STATED THAT WHOLE OF THE INCOME EARN ED BY IT WAS EXEMPT SINCE IT WAS AGRICULTURAL IN NATURE. ASSESSEE RELI ED ON THE AMENDMENT MADE TO SECTION 2(1A) OF THE ACT, ACCORDING TO WHICH, IN COME DERIVED FROM SALE OF SAPLINGS AND SEEDLINGS GROWN IN A NURSERY WAS DE EMED TO BE AGRICULTURAL INCOME. HOWEVER, AO DID NOT ACCEPT THIS CLAIM. AC CORDING TO HIM SUCH CLAIM OUGHT TO HAVE BEEN MADE THROUGH A REVISED RET URN OF INCOME. SINCE ASSESSEE HAD NOT DONE SO AO WAS OF THE OPINION THAT ASSESSEES CLAIM REGARDING AGRICULTURAL NATURE OF ITS RECEIPTS COULD NOT BE ALLOWED. THEREAFTER HE COMPUTED INCOME OF THE ASSESSEE UNDER THE NORMAL PROVISIONS AND ALSO UNDER THE MAT PROVISIONS. WHIL E DOING THE CALCULATION OF TAX UNDER THE MAT, HE STARTED FROM T HE PROFIT AS PER THE P & L APPROPRIATION ACCOUNT. 07. AGGRIEVED ASSESSEE MOVED IN APPEAL BEFORE THE C IT (A). AS PER THE ASSESSEE, ITS CLAIM THAT ITS INCOME WAS AGRICULTURA L IN NATURE WAS WRONGFULLY ITA.879 & CO.185/BANG/2015 PAGE - 4 REJECTED BY THE AO. IN ANY CASE, AS PER THE ASSESS EE NOTHING STOPPED THE CIT (A) FROM ENTERTAINING THIS CLAIM. ASSESSEE POI NTED OUT TO THE CIT (A) THAT THE LIMITATIONS PLACED BY THE HONBLE APEX COU RT THROUGH ITS JUDGMENT IN GOETZE (INDIA) LTD V. CIT [(2006) 284 ITR 323] W AS ONLY ON THE AO AND APPELLATE AUTHORITIES WERE FREE TO CONSIDER SUCH CL AIMS MADE BY THE ASSESSEE. ASSESSEE ALSO MADE SUBMISSIONS ON MERITS , ASSAILING THE DISALLOWANCE OF DEPRECIATION AND R & D EXPENDITURE. ASSESSEE ALSO PUT UP A CLAIM BEFORE THE CIT (A) THAT PROFIT AS PER THE P & L ACCOUNT ALONE SHOULD BE CONSIDERED FOR COMPUTING TAX U/S.115 JB O F THE ACT, AND NOT PROFIT AS PER THE P & L APPROPRIATION ACCOUNT. 08. CIT (A) WAS OF THE OPINION THAT ASSESSEES CLAI M REGARDING AGRICULTURAL NATURE OF ITS INCOME COULD NOT BE ACCE PTED IN VIEW OF THE JUDGMENT OF HONBLE APEX COURT IN GOETZE (INDIA) LT D (SUPRA). HE ALSO UPHELD THE ASSESSMENT IN SO FAR AS IT CONCERNED THE DISALLOWANCE MADE BY THE AO FOR DEPRECIATION AND UNABSORBED R & D EXPEND ITURE. HOWEVER, CIT (A) WAS OF THE OPINION THAT BY VIRTUE OF THE DE CISION OF HONBLE APEX COURT IN THE CASE OF APOLLO TYRES LTD V. CIT [255 ITR 274], THE PROFIT THAT WAS TO BE RECKONED FOR CALCULATING THE MAT WAS THE PROFIT AS SHOWN IN THE P & L ACCOUNT AND NOT PROFIT AS SHOWN IN THE P & L APPROPRIATION ACCOUNT. ITA.879 & CO.185/BANG/2015 PAGE - 5 09. NOW BEFORE US, LD. AR IN SUPPORT OF HIS CROSS O BJECTION SUBMITTED THAT THE JUDGMENT OF HONBLE APEX COURT IN GOETZE ( INDIA) LTD, PLACED RESTRICTIONS ONLY ON THE AO AND NOT ON THE CIT (A) OR THIS TRIBUNAL. AS PER THE LD. AR ONCE INCOME OF THE ASSESSEE WAS EXEMPT U /S.10(1) OF THE ACT, THERE WAS NO QUESTION OF COMPUTING ANY BOOK PROFITS ALSO. 10. PER CONTRA, LD. DR SUBMITTED THAT ASSESSEE HAVI NG NOT PREFERRED THE CLAIM OF AGRICULTURAL INCOME THROUGH A REVISED RETU RN COULD NOT MAKE SUCH A CLAIM BEFORE THE AO OR APPELLATE AUTHORITIES. 11. I HAVE PERUSED THE ORDERS AND HEARD THE RIVAL C ONTENTIONS. BASIS OF CHARGE OF INCOME-TAX HAS BEEN SET OUT IN SECTION 4( 1) OF THE ACT WHICH IS REPRODUCED HEREUNDER : (1) WHERE ANY CENTRAL ACT ENACTS THAT INCOME-TAX19 SHALL BE CHARGED FOR ANY ASSESSMENT YEAR AT ANY RATE OR RATES, INCOME-TAX AT THAT RATE OR THOSE RATES SHALL BE CHARGED FOR THAT YEAR IN ACCORDANCE WITH, AND *S UBJECT TO THE PROVISIONS(INCLUDING PROVISIONS FOR THE LEVY OF ADD ITIONAL INCOME-TAX) OF, THIS ACT IN RESPECT OF THE TOTAL INCOME OF THE PREVIOUS YEAR OF EVERY PERSON : PROVIDED THATWHERE BY VIRTUE OF ANY PROVISION OF TH IS ACT INCOME-TAX IS TO BE CHARGED IN RESPECT OF THE INCOME OF A PERIOD OTHER THAN THE PREVIOUS YEAR, INCOME-TAX SHALL BE CHARGED ACCORDINGLY. 