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Income Tax Appellate Tribunal, ‘C’ BENCH: BANGALORE
Before: SMT. P. MADHAVI DEVI & SHRI ABRAHAM P GEORGE
This is an appeal filed by the Revenue against the order of the CIT(A)-I, Bangalore, dated 23/2/2013 directing the Assessing Officer (AO) to examine if the assessee is engaged in exporting of agricultural products and if so to allow deduction u/s 80HHC of the Income-tax Act, 1961 [hereinafter referred to as 'the Act' for short] for such income. It is the grievance of the Revenue that M/s.Namdhari Seeds. Page 2 of 5 the CIT(A) has given such a direction without appreciating the fact that neither the issue of agricultural income nor the issue of deduction u/s 80- HHC was restored to the AO for fresh consideration by the ITAT and further that the assessee has not made any such claim in its return of income.
Brief facts of the case are that the assessee, a partnership firm, which is engaged in the activity of cultivation of vegetable and fruit seeds and sale thereof, had filed its return of income on 29/8/2003 declaring total income of Rs.7,92,073/- after claiming exemption of agricultural income of Rs.2,61,66,179/- u/s 10(1) of the Income-tax Act, 1961 [hereinafter referred to as 'the Act' for short]. The claim of exemption u/s 10(1) was disallowed by the Assessing Officer (AO) against which the assessee preferred an appeal before the CIT(A) who held that only 10% of the agricultural income should be treated as business income and granted relief to the extent of 90%. The assessee preferred further appeal before the Tribunal regarding treatment of 10% of agricultural income as business income as well as disallowance of advertisement expenses made u/s 40(a)(ia) of the Act. The Revenue had also preferred an appeal before the Tribunal against the relief given to the extent of 90% by treating the income as agricultural income. The Tribunal had confirmed the stand taken by the CIT(A) by dismissing both the assessee’s as well as the revenue’s appeals on this issue.
M/s.Namdhari Seeds. Page 3 of 5 3. The AO has given effect to the order of the Tribunal by his order dated 19/2/2013. The assessee preferred an appeal before the CIT(A) stating that the AO ought to have granted deduction u/s 80HHC of the Act in respect of agricultural income treated as business income and that the AO has to reconsider the same since no claim u/s 80-HHC of the Act in respect of 10% of agricultural income treated as business income had been made. The CIT(A) remanded the issue to the file of the AO with a direction to examine the claim of the assessee u/s 80-HHC. Aggrieved, the revenue is in appeal before us.
The learned Departmental Representative reiterated his objection by supporting the stand of the AO that since the assessee has not made any claim of deduction u/s 80-HHC before the AO, in respect of agricultural income which is treated as business income, the CIT(A) ought not to have remitted the matter to the AO.
The learned counsel for the assessee submitted that the assessee had claimed the entire income as agricultural income exempt from taxation and since part of the same has been treated as business income, the AO ought to have considered the assessee’s eligibility for deduction u/s 80-HHC, since the assessee was also in the business of export of agricultural products.
M/s.Namdhari Seeds. Page 4 of 5 5. Having regard to the rival contentions and the material on record, we find that in its return of income, the assessee had made a claim of exemption of agricultural income from taxation. It is only as a result of the order of the Tribunal that 10% of the agricultural income is being treated as business income. It is in these circumstances that the assessee is now claiming deduction u/s 80-HHC of the Act which, in our opinion, is a legal claim. The assessee may not have made a claim u/s 80-HHC in its return of income but a claim, as has been made, for exemption of the said income u/s 10(1) of the Act and in view of the rejection of part of the claim, the assessee is now claiming deduction u/s 80-80- HHC as an alternate ground. It is for the AO to examine the allowability of the same. Though AO is precluded from considering such claim unless it was made in assessee’s return of income, there is no such prohibition in the case of appellate authorities. The provision of law under which the assessee is entitled to exemption is a legal issue which can be raised by an assessee at any stage of the proceedings as held by the Hon’ble Supreme Court in the case of NTPC reported in 229 ITR 383(SC). In view of the same, we do not find any reason to interfere with the order of the CIT(A) on this issue. It is further observed that the appeal against the order of the Tribunal directing to treat 10% of the income as business income is pending adjudication before the Hon’ble High Court and therefore, consideration of the assessee’s claim of deduction u/s 80-HHC of the Act shall be M/s.Namdhari Seeds. Page 5 of 5 subject to the result of the proceedings before the Hon’ble High Court.
In the result, the revenue’s appeal is dismissed.