D.C.I.T.-CIRCLE-4, KOLKATA, KOLKATA vs. M/S CHENGMARI TEA CO. LTD., KOLKATA

IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH : KOLKATA [Before Hon’ble Sri N.V.Vasudevan, JM & Shri Waseem Ahmed, AM] Assessment Year : 2006-07 D.C.I.T., Circle-4, -vs.- M/s. Chengmari Tea Co.Ltd. Kolkata Kolkata [PAN : AABCC 0672 Q] (Respondent) (Appellant) For the Appellant : Shri Sudipta Guha, JCIT, Sr.DR For the Respondent : Shri Sunil Surana, A.R. Date of Hearing : 18.07.2016. Date of Pronouncement : 20.07.2016. ORDER Per N.V.Vasudevan, JM

This is an appeal by the Revenue against the order dated 25.9.2013 of CIT(A)- IV, Kolkata relating to AY 2006-07. 2. Ground of appeal raised by the revenue reads as follows :-

1. That on the facts and circumstances of the case, the Ld. CIT(A) erred in law as well in holding that cess on green leaf of Rs.60,71,704/- is an allowable expenditure, ignoring the fact that it is directly attributable to core agriculture activities which is taxable under state agriculture income tax, beyond the purview of Central Income Tax and on the same issue SLP is pending in the case of AFT Industries.”

3. The assessee is a Private Limited Company engaged in Manufacturing & Sale of Tea. During the relevant year the assessee had claimed a sum of Rs.60,71,740/- toward Green leaf cess as the same were paid during this year and were not claimed in respective relevant years under the provisions of Section 43B of the Income Tax Act, 1961 (Act) as deduction in computing total income. 3.1. In the Computation filed 40% of these payments were claimed as deduction in Income Tax computation and balance 60% claimed in Agricultural Income 2 M/s. Chengmari Tea Co.Ltd. A.Yr.2006-07 Computations. While making assessment the Learned Assessing officer has treated these expenses as 100% relating to Agricultural income and hence disallowed 40% of these expenses claimed in computing total income under Act Calculation. During the course of hearing it was explained that the addition is being made as similar issue is still pending with Supreme Court although the issue has been decided against the revenue by Jurisdictional Hon’ble Kolkata High Court CIT vs AFT Industries Ltd. 270 ITR 167 (Cal).

4. Aggrieved by the order of AO the assessee preferred appeal before CIT(A). CIT(A) held as follows :- “3. I have examined the assessment order as well as the submissions of. the A.R. of the appellant. While deciding this issue in the favour of the appellant, in the case of M K Jokai India Ltd. vs. the Deptt. Of Income-tax at ITA Nos. l06/125/370/Ko1/2011, the Hon'ble 'A' Bench of ITAT, Kolkata, had held as below :- "14. After hearing the rival submissions and on careful perusal of the materials available on record, keeping in view of the fact that the issue is concluded by the decision of the 'Hon'ble Jurisdictional High Court in the case of CIT vs AFT Industries Ltd. 270 ITR 167 (Cal) where the amount paid as cess was held as eligible for deduction in computing the composite income under Rule 8 of I T. Rules. This issue is, therefore, decided in favour of the assessee and against the Revenue by upholding the order of the CJT(A) who has allowed the deduction of payment of cess on green leaves in computing the composite income from tea business of the assessee under rule 8 of the I. T. Rules. 14.1 The fact that the SLP is pending before the Hon'ble Supreme Court the decision of the Hon'ble Calcutta High Court in. respect of AFT Industries Ltd. Vs CIT(270 ITR 167) will not have any effect since the Hon'bte Apex Court has neither set aside the orders of the Calcutta High Court nor granted any stay. 3.3 Humbly, following the jurisdictional High Court and also the fact that the Hon’ble Apex Court has neither set aside the order of Kolkata High Court in the case of AFT Industries Ltd nor granted any stay., I am of the view that addition on account of cess on green leaves for Rs.60,21,704/- should be deleted.”

5. Aggrieved by the order of CIT(A) the revenue has preferred the present appeal before the Tribunal.