Income Tax Appellate Tribunal - Kolkata
Acit, Cir-34, Kolkata, Kolkata vs M/S Bisseswarlall Mannalal & Sons, ... on 6 September, 2017
आयकर अपील
य अधीकरण, यायपीठ - "C" कोलकाता,
IN THE INCOME TAX APPELLATE TRIBUNAL
KOLKATA BENCH "C" KOLKATA
Before Shri N.V.Vasudevan, Judicial Member and
Shri Waseem Ahmed, Accountant Member
ITA No.1259/Kol/2014
Assessment Year :2010-11
ACIT, Cicle-34, V/s. M/s Bisseswarlall Mannalal
Aayakar Bhavan, & Sons, 12, Pretoria
Poorva, 7 t h Floor, Street, 5 t h Floor,
110, Shantipally, Kolkata-01
Kolkata-107 [P AN No. AACFB 7736 K]
.
अपीलाथ /Appellant .. यथ /Respondent
C.O. No.80/Kol/2014
(a/o ITA No.1259/Kol/2014)
Assessment Year: 2010-11
M/s Bisseswarlall Mannalal V/s. ACIT, Cicle-34,
& Sons, 12, Pretoria Street, Aayakar Bhavan,
5 t h Floor, Kolkata-01 Poorva, 7 t h Floor,
110, Shantipally,
Kolkata-107
.
Co-objector .. यथ /Respondent
आवेदक क ओर से/By Assessee Shri P.J. Bhide, CA
राज व क ओर से/By Respondent Shri David Z.Chawngthu, Addl. CIT-DR
सन
ु वाई क तार
ख/Date of Hearing 26-07-2017
घोषणा क तार
ख/Date of Pronouncement 06-09-2-17
आदे श /O R D E R
PER Waseem Ahmed, Accountant Member:-
This appeal by the Revenue and Cross Objection (CO) by the assessee are for the assessment year 2010-11. Both are directed against the order of ITA No.1259 & CO.80/Kol/2014 A.Y. 2010-11 ACIT Cir-34, Kol. Vs. M/s Bisseswarlall Mnnalal & Sons Page 2 Commissioner of Income Tax (Appeals)-XX, Kolkata dated 18.02.2014. Assessment was framed by JCIT, Range, 34 Kolkata u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') vide his order dated 18.03.2013 for assessment year 2009-10.
Shri David Z. Chawngthu, Ld. Departmental Representative represented on behalf of Revenue and Shri P.J. Bhide, Ld. Authorized Representative appeared on behalf of assessee.
First we take up Revenue's appeal in ITA No.1259/Kol/2014.
2. Grounds raised by Revenue per its appeal as under:-
1. In view of the facts and circumstances of the case and in law Ld. CIT(A) erred in giving relief to the assessee w.r.t disallowance made u/s 14A of Rs.9,67,162/-
2. In view of the facts and circumstances of the case and in law Ld. CIT(A) erred in giving relief to the assessee w.r.t. the treatment of transactions of shares of Rs.10,53,820/- as business income.
3. In view of the facts and circumstances of the case and in law Ld. CIT(A) erred in allowing relief to the as regarding treatment of interest income of Rs.19,06,570/- as Income from other source.
4. In view of the facts and circumstances of the case and in law Ld. CIT(A) erred in allowing relief to the assessee regarding utilization of fund deposited in NABARD for the purpose of Sec. 33AB(4).
5. In view of the facts and circumstances of the case and in law Ld. CIT(A) erred in allowing relief to the assessee regarding treatment of sale of tea waste as Income from other source.
6. The appellant craves the leave to made any addition, alteration, modification of grounds at the appellate stage.
3. First issue raised by Revenue in this appeal is that Ld. CIT(A) erred in deleting the addition made by the Assessing Officer for ₹9,67,162/- under the provision of Section 14A r.w.s. Rule 8D of the IT Rules, 1962.
4. Briefly stated facts are that assessee is a partnership firm engaged in the activities of cultivation, manufacturing and sale of tea under the brand name of M/s Bisseswarlal Manalal & Sons (BM & S for short). The assessee, during the year inter alia has earned non-taxable income as detailed under:-
Dividend Rs. 59,95,155
Tea Board subsidy Rs. 18,60,000
Long Term Capital gains Rs.3,09,53,798
ITA No.1259 & CO.80/Kol/2014 A.Y. 2010-11
ACIT Cir-34, Kol. Vs. M/s Bisseswarlall Mnnalal & Sons Page 3
Total Rs.3,88,08,953
The assessee has not made any disallowance of the expenses incurred in relation to aforesaid non-taxable income. The assessee was also not maintaining separate accounts for taxable as well as non-taxable income. Accordingly, AO was of the view that the disallowance is required to be made under the provision of Section 14A of the Act. Thus the AO called upon the assessee for the explanation of the expenses. However, assessee failed to furnish any satisfactory explanation for the disallowance of the expenses in relation to non-taxable income. Thus, AO invoked the provision of Rule 8D of IT Rules, 1962 and made the disallowance as under:-
Direct expense Nil
Interest expense Rs.7,51,813
Administrative expense Rs.2,15,349
Rs.9,67,162
The AO disallowed the above stated expenses and added to the total income of assessee.
