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Income Tax Appellate Tribunal, KOLKATA BENCH “A” KOLKATA
Before: Shri N.V.Vasusdevan & Shri Waseem Ahmed
आदेश /O R D E R
PER Waseem Ahmed, Accountant Member:-
This appeal by the Revenue is arising out of order of Commissioner of Income Tax (Appeals)-IV, Kolkata in appeal No.212/CIT(A)-IV/2011-12 dated 31.01.2013. Assessment was framed by JCIT (OSD), Circle-4, Kolkata u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his order dated 28.12.2011 for assessment year 2009-10.
ITA No. 905/Kol/2013 A.Y.2009-10 DCIT CIR-4 Kol. v. M/s Gillander Arbuthnot & Co. Ltd. Page 2 1. The first issue in this appeal of revenue is against the order of CIT(A) in allowing Puja expenses and temple expenses as business expenses. For this, Revenue has raised following ground no.1:
“1. Whether on the facts and circumstances of the case the Ld. CIT(A) erred in law in directing the AO to allow puja expense and temple expense for Rs.5,78,610/- since such expenses are non-business expenditure and the assessee company could not establish the relationship between the necessity of such expenditure and the purpose of the business carried on by the assessee company.” 2. We have heard Ld. Counsel for the assessee and gone through facts and circumstances of the case. Briefly stated facts are that the AO disallowed puja expenses and temple expenses for the reason that these are not for a legitimate requirement of the business. The CIT(A) allowed the claim of the assessee. Aggrieved, revenue came in second appeal before Tribunal.
At the outset, Ld. Counsel for the assessee relied on the decision of Coordinate Bench of this Tribunal in assessee’s own case in ITA No. 589/K/2012 for AY 2007-08 dated 19.12.2013 wherein Tribunal has allowed as under: “Aggrieved, now Revenue came in appeal before us. We find that the puja expense incurred on occasion of Diwali and Mahurat are customary expenses and going by the turnover of the assessee- company and the nature of the business of the assessee, we feel that these are incurred for the harmony of the assessee-company’s employees and these are for the purpose of business. Similar are the reasons for incurring temple expense. Hence, we confirm the order of CIT(A) and this issue of Revenue’s appeal is dismissed.”
As the issue is covered in assessee’s own case, we confirm the order of CIT(A). Accordingly, this issue of Revenue’s appeal is dismissed.
ITA No. 905/Kol/2013 A.Y.2009-10 DCIT CIR-4 Kol. v. M/s Gillander Arbuthnot & Co. Ltd. Page 3 4. The second issue in this appeal of Revenue is against the order of CIT(A) in deleting the addition made on account of cess on green leaf. For this, revenue has raised following ground no. 2: “2. Whether on the facts and circumstances of the case the Ld. CIT(A) has erred in law in deleting the addition of Rs.67,90,287/- on 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 n favour of the assessee.”
At the outset, Ld. Counsel for the assessee relied on the decision of Coordinate Bench of this Tribunal in assessee’s own case in ITA No. 589/K/2012 for AY 2007-08 dated 19.12.2013, wherein Tribunal has allowed as under: “5. We find that this issue is covered by the decision of Hon’ble jurisdictional High Court in the case of AFT Industries Ltd. V. CIT 270 ITR 167 (Cal), wherein it has been decided by Hon’ble jurisdictional High Court that cess on green leaf is a normal business expenditure and once the Hon’ble jurisdictional High Court decides the issue in favour of assessee, same is covered. Hence, the order of CIT(A) is confirmed on this issue. This issue of Revenue’s appeal is dismissed.” As the issue is covered in assessee’s own case, we confirm the order of CIT(A). Accordingly, this issue of Revenue’s appeal is dismissed.
The third issue in this appeal of Revenue is against the order of CIT(A) deleting the disallowance made by AO on account of non- deduction of TDS on expenses of commission payment u/s. 195(1) of the Act thereby invoking the provisions of section 40(a)(ia) of the Act. For this, Revenue has raised following ground no. 3: “3. Whether on the facts and circumstances of the case the Ld. CIT(A) has erred in law in deleting the addition of Rs.552692/- on account of non deduction of TDS u/s 40(a)(ia) in view of the judgment given by the
ITA No. 905/Kol/2013 A.Y.2009-10 DCIT CIR-4 Kol. v. M/s Gillander Arbuthnot & Co. Ltd. Page 4 Supreme court in the case of M/s. Transmission Corporation of India reported in 239 ITR 587.”
