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Income Tax Appellate Tribunal, “C” BENCH : KOLKATA
Before: Hon’ble Sri N.V.Vasudevan, JM & Dr.Arjun Lal Saini, AM]
Date of Hearing : 31.01.2017. Date of Pronouncement : 08.02.2017. ORDER Per Bench All these appeals filed by the Assessee are against four different orders all dated 06.12.2013 of CIT(A)-IV, Kolkata relating to AY 2006-07 to 2009-10.
The first common issue that arises for consideration in all these appeals is as to whether CIT(A) was justified in coming to the conclusion that the activity of blending and mixing of tea amounted to manufacturing and consequently coming to the conclusion that the export proceeds of the assessee from export of tea will be eligible u/s 10B of the Act. The grievance of the Revenue is projected in the following grounds of appeal :
“1. The Ld. CIT(A) erred on facts as well as in law in holding that blending and mixing of tea amounted to manufacturing and produce and as such, export proceed of Rs.3,42,25,219/- eligible for exemption u/s 10B, ignoring the fact that blending and mixing of tea is processing, not manufacturing as decided by the jurisdictional Calcutta High Court in the case of Apeejay (P)Ltd. And Brook Bond India Ltd and as such, the assessee did not fulfil the precondition to become eligible for exemption u/s 10B. “
2 to 627 & 711/Kol/2014 M/s. Tea Promoters (India)Pvt. Ltd. A.Yr.2006-07 to 2009-10 3. At the time of hearing it was brought to our notice that identical issue had come up for consideration in assessee’s own case before this Tribunal in ITA No.1189/Kol/2008 for A.Y.2005-06 and this Tribunal by its order dated 23.11.2012 after following the decision of the Special Bench of ITAT, Kolkata in the case of Madhu Jayanti International Ltd. Vs DCIT in ITA No.1463/Kol/2007 order dated 20.07.2012 held that in respect of the activity of blending and mixing of tea amounting to manufacture. The Hon’ble Special Bench has taken the aforesaid view after considering the decision referred to by the revenue in the grounds of appeal. In view of the above we dismiss the impugned grounds of appeal raised by the revenue in all the four appeals.
The second common issue that arises for consideration in two of the four appeals by the revenue is with regard to the disallowance of expenses incurred to earn income which is not chargeable to tax. The disallowance of expenses was made by the AO by invoking the provision of section 14A r.w. Rule 8D(2)(iii) of the IT Rules, 1962 (Rules). This ground of appeal
arises for consideration only in A.Y.2008-09 and 2009- 10 and the grievance of the revenue in this regard is projected in ground no.2 in both the assessment years which the impugned ground reads as follows :-
2. The CIT(A) erred in holding that disallowance u/s 14A was not warranted as nexus between expenses with that of investment was not established, ignoring the fact that Rule 8D is become applicable after A.Y.2008-09 and u/s 14A can be made even if exempt income was not received from investment as decided in the case of Daga Capital Management Ltd and same view has been taken in circular No.5/2004 of CBDT.”
5. At the time of hearing it was noticed by the Bench that the assessee has not made any disallowance under Rule 8(2)(iii) of the Rules and has also not substantiated as to how no expenses are attributable to earning exempt income. The ld. Counsel for the assessee prayed before us that the disallowance under Rule 8D(2)(iii) of Rules may be restricted to the quantum of exempt income. This submission was made without prejudice to the stand which the assessee may take on this issue in any other assessment year. The ld. Counsel for the assessee brought to our notice to the decision of ITAT ‘D 3 to 627 & 711/Kol/2014 M/s. Tea Promoters (India)Pvt. Ltd. A.Yr.2006-07 to 2009-10 ‘Mumbai Bench in the case of M/s. Daga Global Chemicals Pvt. Ltd. Vs ACIT in ITA No.5592/Mum/2012 order dated 01.01.2015 wherein the Hon’ble ITAT took a view that the disallowance u/s 14A of the Act cannot be more than the exempt income earned by the assessee. The ld. Counsel also placed reliance on the identical proposition laid down by the Hon’ble Delhi High Court in the case of Joint Investments Pvt. Ltd. Vs CIT 372 ITR 694 (Delhi).
We have considered the submissions of the ld. Counsel for the assessee and are of the view that it would be just and appropriate to sustain the disallowance of expenses u/s 14A r.w. 8D(2)(iii) of the Rules to the extent of exempt income earned by the assessee during the previous year namely a sum of Rs.88,350/- in A.Y.2008-09 and a sum of Rs.1,61,311/- in A.Y.2009-10. Thus the relevant grounds of appeal
of the revenue are partly allowed.
7. In the result ITA No.625 and 711/Kol/2014 are dismissed and ITA Nos.626 and 627/Kol/2014 are partly allowed. Order pronounced in the Court on 08.02.2017.