5. Aggrieved, assessee preferred an appeal before Ld. CIT(A). The assessee before Ld. CIT(A) submitted that the AO should have taken only those investments for the purpose of disallowance which have yielded dividend income during the year.
Besides the above, assessee also submitted that the AO for the purpose of disallowance under Rule 8D of the IT Rules has considered all the interest expenses of Rs. 28,75,969.00 which is not correct. It is because the following interest expense should be excluded from the total interest expense as discussed above:-
i) Interest to partners for ₹18,86,920/- which is allowable deduction in accordance with the provision Section 40(b)(iv);
ii) Interest expense of the car loan for ₹4,339/-, 58,007/- and ₹54,696/- respectively;
iii) Interest expense of ₹7,15,128/- which was directly incurred on the interest income of ₹18,89,941/- and the same was offered to tax.
ITA No.1259 & CO.80/Kol/2014 A.Y. 2010-11 ACIT Cir-34, Kol. Vs. M/s Bisseswarlall Mnnalal & Sons Page 4
Thus, the balance amount of interest expense should only be considered for the purpose of disallowance. The Ld. CIT(A) after considering the submission of the assessee has granted relief in part by observing as under:-
"6- Ground no. (i) relates to disallowance of Rs.9,67,162/-- u/s 14A of the IT Act, 1961. The fact of the case is that the appellant earned exempt income, therefore, the AO invoked rule 8D and made addition accordingly. However, the appellant submitted that the AO should have considered average value of investments which had yielded dividends and not the entire value of investments while calculating disallowance under rule 8D clause (ii). They had given working of investments as well as calculation of disallowance under rule 8D. After going through the facts and circumstances of the case and submission of the appellant (supra), I find merit in their argument, therefore, the AO is directed to take figures of disallowance at Rs.2,28,917/- and the balance disallowance is directed to be deleted, thereby, the appeal is partly allowed."
The Revenue, being aggrieved is in appeal before us.
6. Before us both parties relied on the order of Authorities Below as favourable to them.
7. We have heard rival contentions of both the parties and perused the material available on record. In the instant case, AO has made the disallowance of expense incurred in relation to non taxable income under the provision of Section 14A r.w.s 8D of the IT Rules, 1962. The AO while making the disallowance has considered all the investments for the purpose of disallowance under Rule 8D of the IT Rules. Now, the proposition is well settled that the disallowance under rule 8D should be made after considering only those investments which have yielded dividend income during the year. In holding so, we draw support and guidance from the judgment of jurisdictional Hon'ble Jurisdictional Tribunal & High Court in the case of REI Agro Ltd. v. Dy. CIT [2013] 35 taxmann.com 404/144 ITD 141 (Kol.-Trib.), wherein it was held that the value of only those shares are required to be considered in computation as per Rule 8D, which have yielded dividend income. The said decision rendered by the Coordinate Bench of this Tribunal ITA No.1259 & CO.80/Kol/2014 A.Y. 2010-11 ACIT Cir-34, Kol. Vs. M/s Bisseswarlall Mnnalal & Sons Page 5 in the case of REI Agro Ltd. (supra) has been affirmed by the Hon'ble Calcutta High Court vide its order dated 19.04.2014 in ITAT No. 220 of 2013.
Since this issue raised by the Revenue is squarely covered in favour of the assessee by the decision of the Coordinate Bench of this Tribunal in the case of REI Agro Ltd. (supra), we direct the Assessing Officer to compute the disallowance as per Rule 8D by taking into consideration only those shares, which have yielded dividend income in the year under consideration. Therefore we find no infirmity in the order of ld. CIT(A). Hence the ground of the Revenue's appeal is dismissed.
8. Next issue raised by Revenue in this appeal is that Ld. CIT(A) erred in granting relief to assessee for ₹10,53,820/- by treating the same as business income.