At the outset, Ld. Counsel for the assessee relied on the decision of Co-ordinate Bench of this Tribunal in assessee’s own case in ITA No. 589/K/2012 for AY 2007-08 dated 19.12.2013, wherein Tribunal has allowed as under: “7. We have heard rival contentions and gone through facts and circumstances of the case. We find that Assessing Officer treated the commission paid to foreign agent as non allowable expenses as assessee failed to deduct TDS and he disallowed the commission to the extent of Rs.11,35,554/-. Aggrieved, assessee preferred appeal before CIT(A), who allowed the claim of assessee by observing vide para-7.1 of his order as under:- “7.1 It is seen that AO made this disallowance on the basis of Supreme Court decision in case of M/s. Transmission Corporation of India reported in 239 ITR 587 wherein it was held that only way to escape liability is to get no deduction certificate or lower rate deduction certificate from AO. Appellant on the other hand has submitted that this issue was further clarified by Hon’ble Supreme Court in case of GE India Technology Centre P Ltd. Vs. CIT in 44 DTR Supreme Court 201,in which Supreme Court has clarified that obligation to deduct tax at source arises u/s.194 only when there is any sum chargeable under the Act. and CBDT circular has also clarified, that TDS provision will not applied in case where such income is not taxable in India. In this case, as the income does not arise in India and the commission is paid to those foreign agents, who have no permanent establishment or business place in India and services are also rendered outside India. It is very clear that no tax is deductible in case where the non-resident agents operate outside the country and no part of his income arises in India. In view of the circular No. 23 and 786, the company was under no obligation to deduct tax and as provision u/s. 40(a)(ia) does not apply, the disallowance made by AO is directed to be deleted.” We find that assessee's claim was that the commission paid to foreign agents, who are not having permanent establishment business place in India and they are providing services outside India and even the payment is directly made outside India in
ITA No. 905/Kol/2013 A.Y.2009-10 DCIT CIR-4 Kol. v. M/s Gillander Arbuthnot & Co. Ltd. Page 5 foreign exchange. According to assessee, assessee's income does not accrue or arise in India and once income does not accrue or arise in India, the assessee is not liable to deduct TDS on foreign payments. According to him, this issue is covered by the decision of Hon’ble Supreme Court in the case of GE India Technology Centre P. Ltd. v. CIT 44 DTR 201 (SC). As the issue is covered in favour of assessee by the decision of Hon’ble Supreme Court, we have no reason to interfere in the order of CIT(A) and we confirm the same. This issue of revenue’s appeal is also dismissed.
As the issue is covered in assessee’s own case in A.Y. 2007-08, we confirm the order of CIT(A). Accordingly, this issue of Revenue’s appeal is dismissed.
The fourth issue in this appeal of Revenue is against the order of CIT(A) in directing the AO to delete the Nursery Expenses without appreciating the fact that nursery expenses has always been held as capital in nature. For this, Revenue has raised following ground no. 4:
“4. Whether on the facts and circumstances of the case the Ld. CIT(A) has erred in law in not allowing nursery expenses of Rs.3548465/- as revenue expenditure while the AO held the same to be capital in nature in view of the judgement of Calcutta High Court in the case of M/s Tasati Tea Co. Ltd.” 9. We have heard Ld. Counsel for the assessee and gone through facts and circumstances of the case. Briefly stated facts are that the AO during the course of assessment proceedings disallowed nursery expenses amounting to Rs.35,48,465/- by attributing the same to be of enduring nature for long term plantation of tea gardens for growing good quality of tea.
