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Income Tax Appellate Tribunal, “C” BENCH : KOLKATA
Before: Hon’ble Sri N.V.Vasudevan, JM & Shri Waseem Ahmed, AM]
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.
We have heard the rival submissions. Income from growing, manufacturing and sale of tea would be Composite income, which means it comprises agricultural income 3 M/s. Chengmari Tea Co.Ltd. A.Yr.2006-07 to the extent of growing tea, which is not chargeable to tax and non-agricultural income to the extent it comprises of income from manufacture and sale of tea, which income is chargeable to tax. Rule 8 of the Income Tax Rules, 1062 provides method of computation for composite income from manufacture of tea. Under Rule 8 (1) of the Income Tax Rules, 1962 (Rules) income derived from sale of tea grown and manufactured by the seller in India shall be computed as if it were income derived from business, and forty per cent of such income shall be deemed to be income liable to tax. According to the AO Cess on green leaf was an expenditure which was attributable to the activity of growing of tea and would therefore be not allowable as deduction while computing income from manufacture and sale of tea. He accordingly added the same to the loss declared in the return of income and later on held that 40% of such loss alone was loss from business of manufacture and sale of tea. The plea of the Assessee was that the entire green leaf cess had to be allowed as deduction first and only on the loss or profit arrived at after such deduction Rule 8(1) of the Rules have to be applied and 40% of such sum has to be considered as income or loss from the business of manufacture and sale of tea.
On appeal by the Assessee, the CIT(A) deleted the disallowance made by the AO by following the order of the Hon'ble Calcutta High Court in the case of AFT Industries Ltd. vs CIT (270 ITR167) wherein it was held that Green Leaf Cess has to be allowed as deduction before applying Rule 8(1) of the rules and only thereafter 40% of such income has to be brought to tax.
After hearing the rival submissions and on careful perusal of the materials available on record and 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, we do not find any merits in this appeal by the revenue. This issue is, therefore, decided in favour of the assessee and against the Revenue by upholding the order of the C.I.T.(A) who has 3 4 M/s. Chengmari Tea Co.Ltd. A.Yr.2006-07 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. The fact that the SLP is pending before the Hon'ble Supreme Court against 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'ble Apex Court has neither set aside the orders of the Calcutta High Court nor granted any stay. The learned counsel for the Assessee also brought to our notice the decision of the Hon’ble Supreme Court in the case of CIT Vs. M/S.Apeejay Tea Co. Ltd. Civil appeal No.3168 of 2006 dated 6.8.2015 wherein the Hon’ble Supreme Court has upheld view as was taken in the case of AFT Industries Ltd. (supra). We therefore dismiss the appeal of the revenue.
In the result the appeal of the revenue is dismissed. Order pronounced in the Court on 20.07.2016.