9. During the year, the assessee purchased & sold the shares of Jindal Steel & Power Co. limited. The assessee purchased 5000 shares during 27th May to 4th Aug 2009 for Rs.1,23,03,654/- only. The assessee subsequently purchased 8,000 shares during 26th Aug to 7th September 2009. The average purchase price was determined for 13,000 shares of M/s Jindal Steel & Power at an agreed cost of ₹2922.72 per share. Thereafter M/s Jindal Steel & Power issued bonus shares in ratio of 5 bonus share per share held by assessee. Thus, the assessee received total ₹65,000/- bonus shares. Therefore the total shares held by assessee are 78,000 as on 24.09.2009 which were held by it in Demat form. After the allotment of bonus shares the average purchase price was determined for 78,000 shares of M/s Jindal Steel & Power at an agreed cost of ₹487.11 per share.
The assessee during the year dated 11.11.20009 sold 5,000 shares @ 697.88 per shares and realized a sum of ₹34,89,419/-only. Thus, the profit was determined by the AO as under:-
Sale consideration of 5000 shares Rs.34,89,419.00 Cost of acquisition (5000 x Rs.487.12) Rs. 24,35,599 Business income Rs. 10,53,820 ITA No.1259 & CO.80/Kol/2014 A.Y. 2010-11 ACIT Cir-34, Kol. Vs. M/s Bisseswarlall Mnnalal & Sons Page 6 The above amount of profit was treated as business income of assessee.
10. Aggrieved, assessee preferred an appeal before Ld. CIT(A). The assessee before Ld. CIT(A) submitted that shares were held by assessee as investment and this fact was duly accepted by AO in earlier year. The assessee further submitted that the bonus share was received by it at nil value. But the assessee has sold the 5000 shares which were acquired at the cost of ₹1,23,03,654/-only on the basis of FIFO method. As such, assessee has suffered a loss of ₹88,14,235/- as detailed under:-
sale price of the shares 34,89,419
less cost of acquisition 12304654
loss incurred of ₹88,14,235/-
Ld. CIT(A) after considering the submission of the assessee has deleted the addition made by AO by observing as under:-
"7- Ground no. (ii) relates to addition of Rs.10,53,820/-. The fact of the case is that the AO found that the appellant sold 10000 shares of Jindal Steel & Power during the period, the appellant had re-purchased the shares of the said company, the total 13000 shares were purchased on which 65000 bonus shares were allotted. The average value of total shares of 78000 [(13000 (shares) + 65000 (bonus)] was arrived at Rs.487.12 of each share. The AO took cost of acquisition of 5000 shares sold on 11.11.2009 at Rs.24,35,599/- by which income of Rs.10,53,820/- was calculated and treated as business income. However, the appellant submitted that they held the shares by way of investment only. Accretion thereto, by issue of bonus shares, was also on account of investment. The cost of bonus share was nil. They sold the original shares which was acquired at a cost of Rs.1,23,03,654/- and realized Rs.34,89,419/- only and thereby, they suffered short term capital loss of Rs.88,14,235/-. The cost of shares was taken following FIFO method of accounting. The appellant also relied upon the judgment of Hon'ble Supreme Court in the case of CIT vs. Madan Gopal Radhe Lal reported in 73 ITR 652 in which it is held that the bonus shares given was liable to be treated as capital. After going through the facts and circumstances of the case, find merit in the argument of the appellant that the shares were held as investment and not as stock in trade and the cost of shares were taken following FIFO method of accounting, hence, the appeal is allowed."
The Revenue, being aggrieved, is in appeal before us.
ITA No.1259 & CO.80/Kol/2014 A.Y. 2010-11 ACIT Cir-34, Kol. Vs. M/s Bisseswarlall Mnnalal & Sons Page 7
11. Before us Ld. DR submitted that Ld. CIT(A) erred in treating the shares held by it as investment rather it is represented as stock-in-trade. Therefore, on the sale of stock-in-trade surplus should be treated as business income of assessee. Similarly the average price should be taken for the determination of the profit. The ld. DR vehemently relied on the order of AO. On the other hand, Ld. AR for the assessee submitted that all the shares were held in the DMAT form and therefore no distinctive nos. of shares was allotted to these shares. Ld. AR further submitted that assessee was following FIFO method of accounting. Therefore, the shares which were acquired earlier would be treated as sold earlier. Ld. AR relied on the order of Ld. CIT(A).
