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Income Tax Appellate Tribunal, ‘B(SMC
Before: Shri Rajpal Yadav, Vice-(KZ) & Dr. Manish Borad
Per Rajpal Yadav, Vice-President (KZ):- The assessee is in appeal before the Tribunal against the order of ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dated 13.12.2022 passed for Assessment Year 2020-21.
Assessment Year: 2020-2021 Madoorie Tea Estate Pvt. Limited 2. The assessee has taken seven grounds of appeal in Form No. 36 against Column No.
10. However, the only grievance of the assessee is that the disallowance made under section 36(1)(va) amounting to Rs.37,01,683/- out of employee-employer’s contribution not paid to the respective PF & ESI account within the due date ought to be divided in the ratio of 60 : 40% for the purpose of levy of taxes upon the assessee.
Brief facts of the case are that the assessee has filed its return of income on 04.01.2021. A sum of Rs.37,01,683/- was disallowed by the ld. Assessing Officer under section 36(1)(va) of the Act on the ground that these employees’ contributions were not paid within the due dates to the respective accounts. Accordingly in an assessment order under section 143(1), ld. Assessing Officer has made adjustment. Appeal to the ld. CIT(Appeals) did not bring any relief to the assessee.
Ld. Counsel for the assessee did not dispute that the Hon’ble Supreme Court has resolved the controversy in the judgment of Checkmate Services Pvt. Limited –vs.- CIT reported in 43 taxmann.com 178, but she further contended that since the assessee is a Company engaged in growing of tea plant and manufacturing of tea, therefore, its income is to be determined as per Rule 8 of the Income Tax Rules. The assessee has raised an additional ground of appeal vide the written submissions submitted by the ld. Counsel for the assessee. She submitted Assessment Year: 2020-2021 Madoorie Tea Estate Pvt. Limited that being a tea-company, which is engaged in growing of tea plant and manufacturing of tea, its income is to be determined as per Rule 8 which contemplates that income derived from sale of tea grown and manufactured by the seller of India shall be computed as if its income derived from business and 40% of such income shall be deemed to be income liable to tax. On the strength of this Rule, ld. Counsel for the assessee contended that only 40% of the total disallowance is taxable for the purpose of income-tax. In support of her contention, she relied upon the decision of the Coordinate Bench of this Tribunal rendered in ITA No. 494/KOL/2022.
On the other hand, ld. D.R. submitted that it is not an income derived from tea growing rather it is employees’ contribution therefore it cannot attain the character of agricultural income.
Before adverting to the finding in order to appreciate the facts in more scientific manner and elaborately, we deem it appropriate to reproduce the written submission filed by the ld. Counsel for the assessee on this additional ground of appeal, which reads as under:- Assessment Year: 2020-2021 Madoorie Tea Estate Pvt. Limited Assessment Year: 2020-2021 Madoorie Tea Estate Pvt. Limited Assessment Year: 2020-2021 Madoorie Tea Estate Pvt. Limited
As far as entertainment of the additional ground of appeal is concerned, we are of the view that it affects the very taxability of the assessee, therefore, on the strength of the Hon’ble Supreme Court decision in the case of National Thermal Power Corporation Limited reported in 229 ITR 383, we admit this additional ground of appeal.
8. As far as the objection of the ld. D.R. is concerned, we do not find force in her contention because Rule 8 does not create a distinction between agriculture activity or otherwise. It only contemplates that if an assessee derives income from the sale of tea grown and manufactured by the seller, then only 40% will be 6 Assessment Year: 2020-2021 Madoorie Tea Estate Pvt. Limited added back, it will fall within the business income of the assessee and the moment it becomes business income, it is to be divided in the ratio of 60:40. In identical circumstance, the Coordinate Bench has also directed the ld. Assessing Officer to confine the levy of tax to the extent of 40% of such addition.
9. Taking into consideration all these details, we direct the ld. Assessing Officer to include the amount of Rs.14,70,730/- being 40% of the disallowance in the taxable income of the assessee and rest is to be excluded as per Rule 8.
In the result, the appeal of the assessee is allowed in the terms indicated above. Order pronounced in the open Court on 28th February, 2023. Sd/- Sd/- (Manish Borad) (Rajpal Yadav) Accountant Member Vice-President (KZ) Kolkata, the 28th day of February, 2023 Copies to :(1) Madoorie Tea Estate Pvt. Limited, Kasba Industrial Estate, Phase-II, Plot-3, East Kolkata Township, Kolkata-700107 (2) Assistant Commissioner of Income Tax, Circle-4(1), Kolkata, Aayakar Bhawan, P-7, Chowringhee Square, Kolkata-700069 7