THE COMMISSIONER OF INCOME TAX-II vs. JAIN IRRIGATION SYSTEMS LTD
What did the High Court hold?
The High Court held that the reasons provided by the appellate authorities (CIT(A) and ITAT) were proper and reasonable, and thus, no interference was warranted. The CIT(A) had observed that orchard activities were treated as stock under Current Assets, making any loss due to mortality a trade loss and allowable. The CIT(A) also found the mortality rate claimed to be normal and reasonable. The ITAT confirmed this view, dismissing the revenue's appeal and referring to its own earlier order in Income Tax Appeal No. 1080/PN/09 for the assessment year 2005-2006 concerning the same assessee, where a similar disallowance was deleted. The court noted that it was not shown that the earlier decision was reversed or that any other view was possible. Consequently, the appeals were found to be devoid of substance and were dismissed.
What were the facts?
The appeals were filed by the Commissioner of Income Tax-II (Revenue) challenging the orders of the Income Tax Appellate Tribunal (ITAT) dated March 29, 2012. These ITAT orders had confirmed the decisions of the Commissioner of Income Tax (Appeals) - II, Nashik, dated August 22, 2007. The core issue revolved around the treatment of expenditure incurred on the amortization of orchards. The assessee, Jain Irrigation Systems Ltd., engaged in the fruit products business, incurred expenditure for plantation of fruit trees. Due to various reasons, some plants died, and the assessee claimed a certain percentage of this expenditure as revenue expenditure, debiting it to the Profit & Loss Account. The Assessing Officer, however, treated this mortality as a capital loss, disallowing the deduction.
What were the issues?
1. Whether the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal were justified in treating the expenditure incurred on amortization of orchard as revenue expenditure, rather than capital expenditure as assessed by the Assessing Officer, concerning the amounts of Rs. 47,69,233/-, Rs. 36,04,769/-, and Rs. 30,86,251/- in the respective appeals. Assessee's Contentions: The assessee argued that the orchard activities were shown as stock under Current Assets in the balance sheet. Therefore, any loss on account of mortality related to business stock is a trade loss and allowable as expenditure. The mortality rate claimed was normal and reasonable given the nature of the orchard activities. Revenue's Contentions: The revenue contended that the untimely death of plants, referred to as mortality, constituted a capital loss and was not liable for deduction. The Assessing Officer had disallowed the claim on this basis.
AI-generated summary — verify with the full judgment below
Cause title — parties, addresses and appearances
ORDER :
These appeals are presented challenging the judgment and order passed by Income Tax Appellate Tribunal on 29.03.2012 disallowing the appeals presented by revenue and thereby confirming the order dated 22.08.2007 passed by the Commissioner of Income Tax (Appeals) – II, Nashik.
The questions that arises for consideration in the appeals is as to whether the Commissioner for Income Tax (Appeals) as well as the Income Tax Appellate Tribunal were justified in treating the expenditure incurred
ita27.12 3 on amortization of orchard as revenue expenditure and not as capital expenditure as assessed by the assessing officer. The amount involved and permitted deduction by the appellate authority is to the tune of Rs. 47,69,233/, Rs. 36,04,769/ and Rs. 30,86,251/ respectively in all the appeals. The assessee company is engaged in the business of fruit products and for the business activities the assessee incurred expenditure for plantation of fruit trees. In the process of plantation of fruit trees, some of the plants got died due to various reasons. The assessee, as such claimed certain percentage of expenditure incurred for plantation as return of debited the same in the Profit & Loss A/c. The assessee categorised the expenditure as of revenue nature and claims the same to be allowed. The Assessing Officer, however, disallowed the claim holding that untimely death of plants mainly referred as mortality is nothing but capital loss and is not liable for deduction.
The appellate authority while deciding the appeal presented by the assessee observed in the judgment that the orchard activities were shown as stock under the head Current Assets in the balance sheet and any loss on account of mortality relating to business stock is trade loss and allowable as expenditure. It is further observed in the judgment that considering the nature of orchard activities carried on by the appellant / assessee, the mortality rate claimed is normal and reasonable and therefore it should be allowed as revenue expenditure. The view adopted by the appellate authority is confirmed by the tribunal while dismissing the
ita27.12 4 appeal presented by revenue. The tribunal has also referred to its earlier order passed in Income Tax Appeal No. 1080/PN/09 decided on 21.09.2010 for the assessment year 20052006 in respect of the assessee himself whereby disallowance of Rs. 22,58,764/ was deleted by CIT(A). It has not been shown that the earlier decision in respect of the assessee has been reversed or that any other view is possible.
On perusal of the order passed by the appellate authorities as well as the tribunal, we are of the opinion that the reasons set out in support of the order are proper and reasonable and do not call for any interference in the appeals. Appeals are devoid of substance hence stand dismissed.
Pending civil application, if any, does not survive and stands disposed of. ( A. M. BADAR ) ( R. M. BORDE ) JUDGE JUDGE dyb
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