12. We have heard rival contentions of both the parties and perused the material available on record. In the instant case, AO treated the shares held by assessee as stock-in-trade though assessee claimed that these have been shown under the head "investment" for the last many years. This fact was also not disputed by Revenue in earlier years. Considering the totality of facts and circumstances of the case, we are of the view that investment in shares should be treated as investment. In holding so, we find support and guidance from the judgment of Hon'ble Supreme Court in the case of CIT vs. Modan Gopal Radhe Lal reported in 73 ITR 652 (SC) wherein the Hon'ble Court has held as under:-
"It was assumed that the companies had issued bonus shares in exercise of the power conferred upon them by the articles of association, and no argument had been raised in that behalf. A company when authorised by its articles of association may convert its accumulated profit into capital and then utilize such profit by issuing additional shares by way of bonus to the shareholders. Under the 1922 Act, at the relevant time, issue of such bonus shares by capitalisation of the accumulated profit was not treated as distribution of dividend.
Bonus shares would normally be deemed to be distributed by the company as capital and the shareholder receives the shares as capital. The bonus shares are accretions to the shares in respect of which they are issued, but on that account those shares do not become stock-in-trade of the business of the shareholder. A trader may acquire a commodity in which he is dealing for his own purposes, and hold it apart from the stock-in-trade of his business. There is no presumption that every acquisition by a dealer in a particular commodity is acquisition for the purpose of his business; in each case the question is one ITA No.1259 & CO.80/Kol/2014 A.Y. 2010-11 ACIT Cir-34, Kol. Vs. M/s Bisseswarlall Mnnalal & Sons Page 8 of intention to be gathered from the evidence of conduct and dealings by the acquirer with the commodity.
Bonus shares having been received by the assessees in respect of their stock-in-trade did not, therefore, become part of their stock-in-trade, merely because they were accretions to the stock-in-trade. The bonus shares were received as capital; they could be converted by the assessees into their stock- in-trade or retained as their capital asset.
The Tribunal found that the sale proceeds of the bonus shares were received in the course and as part of their business in shares and were on that account taxable. It was somewhat unfortunate that the Tribunal had not set out in detail the facts found by it and the inference drawn therefrom. Even in the supplementary statement no attempt had been made to set out the facts on which the conclusion was based. The mere circumstances that in the copies of the balance-sheets tendered by the assessees the bonus shares did not find a place had, no importance, and the credit entries in the capital account on the last dates of the respective accounting years in the four years in question also did not support an inference in favour of the assessees."
Now the second question comes before us how to determine the cost of acquisition of shares which were sold by the assessee in the year under consideration. In the present case the assessee is claiming that it is following FIFO method and accordingly the shares which were purchased at a cost of ₹1,23,03,654/- were sold by assessee. To this point of argument Ld. DR has not brought anything contrary to the finding of Ld. CIT(A). Therefore we find no reason to interfere with the finding arrived by the Ld. CIT(A). Under these circumstances, this issue of Revenue's appeal is dismissed.
13. Next issue raised by Revenue in this appeal is that Ld. CIT(A) erred in deleting the addition made by the AO on account of interest income.
14. The assessee in the year under consideration received gross receipt of interest income for ₹19,06,570/- only. Against, this income, assessee has claimed interest expense of ₹7,15,128/- and the difference amount was shown as "income from other source". The claim of assessee was that it has borrowed fund from certain parties on which interest of ₹7,15,128/- was incurred as "cost". The same amount of borrowed fund was advanced to ITA No.1259 & CO.80/Kol/2014 A.Y. 2010-11 ACIT Cir-34, Kol. Vs. M/s Bisseswarlall Mnnalal & Sons Page 9 certain parties on which the interest income was earned for ₹19,06,570/- only. As per the assessee there was a direct link between interest income and interest expense. Therefore net amount of interest income should be brought to tax. However, the AO observed that the interest expense has been incurred by assessee in relation to its tea business. The interest expense has no relation with the interest income. Accordingly, AO treated the entire amount of interest of ₹19,06,570/- as income from other sources.
15. Aggrieved, assessee preferred an appeal before Ld. CIT(A). The assessee before Ld. CIT(A) submitted that the borrowed fund on which interest cost of ₹7,15,128/- was incurred were directly utilized for the earning of interest income of ₹18,89,941/- only. Therefore the interest expenses should be adjusted against interest income. Ld. CIT(A) after considering the submissions of assessee deleted the addition made by AO by observing as under:-
"8- Ground no. (iii) relates to disallowance of Rs.7,15,128/-. The fact of the case is that the AO found that the appellant received gross interest of Rs.19,06,570/- on which expenditure of Rs.7,15,128/- was claimed. However, he found that the expenditure was related to tea business and not earning of interest income. The appellant submitted that the interest income includes interest received from three persons of Rs.18,89,941/- and the expenses includes interest paid on unsecured loans to eight persons amounting to R.7,15,128/-. After going through the facts and circumstances of the case, I find that there is direct nexus between payment of interest and interest receipts, thereby, the interest expenses of Rs.7,15,128- were incurred to earn interest income. The AO could not bring any material on record to establish that the unsecured loans on which interest was paid were not utilized for giving loans/advances on which interest income was earned. Under such circumstances, the AO was not justified to make disallowance of expenditure which was incurred for earning interest income. Thereby, appeal on this ground is allowed."
