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Facts
The assessee, Andrew Yule & Co. Ltd., a Govt. of India enterprise engaged in tea and engineering goods, filed its return for AY 2014-15. The Assessing Officer (AO) made several disallowances related to liquidated damages, maintenance of young tea bushes, prior period expenses, and sundry receipts of the tea division. The AO also adjusted for exempt dividend income, leading to an increased assessed income. Aggrieved, the assessee appealed to the CIT(A), who allowed the appeal.
Held
The Tribunal upheld the CIT(A)'s order, finding no infirmity. It noted that most grounds of appeal raised by the revenue were covered by previous ITAT orders in the assessee's own case for AY 2008-09 to 2011-12, which the revenue had not appealed. Regarding sundry receipts, the Tribunal confirmed they were related to the tea business and eligible for the benefit of Rule 8 of the Income Tax Rules, 1962, citing earlier judgments.
Key Issues
Whether the CIT(A) erred in deleting additions related to liquidated damages, maintenance of young tea bushes, prior period expenses, and sundry receipts of the tea division.
Sections Cited
143(2), 142(1), 14A, 28, 44, Rule 8 of IT Rules, 1962
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Income Tax Appellate Tribunal, “A” BENCH: KOLKATA
Before: Shri Pradip Kumar Choubey&Shri Rakesh Mishra]
ORDER / आदेश Per Pradip Kumar Choubey, JM:
This is the appeal preferred by the revenue against the order of Commissioner of Income Tax (Appeals)-NFAC, Delhi (hereinafter referred to as the Ld. CIT(A)] dated 01.05.2024 for AY 2014-15.
Assessment Year: 2014-15 Andrew Yule & Co. Ltd. 2. It appears from the report of the registry that the appeal has been filed after a delay of 73 days. At the time of hearing the counsel of the assessee explained the reason for delay in filing the appeal. The Ld. A.R did not raise any objection in condoning the delay. Keeping in view, the submission made by the A.R. and the judicial pronouncement that a case should be decided on merit not on technical issue, the delay is hereby condoned.
Brief facts of the case of the assessee are that the assessee being a company Govt. of India enterprises, engaged in the business of growing, manufacture and sale of tea and engineering goods, filed its return of income on 30-09-2014 showing total income of Rs. 4,17,88,350/-. The case of the assessee was selected for scrutiny, statutory notices u/s 143(2) and 142(1) were issued. The AO observed that the assessee had debited profit and loss account with an extent of Rs. 2,78,28,00,000/- on account of liquidated damages. The AO has further observed that in the profit and loss account the assessee has debited Rs. 1,12,58,543/- towards maintenance of young tea bushes. The AO has further found that it is seen from the records that the company has spent Rs. 6,02,090/- towards club expenses out of which Rs. 5,09,375/- for tea division and Rs. 92,715/- for non-tea division. The AO has further observed while verifying the details of income of the assessee that in addition to other income the assessee has earned dividend income of Rs. 23,46,25,998/- being an exempt income, hence not confirming part of the total income. Considering the submission made by the assessee the AO has computed the income of the assessee which is as under:
Aggrieved by the said assessed income the assessee preferred an appeal before the Ld. CIT(A) wherein the appeal of the assessee has been allowed.
Being aggrieved and dissatisfied the revenue has preferred an appeal before us.
The Ld. D.R challenges the impugned order by taking following grounds in appeal:
Assessment Year: 2014-15 Andrew Yule & Co. Ltd. i) Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of the disallowance of Rs. 8,89,219/- on Liquidated damages? ii) Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of the Disallowance of Rs. 2,20,26,806/- on Maintenance of young tea bushes? iii) Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of the prior period expenses of Rs. 3,69,509/-? iv) Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of the disallowance of Rs. 49,83,627/- on sundry receipts of Tea Division? v) The appellant craves leave to make any amend, addition, alteration, modification etc. of the grounds either before the appellate proceedings, or in the course of appellate proceedings.
Contrary to that the Ld. A.R supports the impugned order thereby submitting that most of all the grounds taken by the D.R are in fact covered by the order passed by the Hon’ble ITAT in the own case of the assessee for the AY 2008-09 to 2011-12 and revenue did not prefer any appeal against the said order. The Ld. Counsel submits that the Ld. CIT(A) has passed the order in favour of the assessee considering the order passed by the ITAT in the case of the assessee, so there is no illegality in the impugned order. The Ld. Counsel further submits that so far as disallowance of Rs. 49,83,627/- on sundry receipts of tea division are concerned, the assessee has submitted details before the assessment proceedings reflected that such amount of receipt represented the insurance claims and carrier claims on tea manufacturing and tea sold through auction and export, sale of logs out of shade trees required for maintenance of tea bushes etc. hence Rule 8 is not at all applicable.
