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Income Tax Appellate Tribunal, “C” BENCH : KOLKATA
Before: Hon’ble Sri N.V.Vasudevan, JM & Shri Waseem Ahmed, AM]
This is an appeal by the Revenue against the order dated 18.3.2013 of CIT(A)- IV, Kolkata, relating to AY 2004-05.
The grounds of appeal
raised by the Revenue reads as follows: “1. That on the facts and circumstances of the case the Ld. CIT(A) has erred in law in deleting the addition of Rs.5001369/- on account of cess on green leaf without considering the fact that expenses on account of cess on green leaf is related to 100% agricultural operation and SLP is pending before the Hon’ble Supreme Court against the decision of Calcutta High Court in the case of AFT Industries Ltd –vs- CIT (270 ITR 167) in the light of which Ld. CIT(A) decided the issue in favour of the assessee.
2. That on the facts and circumstances of the case the Ld. CIT(A) has erred in law in deleting the disallowance of Rs.38,66,258/- on account of deprecation on plant and machinery purchased out of the amount withdrawn from NABARD.
3. That the appellant craves for leave to add, delete or modify any of the grounds of appeal before or at the time of hearing.”
3. As far as ground No.1 raised by the revenue is concerned, the facts are that the Assessee is a company engaged in the business of growing, manufacturing and selling
M/s. Stewart Holl (India)Ltd.. A.Yr.2004-05 of Tea. The Assessee filed return of income for AY 2004-05 declaring loss of Rs.1,58,36,280/-. In arriving at this loss the Assessee had deducted a sum of Rs.50,01,369/-being cess on green leaf. Income from growing, manufacturing and sale of tea would be Composite income, which means it comprises agricultural income 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.
M/s. Stewart Holl (India)Ltd.. A.Yr.2004-05 5. Aggrieved by the order of the CIT(A), the revenue has raised Gr.No.1 before the Tribunal. The ld. DR appearing on behalf of the Revenue relied on the order of the AO. On the other hand, the ld.counsel for the assessee relied on the orders of the ld. CIT(A).
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 C.I.T.(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. 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 Gr.No.1 raised by the Revenue.
As far as Gr.No.2 raised by the Revenue is concerned, the facts are that during the relevant assessment year, the Assessing Officer noticed that the assessee had acquired fixed assets out of withdrawals made from NABARD A/c. Assessee had claimed depreciation on these assets. After considering the provisions of section 33AB(6), the Assessing Officer required the assessee to explain as to why the claim of depreciation be not disallowed as term 'expenditure' also includes depreciation. He observed that the assesee had already claimed the benefit of the amount deposited in NABARD a/c. in the 3
M/s. Stewart Holl (India)Ltd.. A.Yr.2004-05 year in which it was deposited and hence by further claiming depreciation on assets purchased out of withdrawal, double benefit accrued to the assessee on the amount deposited which is against the very principle of taxation. He, therefore, disallowed Rs.36,27,225/- under section 33AB(6) of the Act. It was pointed before AO that similar disallowance made in AY 2001-02 has been deleted by CIT(A) and the order of CIT(A) was confirmed by the ITAT in Assessee’s case in order dated 28.7.2005. The AO however was of the view that an appeal has been filed by the revenue before the Hon’ble Calcutta High Court and hence to keep the issue alive similar disallowance of depreciation was being made. On appeal by the Assessee, the Ld. CIT(Appeals) allowed the assessee's claim following the decision of ITAT, Kolkata in the case of CIT -vs.- Goodrick Group Limited in ITA No. 2557/Kol./2004 and Assessee’s own case.
Aggrieved by the order of the CIT(A) the revenue has raised Gr.No.2 before the Tribunal. We have considered the submissions of both the parties and perused the records of the case. At the time of hearing, ld. counsel for the assessee filed before us the decision dated 07.05.2010 of this Tribunal in assessee's own case in order dated 28.7.2005 for AY 2001-02 wherein this tribunal held as follows: “5. We have heard both the parties and have perused the orders of tax authorities. We have also considered the order of this Bench and observed that this Bench in case of Borojalingh Tea Co.(supra) has already decided the issue in favour of assessee and even otherwise the depreciation is statutory allowance for which the assessee has fulfilled the condition prescribed under section 32 of the Income Tax Act and as the provision of section 33AB was inserted with a view to encouraging business of growing and manufacturing of tea, the same should be interpreted in a liberal way. We, therefore, in view of the above judgment and discussion, are of the opinion that the Id. CIT(A) was justified in allowing such claim of the assessee and hence we do not find any reason to interfere with the order of Id. CIT(A) and uphold the same and reject the ground raised by the Revenue.”
M/s. Stewart Holl (India)Ltd.. A.Yr.2004-05 9. Respectfully following the decision of Coordinate Bench of Tribunal (supra), we find that ld. CIT(Appeals) was justified in deleting the disallowance. Hence, Ground No.2 taken by the Revenue is dismissed.
In the result, appeal by the revenue is dismissed.
Order pronounced in the Court on 6.4.2016.