Calcutta High Court
M/S. Apeejay Tea Ltd vs Commissioner Of Income Tax & Anr on 14 March, 2014
Author: Girish Chandra Gupta
Bench: Girish Chandra Gupta
ORDER SHEET
IN THE HIGH COURT AT CALCUTTA
Special Jurisdiction
[Income Tax]
ORIGINAL SIDE
GA No. 3135 of 2013
ITAT No. 165 of 2013
M/S. APEEJAY TEA LTD.
Versus
COMMISSIONER OF INCOME TAX & ANR.
BEFORE:
The Hon'ble JUSTICE GIRISH CHANDRA GUPTA
The Hon'ble JUSTICE SUDIP AHLUWALIA
Date : 14th March, 2014.
For Apapellant : Mr. Abhrotosh Majumdar with
Ms. Nilanjana Banerjee, Advocates
For Respondent : Ms. A. Ghutghutia, Advocate
The Court : The CIT (A) in his order observed that Rule 8 has no applicability in the matter of calculation of Fringe Benefit Tax. Rule 8 of the Income Tax Rules provides as follows:
"Income from the manufacture of tea.
8. (1) Income derived from the 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.2
(2) In computing such income an allowance shall be made in respect of the cost of planting bushes in replacement of bushes that have died or become permanently useless in an area already planted, if such area has not previously been abandoned [ and for the purpose of determining such cost, no deduction shall be made in respect of the amount of any subsidy which, under the provisions of Clause (30) of Section 10, is not includible in the total income.]"
Mr. Majumdar, learned advocate appearing for the appellant/assessee, drew our attention to Clause 1 of Article 366 of the Constitution of India wherein agricultural income has been defined as follows:
"(1) "Agricultural income" means agricultural income as defined for the purposes of the enactments relating to Indian income-tax;"
Pursuing the aforesaid definition, he drew our attention to the definition of agricultural income appearing in Section 2 (1A) of the Income Tax Act. He also drew our attention to Schedule 7 to the Constitution of India in particular to entry 82 of the Union List, which reads as follows:
" 82. Taxes on income other than agricultural income. Correspondingly, he also drew our attention to entry 46 of the State List also appearing in Schedule 7, which reads as follows:
"46. Taxes on agricultural income."
He also drew our attention to paragraphs 27 and 30 of the judgment in the case of Tata Tea Ltd. and Another vs. State of West Bengal & Ors., 1988 (Supp) Supreme Court Cases 316. From paragraph 27 he pointed out that Their Lordships ruled that Rule 24 of the Income Tax 3 Rules, 1922 and Rule 8 of the Income Tax Rules, 1922 are in pari materia. From paragraph 30 of the said judgment he read out the following portion:
"30. In Karimtharuvi Tea Estates Ltd. v. State of Kerala, a Bench comprising of five learned Judges of this Court was called upon to consider the question of the power of a State legislature to make a law in respect of taxes on agricultural income arising from tea plantations and the Bench took the view that the power of the State legislatures in this connection is limited to legislating with respect to agricultural income determined in accordance with Rule 24 of the Indian Income Tax Rules, 1922, under which income derived from the sale of tea grown and manufactured by the seller is first to be computed under Section 10 of the Act of 1922, as if it were income derived from business. Any expenditure by the assessee, not being an allowance described in clauses (i) to (xiv) of Section 10(2) of the Act of 1922 and not being in the nature of capital expenditure or personal expenses of the assessee, laid out or expended wholly and exclusively for the purposes of such business would be deductible. Of the income so computed, 40 per cent, being under Rule 24 of the Indian Income Tax Rules, 1922 treated as income liable to income tax, the other 60 per cent alone will be "agricultural income". The State legislature is free in the exercise of its plenary legislative power to allow further deductions from such computed agricultural income in the case of tea plantations as it considers fit but it cannot add to the amount of agricultural income so computed by providing that certain items of expenditure deducted in the computation of the income from business under the provisions of the Indian Income Tax Act, 1922 be not deducted 4 and be considered to be a part of the taxable agricultural income. The State legislature cannot enact such a provision which would make agricultural income from tea plantations higher than what it would be if computed in accordance with Rule 24 read with Section 10 of the Indian Income Tax Act."
He submitted that fringe benefit tax and the related provisions contained in Section 115WA to 115 WM are in the nature of additional income tax as would appear from the definition of tax to be found in Clause 43 of Section 2 of the Income Tax which provides as follows:
"(43) "tax" in relation to the assessment year commencing on the 1st day of April, 1965, and any subsequent assessment year means income-tax chargeable under the provisions of this Act, and in relation to any other assessment year income-tax and super-tax chargeable under the provisions of this Act prior to the aforesaid date [and in relation to the assessment year commencing on the 1st day of April, 2006, and any subsequent assessment year includes the fringe benefit tax payable under section 115WA ;]"
He also drew our attention to Section 115WL in order to contend that the fringe benefit tax is a part of the income tax and cannot be treated separately or de hors the provisions of the Income Tax Act. In support of his submission he relied upon Section 115WL which reads as follows:
"115WL. Notwithstanding that the regular assessment in respect of any fringe benefits is to be made in a later assessment year, the tax on such fringe benefits shall be payable in advance during any financial 5 year, in accordance with the provisions of section 115WJ, in respect of the fringe benefits which would be chargeable to tax for the assessment year immediately following that financial year, such fringe benefits being hereinafter in this Chapter referred to as the "current fringe benefits"."
The matter is adjourned for further hearing till 3rd April, 2014, by consent of the parties.
(GIRISH CHANDRA GUPTA, J.) (SUDIP AHLUWALIA, J.)