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ORDER / आदेश
This is the appeal preferred by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals)-NFAC, Delhi (hereinafter referred to as the Ld. CIT(A)”] dated 07.07.2022 for the AY 2019-20.
The assessee in the regular grounds of appeal
has challenged the confirmation of addition of Rs. 25,40,572/- by Ld. CIT(A) as made by the AO on account of employees contribution to PF u/s 36(1)(va) r.w.s 2(24)(x) ignoring the fact that this payment was made before the due date of filing of return and the ground no. 2 is in support of ground no.
1. At the time of hearing, the Ld. Counsel of the assessee did
3. The ld. Counsel submitted that the assesse vide letter dated 23.11.2022 has raised two additional grounds which may be admitted and adjudicated. The ld AR submitted that all the facts qua these grounds are on records and no fresh verification of facts are required at the end of AO. The ld AR therefore prayed that these may be admitted for adjudication. After hearing both the sides we find that the facts qua these grounds are already on records and in fact these grounds are modified versions of the grounds already raised in the memorandum of appeals. Therefore the same are admitted for adjudication. The additional grounds raised by the assesse are extracted below for the sake of convenience as under:
i. That, on the facts and circumstances of the case, the Ld. CIT(A) erred in upholding the addition of the aggregate sum of Rs. 25,40,572/-, being employees contribution to PF u/s 36(1)(va) r.w.s. 2(24)(x) of the Act, totally ignoring the fact that contributions to the tune of Rs. 6,12,445/- were already deposited within the due date of the relevant Act. ii) That on the facts and circumstances of the case, as regard the balance sum of disallowance of Rs. 19,28,127/-, Rule 8(1) of the Income Tax Rules, 1962 is to be applied after making disallowance of the above sum in view of the fact that the appellant is engaged in tea plantation business.
Issue raised in additional ground no. 1 is in respect of fact that Rs. 6,12,445/- were deposited within due date under the relevant Act being employees contribution to PF and therefore the same should be allowed to the assessee.
After perusing the facts on record and having heard the rival contentions and also perusing the tax audit report as filed before us particularly annexure 2 in respect of details of account of Assam Tea Employees Provident Fund Organization (ATEPFO) as mentioned in Section 2(24)(x) and actual date of payment, we observe that Rs. 6,12,445/- was paid within the due date under the respective date the details whereof are reproduced as under:
Rs. 19,28,127/- was admitted by the assessee to have been paid beyond the due date under respective Act but was made before the due date of filing of return which was the position of law as on the date of filing of return. The Ld. Counsel for the assessee stated that in view of the decision of Hon’ble Supreme Court in the case of Checkmate Services P. Ltd. vs. CIT in TS-791-SC-2022 holding that explanation 2 to Section 36(1)(va) to be retrospective and explanation 5 of Section 43B of the Act are not applicable any more, the assessee withdrew the claim to the extent of Rs. 19,28,127/-. In view of this fact, we set aside the order of Ld. CIT(A) and direct the AO to allow the claim of the assessee. The additional ground no. 1 is allowed.
Issue raised in additional ground no. 2is as regards the balance sum of disallowance of Rs. 19,28,127 under Rule 8(1) of Income Tax Rules, 1962 was applied after making disallowance of the above sum as the assessee is engaged in tea plantation business.
The Ld. Counsel for the assessee submitted before the Bench that the assessee is engaged in the business of growing and manufacturing tea and thus the income of the assessee comprised of agricultural component as well as business component. The Ld. A.R. referred to Rule 8(1) which provides the manner of computation of income of the assessee engaged in growing and manufacturing of tea. The Ld. A.R submitted that the income as computed under the Act has to be apportioned in the ratio of 4 Assessment Year: 2019-20 Hanuman Plantations Limited 60:40between two components 60% as agricultural income and 40% as business income and then the business income is to be brought tax under the Act. The Ld. A.R therefore submitted that first the income of the assessee has to be computed after making disallowance of Rs. 19,28,127/- on account of EPF and then whatever is resultant figure of income is worked out would be subjected to split in the ratio of 60:40 and income should be assessed accordingly. In defense of his arguments the Ld. A.R relied on the decision of Hon’ble Jurisdictional High Court , Calcutta in the case of AFT Industries Ltd. vs. CIT [2004] 270 ITR 167 and also various other Tribunal decision namely Dholai Tea Co. Pvt. Ltd. vs. DIT in ITA NO. 2251/Kol/2010. The ld counsel also submitted that decision in the case of Jayshree Tea and Industries Ltd. vs. DIT in ITA No. 1777/Kol/2010 has been passed after following the above decision of the Hon’ble High Court. The ld counsel of the assesse finally prayed that ground no. 2 may be allowed by directing the assesse to tax only 40% of the total income arrived as such. The ld DR on the other hand argued relied on the orders of authorities below.
7. We have heard the rival arguments and also perused the records before us. We have also perused the and also Rule 8(1) of Income Tax Rules, 1962 which provides for manner of computing taxable income in the assessee is engaged in tea plantation business. The said rule provides that the total income arrived at shall be apportioned in the ratio of 60:40 and 60% would be treated as agricultural income and remaining 40% would be business income. Therefore we find merit in the arguments of the ld counsel that the disallowance of EPF has to be first added to the income of the assesse and only thereafter 40% would be taxed as business income. The Ld. Counsel for the assessee placed before us the computation of business income which is extracted below:
We have also examined the above computation of income and find that the income of Rs. 6,92,424/- is be treated as business income being 40% of income of manufacturing of tea as per Rule 8 of Rules, 1962 instead of Rs. 23,43,506/- assessed as per intimation u/s 143(1) of the Act. We have perused the Rule 8(1) of Rules, 1962 vis-a-vis decision of Hon’ble Calcutta High Court and also the decisions of Tribunal and find that the case of the assesse is squarely covered by these decisions. Accordingly we set aside the order of Ld. CIT(A) and direct the AO to assess Rs. 6,92,424/- as business income as computed above. The ground no. 2 is allowed.
In the result, the appeal of the assessee is allowed.
Order is pronounced in the open court on 17th February, 2023