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Income Tax Appellate Tribunal, KOLKATA ‘A’ BENCH, KOLKATA
Before: Shri P.M. Jagtap, Vice-(KZ) & Shri S.S. Viswanethra Ravi
Per Shri P.M. Jagtap, Vice-President (KZ):- This appeal is preferred by the Revenue against the order of ld. Commissioner of Income Tax (Appeals)-2, Kolkata dated 09.01.2017 and the grounds raised
by the Revenue therein read as under:-
1. That the ld. CIT(A) has erred in interpreting the essence of CBDT's Circular No. 495 dated 22 n d September 1987 in respect of procedure for determining the books profit u/s 115JB in the case of tea companies.
2. That the ld. CIT(A) has erred in appreciating the fact of correctness of book profit u/s 115JB as determined by the AO in the line of CBDT's Circular No. 495 dated 22 nd September, 1987.
3. That the ld. CIT(A) has erred in law in expressing his view that 40% of the composite income to be determined as book profit u/s. 115JB by violating the CBDT's Circular.
Ganeshka Kanoi Tea Co. Pvt. Limited
4. That the ld. CIT(A) has erred in law in appreciating the essence of Rule 8 of I.T. Rules 1962.
The assessee in the present case is a Company, which is engaged in the business of manufacturing of tea/coffee. The return of income for the year under consideration was filed by it on 30.09.2013 declaring total income of Rs.1,35,700/- and book profit of Rs.26,52,930/- under section 115JB of the Income Tax Act, 1961. In the assessment completed under section 143(3) of the Act vide an order dated 23.02.2016, the book profit of the assessee-company under section 115JB was determined by the Assessing Officer at Rs.91,07,628/- after restricting the deduction claimed by the assessee amounting to Rs.1,04,68,967/- for exemption on account of composite income to Rs.40,14,269/-.
Against the order passed by the Assessing Officer under section 143(3), an appeal was preferred by the assessee before the ld. CIT(Appeals) challenging the computation of book profit under section 115JB as made by the Assessing Officer and after considering the submissions made by the assessee as well as the material available on record, the ld. CIT(Appeals) decided this issue vide his impugned order as under:- “l have considered the submissions of the authorized representative of the appellant as well as the assessment order framed in the light of the materials available on record before the assessing officer during the assessment proceedings. The AR has submitted that the A.O while computing Book Profit u/s 115JB has allowed deduction as agricultural profit as 60% on composite income calculated under the normal provision of the Income Tax Act, 1961 and not as 60% of the profit as per Profit and loss account as per return filed by the assessee. The circular issued by CBDT in respect of Tea Companies as to the procedure for ascertaining the Book Profit under MAT in respect of computation under 115JB says as under:- "In the case of a tea company where income is derived from the sale of tea grown and manufactured by the seller, only 40 per cent of such income is liable to tax under rule 8 of the Income- tax Rules, 1962. 60 per cent of the income, which is disregarded for the purposes of taxation is considered to be agricultural Ganeshka Kanoi Tea Co. Pvt. Limited
income and is, therefore, exempt under the provisions of Chapter JII. The net profit determined in accordance with Schedule VI to the Companies Act, 1956, has to be adjusted, inter alia, in accordance with clause UJ and sub-clause (ii) of the Explanation to section 115J(1). In the case of the tea companies, the book profit should be computed by making all the adjustments referred to in the Explanation. However, no adjustment in respect of clause (f) and sub-clause (ii) of the Explanation is to be made for the agricultural income earned by tea companies from tea business. 40 per cent of the adjusted amount arrived at in this manner will be the book profit of the tea company in accordance with rule 8 of the Income-tax Rules. " The circular very clearly and specifically explains the modus in which Exempt Income i.e. Agricultural Income in case of Tea Manufacturing Companies needs to be dealt with in preparing computation for MAT. Last para clearly explains that no adjustment in respect of clause (f) and sub-clause (ii) of the Explanation is to be made for the agricultural income earned by tea companies from tea business and flat 40 % of the adjusted amount arrived in this manner will be book profit of the tea company in accordance with rule 8 of the Income Tax Rules. Keeping in view of above, the AO is directed to compute the book profit correctly in accordance with the above circular. This ground is therefore allowed for statistical purposes”.
Aggrieved by the order of the ld. CIT(Appeals), the Revenue has preferred this appeal before the Tribunal.
At the time of hearing fixed today, none has appeared on behalf of the assessee. This appeal of the assessee is, therefore, being disposed of ex-parte qua the respondent-assessee after hearing the arguments of the ld. D.R. and perusing the relevant material available on record. It is observed that the ld. CIT(Appeals) vide his impugned order has only directed the Assessing Officer to compute the book profit of the assessee correctly in accordance with the relevant CBDT Circular and Revenue, therefore, cannot be said to have any material grievance from the decision rendered by the ld. CIT(Appeals) on this issue. It is also observed that the tax effect involved in this appeal of the Revenue is less than the monetary limit of Rs.20 lakhs fixed by the CBDT vide Circular No. 3/2018 dated 11.07.2018 for filing the appeal of the Revenue before the Ganeshka Kanoi Tea Co. Pvt. Limited Tribunal. We, therefore, find no merit in this appeal of the Revenue and dismiss the same.