Aggrieved, assessee preferred appeal before CIT(A), who relying on the jurisdictional High Court decision in the case of CIT Vs. Tasati Tea Ltd. (2003) 262 ITR 388(Cal) deleted the disallowance of expenses
ITA No. 905/Kol/2013 A.Y.2009-10 DCIT CIR-4 Kol. v. M/s Gillander Arbuthnot & Co. Ltd. Page 6 by observing as under:
“10.2. I have considered the facts narrated by appellant and also decision relied upon of the Hon’ble jurisdictional High Court. The expenditure claimed by appellant is incurred for the purpose of re- plantation in the existing area and plants grown in the nursery were used for replacement of useless or dead plants within the plantation area. As the re-plantation is an essential part of the growing and manufacturing tea, and nothing contrary to the fact is brought on record by the AO, the expenditure claimed by appellant is to be allowed as revenue expenditure. As per facts available, the area under cultivation also remains the same, and therefore, the claim of expenditure is allowable as revenue expenditure. The addition made, therefore, by AO is directed to be deleted and claim of appellant is allowed.” 11. We find that the assessee has incurred expenditure for re- plantation in the existing area and plants grown in the nursery were used for replacement of dead plants within the plantation area. This fact has not been denied by revenue before CIT(A) or before us now. The AO also noted that this is re-plantation in the existing area and replacement of dead plants but by going through the volume of expenditure he made disallowance and Hon’ble jurisdictional High Court in the case of Tasati Tea Ltd., (supra) has considered the issue and allowed the claim of replacement of plants in existing area against dead plants by observing as under:
“But, however, we are not inclined to interfere with the order allowing the expenditure of Rs.4,68,615/- as a revenue expenditure, though on different grounds, inasmuch as if the plants are raised and maintained in a nursery for being utilized for the purpose of re-plantation without any expansion of the plantation area or re-plantation in an abandoned area, then it cannot be said to be a capital expenditure. Capital expenditure involves an investment increasing the capital for higher profit. The expansion means extension of plantation to an additional area. An area already abandoned, if replanted would be an expansion of the area under cultivation for the previous year concerned. The maintenance of an area already under cultivation cannot be treated to be an expansion of the plantation nor can it be treated
ITA No. 905/Kol/2013 A.Y.2009-10 DCIT CIR-4 Kol. v. M/s Gillander Arbuthnot & Co. Ltd. Page 7 to be an investment or expansion adding to the capital already invested. On the other hand, it would be a maintenance of the plantation itself and, therefore, is a revenue expenditure.” In view of the above facts and circumstances and following the case law of Hon’ble Jurisdictional High Court in the case of Tasati Tea Ltd., (supra), we uphold the order of CIT(A) and this issue of Revenue’s appeal is dismissed.
The fifth issue in this appeal of Revenue is against the order of CIT(A) in directing the AO to allow deduction of wealth tax while computing book profit u/s. 115JB of the Act. For this, Revenue has raised following ground no.5:
“5. Whether on the facts and circumstances of the case the Ld. CIT(A) has erred in law in directing the AO to deduct Wealth Tax from the net profit to ascertain book profit u/s. 115JB.” 13. We have heard both the parties and gone through facts and circumstances of the case. Briefly stated facts are that the AO while computing book profit u/s. 115JB of the Act adjusting the book profit by the amount of provision made for Wealth Tax Act Rs.1.10 lac.
Aggrieved, assessee preferred appeal before CIT(A), who relying on the decision of Coordinate Bench of ITAT in the case of Usha Martin Industries Ltd. Vs. CIT (2003) 81 TTJ 158 (Cal) and allowed the claim of assessee. We find no infirmity in the order of CIT(A) as he allowed the claim of assessee by relying on the decision of ITAT Kolkata in the case of Usha Martin Industries Ltd., (supra). Hence, this ground of appeal of Revenue is dismissed.
The sixth and last issue in this appeal of Revenue is against the order of CIT(A) in rejecting the addition made by AO towards donation. For this, Revenue has raised following ground No.6:-
ITA No. 905/Kol/2013 A.Y.2009-10 DCIT CIR-4 Kol. v. M/s Gillander Arbuthnot & Co. Ltd. Page 8 “6. Whether on the facts and circumstances of the case the Ld. CIT(A) has erred in law in rejecting the addition made by the AO towards donation to various clubs the purpose of the business carried on by the assessee company when the clubs are not approved for donation u/s. 80G of the IT Act.” 16. At the outset, we observed that this ground of appeal has neither been raised nor been adjudicated by the ld. CIT(A). Therefore this ground does not require any adjudication. Hence, we dismiss as infructus.
In the result, the appeal of revenue dismissed.
Sd.- Sd/- (N.V.Vasudevan) (Waseem Ahmed) (Judicial Member) (Accountant Member) Kolkata, *Dkp �दनांकः- 29/02/2016 कोलकाता । आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. अपीलाथ�/Appellant-DCIT, CIRCLE-4, P7, Chowringhee Square, Kolkata-69 2. ��यथ�/Respondent-M/s Gillanders Arbuthnot &Co.C-4, Gilander House, N.S.Road, Kol-01 3. संबं�धत आयकर आयु�त / Concerned CIT Kolkata 4. आयकर आयु�त- अपील / CIT (A) Kolkata 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, कोलकाता / DR, ITAT, Kolkata 6. गाड� फाइल / Guard file. By order/आदेश से, /True Copy/ उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, कोलकाता ।