Upon hearing the submission of the counsel of the respective parties, we have perused the order passed by the Ld. CIT(A) as there is a submission of Ld. A.R that all the issues except the addition of disallowance on sundry receipts has been covered by the order of Hon’ble ITAT in the own case of the assessee. The Ld. DR in course of argument has conceded that there is an order passed by the Hon’ble ITAT in favour of the assessee on the same issue for AY 2008-09 to 2011-12 and department did not prefer any appeal against the said order. On perusal of the order of the Ld. CIT(A), it appears to us that the Ld. CIT(A) has allowed the appeal of the assessee by relying the issue Assessment Year: 2014-15 Andrew Yule & Co. Ltd. passed in favour of the assessee in AY 2008-09 to 2011-12 in 1737, 1882 & 1883/Kol/2016. It is needless to reproduce the order passed by the ITAT in favour of the assessee in his own case in view of the admission of the Ld. D.R. The Ld. CIT(A) after going over the order passed by the ITAT in the own case of the assessee has allowed the appeal of the assessee. The Ld. CIT(A) has held in its operative portion as thus:
I have perused the details filed by the appellant which show that expenses were incurred towards miscellaneous expenses bill for garden, for stores received and paid in FY 2013-14, arrear payments to Assam Gas Co. Ltd. as per revised rates wherein bills were received in FY 2013-14 etc. Sample copies of bills/vouchers related to such expenses also show that these were incurred for revenue purpose, were on account of liabilities that crystallized in this FY 2013- 14 and actually paid in this FY 2013-14 (AY 2014-15). It is also noted that considering the volume of transactions of the appellant and the scale of its operations and decision of my worthy predecessor which was upheld by Hon’ble ITAT in its order in AY 2008-09 to 2011-12 as cited above, the claim of Rs. 3,69,509/- is allowable to the appellant.
So far, the issue of addition of Rs. 49,83,628/- under Rule 8 is concerned, we find that the assessee had filed details of receipts in tabular form before the AO during the assessment proceedings. Out of such total sundry receipts of Rs. 49,83,627/-, Rs. 33,56,445/- were towards West Bengal gardens and Rs. 16,27,181/- were towards Assam gardens. The Ld. CIT(A) in its order has held thus:
5.6.3 I have perused the submissions of the appellant and it is seen that vide letter dated 22/08/2016, the appellant had filed details of such receipts in a tabular form before the AO during the assessment proceedings. Out of such total sundry receipts of Rs. 49,83,627/, Rs. 33,56,445/- were towards West Bengal gardens & Rs. 16,27,181/- were towards Assam Gardens. A perusal of such receipts shows that for the tea-division, the major amounts were from sale of logs, sale of gunny bags, insurance claims & claims from carriers, etc. On this issue, it is noted that the tax audit report has also not pointed out anything adverse on account of such receipts not being from activities of tea growing/tea manufacturing. Further, the nature of receipts on account of claims of carriers and sale of logs and gunny bags bring out the nature of articles sold in scrap or receipts from others on account of tea business of the appellant. It is also seen that in the case of Apeejay Tea Ltd (ITA No. 2456/Kol/2013 dated 02/12/2016), Hon’ble ITAT, Kolkata had decided a similar issue in favour of appellant. In that case, the AO had held that rent received from others for use of warehouse, insurance claims (received other than for loss of stock), rental income for generators given to others, hospital recovery & bazar collection & other receipts, DEPB license had no had no nexus with the business of growing and manufacturing of tea, and hence, Rule 8 was not applicable on any profit out of such Assessment Year: 2014-15 Andrew Yule & Co. Ltd. receipts. While deciding this case, Hon’ble ITAT observed that in assessee's own case for A.Y.2005-06 (ITA No.1406/Kol/2009 and 1233/Kol/2009 order dated 11.09.2015), similar receipts from discount out of packing material, machinery breakdown claim, tea board subsidy, scrap sales, storm damage claim, bazar rent were held to be arising out of tea business. Thereafter, Hon’ble ITAT discussed the cases of Kothari Plantations & Industries Ltd. 203 ITR 547 (Cal), McLeod Russel India Ltd. Vs. CIT (2013) 260 CTR 0337 (Gau) and held that rule making authority has prescribed that income, which is derived from sale of tea grown and manufactured by seller, shall be treated as if it were 'income derived from the business'. Therefore, it was held that the principle of ‘direct nexus’ with ‘eligible business’, cannot be applied here and, the tests to be applied while computing composite income under Rule 8, was to see whether the receipts fall within the ambit of receipts under Sec.28 to 44 of the Act. Considering the same, in that case, Hon’ble ITAT had held that such receipts viz. Insurance claims received on account of assets used in tea business, interest subsidy received from Government on capital for plant & machinery employed in tea business, scrap sales, bazar rent etc., which had been held by the AO & CIT(A) as business income, would have to be included as part of composite income eligible for Rule 8 of the Act. In view of the above and the fact that the appellant has given bifurcation of sundry receipts, the nature of receipts indicates towards relation of these with the tea business, the tax auditors not having remarked anything adverse about it and the AO having taxed these as business receipts, these sundry receipts of Rs. 49,83,627/- are held to be part of composite receipts eligible for benefit of rule 8 of the I.T. Rules, 1962.
Going over the order passed by the Ld. CIT(A) and considering the submission of the assessee, we do not find any infirmity in the impugned order. Accordingly, the appeal of revenue is hereby dismissed.