12. A READING OF THE ABOVE CLEARLY SHOW THAT THE CH ARGE OF TAX IS ON TOTAL INCOME. AGRICULTURAL INCOME IS EXEMPT U/S.10(1) OF THE ACT WHICH FALLS IN CHAPTER III OF THE ACT. HEADING OF CHAPTER III IS INCOMES WHICH DO ITA.879 & CO.185/BANG/2015 PAGE - 6 NOT FORM PART OF TOTAL INCOME. THUS THE ITEMS OF INCOME SPECIFIED IN SECTION 10(1) OF THE ACT OR CHAPTER III OF THE ACT WOULD NOT BE A PART OF TOTAL INCOME. THERE CANNOT BE A CHARGE OF TAX U/S. 4(1) OF THE ACT ON ANYTHING OTHER THAN TOTAL INCOME. AS PER THE ASSES SEE, NATURE OF ITS INCOME WAS AGRICULTURAL. IRRESPECTIVE OF THE FACT WHETHER ASSESSEE HAD PREFERRED A CLAIM IN THIS REGARD OR NOT, THE CHARGE OF TAX UNDER THE ACT CAN ONLY BE ON TOTAL INCOME OF AN ASSESSEE. EXEMPTION OF AGRICULTURAL INCOME GIVEN TO AN ASSESSEE U/S.10(1) OF THE ACT IS NOT DEPENDENT ON A CLAIM MADE THROUGH A RETURN OF INCOME, SINCE A CHAR GE OF TAX CAN ONLY BE ON TOTAL INCOME AND TOTAL INCOME CANNOT INCLUDE THE REIN ANY AGRICULTURAL INCOME. EXPLANATION 3 TO SECTION 2(1A) OF THE ACT WHICH DEFINES AGRICULTURAL INCOME CLEARLY STATES THAT INCOME DERI VED FROM SAPLINGS OR SEEDLINGS GROWN IN A NURSERY SHALL BE DEEMED TO BE AGRICULTURAL INCOME. SAID EXPLANATION HAS BEEN INSERTED BY FINANCE ACT, 2008, W.E.F. A. Y. 2009-10. IMPUGNED ASSESSMENT YEAR BEING 2009-10, E XPLANATION WAS SQUARELY APPLICABLE. HOWEVER, WHAT WE FIND IS THAT NONE OF THE LOWER AUTHORITIES HAD GONE INTO THE CLAIM OF THE ASSESSEE THAT INCOME FROM SAPLINGS AND SEEDLINGS GROWN IN A NURSERY WAS ELIGI BLE FOR EXEMPTION U/S.10(1) OF THE ACT, HAS ALREADY BEEN MENTIONED AB OVE. QUESTION OF DISALLOWANCE OF ANY EXPENDITURE MAY BECOME IRRELEVA NT IF INCOME OF THE ITA.879 & CO.185/BANG/2015 PAGE - 7 ASSESSEE IS CONSIDERED AGRICULTURAL IN NATURE. SIM ILARLY THE QUESTION OF COMPUTATION OF BOOK PROFIT MAY ALSO NOT ARISE ONCE INCOME OF THE ASSESSEE IS HELD TO BE AGRICULTURAL IN NATURE, SINC E IT WOULD NOT COME WITHIN THE SCOPE OF TOTAL INCOME. NEVERTHELESS SIN CE NONE OF THE LOWER AUTHORITIES HAVE CONSIDERED THESE ISSUES, I AM OF T HE OPINION THAT THE MATTER REQUIRES A FRESH LOOK BY THE AO. I SET ASID E THE ORDERS OF LOWER AUTHORITIES AND REMIT THE ISSUE REGARDING THE CLAIM OF THE ASSESSEE REGARDING AGRICULTURAL NATURE OF ITS INCOME BACK TO THE AO FOR CONSIDERATION IN ACCORDANCE WITH LAW. FOR REASONS MENTIONED EARLIER, I DO NOT FIND IT NECESSARY TO DECIDE ON ANY OF THE IS SUES RAISED BY THE REVENUE AS ALSO OTHER ISSUES IN ASSESSEES CROSS OB JECTION. AO SHALL BE FREE TO CONSIDER THESE ISSUES ALSO WHEN THE MATTER IS CONSIDERED AFRESH. 13. IN THE RESULT, BOTH APPEAL OF THE REVENUE AS WE LL AS THE CROSS OBJECTION OF THE ASSESSEE ARE TREATED AS ALLOWED FO R STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH DAY OF DECEMBER, 2015. SD/- (ABRAHAM P GEORGE) ACCOUNTANT MEMBER MCN ITA.879 & CO.185/BANG/2015 PAGE - 8 COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME-TAX 4. COMMISSIONER OF INCOME-TAX(A) 5. DR 6. GF, ITAT, BANGALORE BY ORDER ASSISTANT REGISTRAR