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This appeal by the Revenue is directed against the order dated 02/01/2015 passed by the Commissioner of Income Tax(Appeals)-2, Kolkata for the assessment year 2006-07.
M/s. Darjeeling Dooars Plantations (Tea) Ltd 1
It is noticed that the appeal filed by the revenue is time barred by 17 days. For which the revenue filed an affidavit dated 18-05-2015 stating the reasons for delay in filing the appeal. On perusing the same and hearing both the parties, we condone the delay and dispose off the same on merits.
The appellant Revenue has raised following grounds:-
1. That on the facts and in circumstances of the case, the ld. CIT(A) erred in holding that cess on green leaf of Rs.29,67,150/- is an allowable expenditure, ignoring the fact that green leaves is attributable to agricultural activities which is taxable under state agriculture income tax beyond the purview of the Central Income Tax as per Rule 8 only 40% of the composite income is taxable under Central Income Tax and moreover on the same SLP is pending before the Apex Court.
2. That the appellant craves for leave to add, delete or modify any of the grounds of appeal before or at the time of hearing.
Brief facts of the case are that the assessee is company and involved in the business of growing and manufacturing of Tea and filed return of income on 30-11-2006 showing total loss of Rs. 68,63,199/-. Under scrutiny, notices u/s. 143(2) and 142(1) were issued and, in response to the said notices, the assessee appeared.
Ground no-1 is relating to disallowance made on account of Cess on green leaf. The contention of the Assessee is that the green leaf is purely an agricultural activity and as such, the cess levied on the production of the green leaf does not come under the purview of composite income and claimed deduction before applying Rule 8. According to AO the Revenue challenged the order of the Hon'ble Calcutta High Court in the case of AFT Industries before the Hon'ble Supreme Court and the Hon’ble Supreme Court admitted said SLP and in view of pendency of the matter, the AO
M/s. Darjeeling Dooars Plantations (Tea) Ltd 2 treated the cess is non deductible expenditure from the composite income of the assesse and added an amount of Rs. 29,67,150/-.
Before the CIT-A the assessee relied on the order of the Calcutta High Court in the case of AFT Industries Ltd reported in 270 ITR 167. The CIT-A held as under:-
6.1 During appellate proceeding the A.R of the appellant has relied upon the jurisdictional High Court case of CIT –Vs- AFT Industries Limited reported at 270 ITR 167. I am in agreement with a view of the A.R of the appellant. The Hon’ble Supreme Court of India while admitting the SLP of the Department in the case of AFT Industries Ltd has neither set-aside nor kept the order of the Hon’ble High Court of Kolkata in abeyance. Therefore, as on date the legal position is that the judgment of the jurisdictional High Court at 270 ITR 167 will continue to be in effective and authorities down below have to accept the ratio of this decision. Accordingly, I am of the view that addition of Rs. 29,67,150/- made by the AO should not sustained. Ground No. 4 of the appeal is allowed.
We find that, as matter stood thus, the Honourable Supreme Court dismissed the SLP filed by the appellant revenue and agreed with the interpretation of scope of Rule 8 of Income Tax Rules 1962 rendered by the Honourable High Court of Calcutta. The Learned AR placed copy of such order before us and submitted that the present appeal may be disposed of in pursuance of the decision of Honourable Supreme Court and learned DR submits that the appellant revenue did not succeed in SLP and the decision of Honourable High Court of Calcutta has become final and binding on the appellant revenue in view of the confirmation of the such decision by the Honourable Supreme Court. The relevant portion of which is reproduced herein below:
“The respondent-assessee had paid cess on green leaf to the Government of Assam which was levied under Assam Taxation ( On Specified Land) Act, 1990. In its income tax return, it had claimed the M/s. Darjeeling Dooars Plantations (Tea) Ltd 3 same as deduction which has been allowed by the High Court. The relevant discussion in this behalf is as under:-
"However, the learned Tribunal had held that the deduction is eligible after computing the income under Rule 8 and the apportionment is to be made only after the income is so computed. Such apportionment cannot be made before the deduction. Rule 8 of the Income Tax: Rules, 1962 requires that the computation is to be made as if by fiction the entire income out of the tea grown and manufactured as income assessable under the Income Tax Act, 1961. In view of Rule 8, the income so computed is to be apportioned 60: 40 of which 40 is assessable to tax under the Act. It does not provide that after apportionment of the 60 % of the income so computed shall again be required to be computed under the Agricultural Income Tax Act. On the other hand, this 60% is exposed and becomes exigible to tax under the Agricultural Income Tax Act. without being required to be assessed under the said Act by reason of the fiction so created. Therefore, the cess paid has rightly been excluded while computing the income under Rule 8 of the tea grown and manufactured."
In arriving at the aforesaid conclusion, the High Court has referred to the various judgments of this Court.
We are of the opinion that the High Court has rightly interpreted the scope of Rule 8 of the Income Tax Rules 1962. We, thus, find no merit in this appeal which is, accordingly, dismissed. “
In accordance with the principle as laid by the Hon’ble High Court of Calcutta in the case of AFT Industries which has been further strengthened by dismissal of SLP by the Honble Supreme Court, we hold that the income so computed is to be apportioned 60: 40 of which 40 is assessable to tax under the Act. Thus, ground no-1 raised is, accordingly dismissed.
Ground no. 2 is general in nature and requires no adjudication.
M/s. Darjeeling Dooars Plantations
(Tea) Ltd 4
In the result, the appeal filed by the revenue is dismissed.
Order pronounced in the open Court on 18-10-2017.
Sd/- Sd/- J. Sudhakar Reddy S.S. Viswanethra Ravi Accountant Member Judicial Member Date: 18-10-2017 Copies to : **PP/SPS (1) Appellant/Department: The DCIT, Cir-4(2), Kol., P-7 Chowringhee Square, Kolkata-69. (2) Respondent/Assessee: M/s. Darjeeling Dooars Plantations (Tea) Ltd. ,Nicco House, 2 Hare Street, 4th Floor, Kolkata-1. (3)Commissioner of Income-tax (Appeals) (4) Commissioner of Income Tax, Kolkata (5) The Departmental Representative (6) Guard File By order Sr.PS/H.O.O ITAT, Kolkata M/s. Darjeeling Dooars Plantations (Tea) Ltd 5