M/S OIL PALM INDIA LTD,KOTTAYAM vs. DCIT, KOTTAYAM

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH : COCHIN BEFORE SHRI N. V. VASUDEVAN, VICE PRESIDENT AND MS. PADMAVATHY S, ACCOUNTANT MEMBER

ITA No.37/Coch/2020 Assessment Year : 2009-10 M/s. Oil Palm India Ltd., Vs. DCIT, XIV/130, Kottayam South P.O., Circle – 1, Kodimatha, Kottayam. Kottayam. PAN : AAACI 3695 G APPELLANT RESPONDENT

Assessee by : None Revenue by : Smt. J M Jamuna Devi, Sr DR Date of hearing : 07.12.2022 Date of Pronouncement : 19.12.2022 O R D E R Per Padmavathy S, Accountant Member

This appeal is against the order of CIT(A), Kottayam, for the Assessment Year 2009-10. The only issue arising out of the various grounds raised by the assessee is that the AO in the order giving effect to the order of the CIT(A) has considered certain line items not as per the directions.

ITA No.37/Coch/2020 Page 2 of 5 2. The assessee filed the return of income for the Assessment Year 2009-10 and the assessment under section 143(3) of the Income Tax Act, 1961 (hereinafter called ‘the Act’) was completed on 28.12.2011. The assessee was given relief during the appeal proceedings and the order giving effect was passed on 28.08.2014 assessing the total income at Rs.10,33,82,150/-. Subsequently, the AO noticed that there is a mistake apparent from record and passed the rectification order under section 154 of the Act on 09.03.2015 whereby the total income was assessed at Rs.10,47,61,990/-. The assessee aggrieved by the order of rectification, filed appeal before the CIT(A). However, the CIT(A) dismissed the appeal by stating that the objections were not raised before the AO during the rectification proceedings under section 154 of the Act. Aggrieved, the assessee is in appeal before the Tribunal. The learned AR filed a detailed submission with regard to the rectification order passed by the AO which is extracted as below: In fact, the issue of taxability of income from the manufacture and sale of palm oil has been a consistent issue in the assessment of assessee from AY 1998 - 99 onwards. It was during this time that the income from sale of palm oil was first assessed to tax under the income tax act, 1961. The assessment order was upheld by the commissioner (appeals) with modifications vide order ITA-49/K/CIT-IV/04-05 dated 29- 01-2005. The Commissioner (appeals) laid down a scheme for apportioning expenses between assessee's farm and factory so as to arrive at business income assessable under the income tax act,1961. Subsequent assessments are being concluded along these lines. The Income Tax Appelate Tribunal, Kochi bench has upheld the assessments with slight modifications (ITA 649,650 & 651 dated 30-11-2007). 2. Page 16 Para 35 Note No. 6 step 1 and step 2(CIT Appeal order ITA48, 49 & 50K/CIT-IV/04-05 dated 29-01-2005). "Rule 7(2) (b) also requires the AO to make allowance for a reasonable profit. I have taken the net profit on agricultural operations 8% before depreciation and payment of agricultural

ITA No.37/Coch/2020 Page 3 of 5 income tax (Step 1). The appellant requires fund to develop the estate and also for possible expansion. This has to be obtained from income from agriculture. As palm fruits are not sold in open market, the market rate is adopted at 108% of the expenses incurred. Depreciation and agricultural income-tax paid also would be allowed in addition to this to arrive at the cost of raw material"(Step 2)(This note no.6 is reproduced by the Hon. Tribunal in ITA 649,650 & 651 dated 30-11-2007 on page 4& 5). 3. But in the present rectification order dated 09-03-2015, though the formula of 108% was worked out on plantation expenses excluding depreciation(step 1), the further (step 2) given in the formula of adding depreciation (Rs.11,99,111) to the amount of plantation expenses so arrived (Rs.13,18,89,474) applying the formula was left out to be carried out(Hence this appeal). 4. Therefore, Depreciation relating to plantation (Rs.11,99,111) should be further added to plantation expenses arrived at (Rs.13,18,89,474) as is clearly given in the method of computation by the Commissioner of Income Tax (Appeals) in his order dated 29-01- 2005 for the Assessment Year 1997-98 onwards which was accepted by the Department and taken as the basis for subsequent assessment). 5. Therefore, the order in appeal dated 09-03-2015 is prayed to be further rectified, adding depreciation Rs. 11,99,111/- to plantation expenses arrived at Rs. 13,18,89,474/-. Following the formula/scheme prescribed by the CIT appeals in his order dated 29-01-2005 and followed in all subsequent assessment orders (referred by the Hon. Tribunal in ITA 649, 650 & 651 dated 30-11-2007 on page 4&5). 6. Similar rectification was made by the Assessing Officer for the AY 2010-11. 1. The correct computation of the Income u/s 154 will be as under Composite income as per the original Assessment order dated 28/12/2011 (A) Rs.30,32,12,523 Less: Factory Expenses as per Revised Order dated 09/03/2015 (B) Rs. 8,77,62,798 Rs.21,54,49,725

ITA No.37/Coch/2020 Page 4 of 5 Less: Plantation Expenses Rs. 12,33,18,994 Excluding Depreciation Rs. 11,99,111 (Step 1) Rs. 12,21,19,883 108% of (Rs. 12,21,19,883) (C) Rs.13,18,89,474 Rs. 8,35,60,251 Balance Income * Less: Further (Step 2) Deduction of Depreciation as Directed by the CIT (A) and Honorable Tribunal and accepted by the Department As per the formula left out by the assessing Rs. 11,99,111 Officer in the order dated 09/03/2015 Balance correct Manufacturing Rs.8,23,61,140 Income as per the formula Manufacturing Income as per Original Order dated 28/12/20 Rs. 8,21,80,408 Difference Short Assessed is only Rs. 1,80,732 (Not Rs.13,79,843). Correct Revised Manufacturing Income is:- Total Income as per Revised Proceeding Dated 28/08/2014 Rs. 10,33,82,150 Add: Manufacturing Income Short Assessed Rs. 1,80,732 Revised Correct Total Income Rs. 10,35,62,882 Only (Not Rs. 10,47,61,990).

Relief (10,47,61,990 - 10,35,62,882 = 11,99,108 (Say 11,99,111 amount of depreciation left out)) 3. The learned DR did not raise any objections to the issue contended by the assessee. 4. We heard the rival submissions and perused the material on record. From the above submissions of the learned AR, it is noticed that the AO while granting relief to the assessee as per the directions from the

ITA No.37/Coch/2020 Page 5 of 5 appellate proceedings, had considered depreciation adjustment differently and not as per the directions of the CIT(A). We, therefore, remit the issue back to the AO to consider the directions correctly as per the order of the CIT(A) as submitted by the assessee which is reproduced in the earlier part of this order and re-compute the income providing the relief accordingly. Needless to say that the assessee may be given reasonable opportunity of being heard. 4. In the result, appeal filed by the assessee is allowed for statistical purposes. Pronounced in the open court on the date mentioned on the caption page.

Sd/- Sd/- (N. V. VASUDEVAN) (PADMAVATHY S) Vice President Accountant Member Bangalore, Dated: 19.12.2022. /NS/*

Copy to: 1. Appellants 2. Respondent 3. CIT 4. CIT(A) 5. DR 6. Guard file By order Assistant Registrar, ITAT, Cochin.