The Revenue, being aggrieved, is in appeal before us.
16. Before us both parties relied on the order of Authorities Below as favourable to them.
17. We have heard rival contentions of both the parties and perused the material available on record. At the outset, it was observed that AO presumed ITA No.1259 & CO.80/Kol/2014 A.Y. 2010-11 ACIT Cir-34, Kol. Vs. M/s Bisseswarlall Mnnalal & Sons Page 10 that the loan on which interest expense was incurred for ₹ 7,15,128/- was utilized for the purpose of business. But the AO has not brought any iota of evidence suggesting that the interest cost was incurred in connection with business income. Ld. DR before us has also not brought anything contrary to the finding of Ld. CIT(A). In the light of the above reasoning, we hold that the order of the Ld. CIT(A) is correct and in accordance with law and no interference is called for. We uphold the same. Thus this ground of Revenue's appeal is dismissed.
18. Next issue raised by Revenue in this appeal is that Ld. CIT(A) erred in granting relief to assessee for utilization of fund deposited in NABARD u/s. 33AB(4) of the Act.
19. The assessee during the year has made investment in NABARD in a scheme approved by Tea Board under the provision of Section 33AB(4) of the Act. Subsequently assessee has withdrawn the money from the NABARD during the year. The details of the deposits as well as withdrawal and its utilization are reproduced as under:-
DEPOSIT WITHDRAWAL UTILIZATION
Date Amount Date Amount Purpose
26.5.10 45,00,000 July 2009 20,05,000 Re-payment of Tea Board
Plantation Loan (acquired
during the year 2004 and
2005)
02.06.10 8,00,000 25.09.09 to 9,93,026 Scorpio/VLX/2WD/BU-III
31.07.09 (jeep type vehicle)
11.06.10 48,00,000 21.07.09 to 3,43,250 One special purpose cutter
17.08.09 grinder model CU-99
30.09.09 to 31,45,355.77 Labour quarter (25 Nos),
31.03.10 525 sq.ft. 3 room, kitchen,
bathroom and toilet
30.09.09 to 3,29,877.78 Staff quarter 1 No.
31.03.10
22.02.10 to 4,05,632.37 Bridge 3 Nos. (all 3 in R K
31.03.10 Division)
29.09.09 to 19,70,062.44 Extension planting 7.06
31.03.10 hector
Total 1,01,00,000 91,92,204.36
The AO further observed that the purpose of the provision of Section 33AB of the Act is to provide incentive for the Tea Estate and other expenditure ITA No.1259 & CO.80/Kol/2014 A.Y. 2010-11 ACIT Cir-34, Kol. Vs. M/s Bisseswarlall Mnnalal & Sons Page 11 therefore will not be allowable. Accordingly the AO observed that following expenses should be allowed treated as income of the assessee :
WITHDRAWAL UTILIZATION
Date Amount Purpose
25.09.09 to 9,93,026 Scorpio/VLX/2WD/BU-III
31.07.09 (jeep type vehicle)
30.09.09 to 31,45,355.77 Labour quarter (25 Nos),
31.03.10 525 sq.ft. 3 room, kitchen,
bathroom and toilet
30.09.09 to 3,29,877.78 Staff quarter 1 No.
31.03.10
22.02.10 to 4,05,632.37 Bridge 3 Nos. (all 3 in R K
31.03.10 Division)
48,73,891.00
Thus the AO treated the amount of Rs. 48,73,891.00 as income of the assessee.
20. Aggrieved, assessee preferred an appeal before Ld. CIT(A). The assessee before Ld. CIT(A) submitted that all the amounts were withdrawn in accordance with Tea Development Scheme and therefore eligible for the benefit under the provision of Section 33AB of the Act. The assessee further submitted that the amount from the NABARD cannot be withdrawn until and unless NABARD is satisfied with the scheme of Tea Board. The Ld. CIT(A) after considering the submission of assessee deleted the addition made by AO by observing as under:-
10- Ground no. (vi) relates to contention of the appellant against disallowance of Rs.48,73,891/-. The fact of the case is that the AO found that the appellant had made investment in NABARD in terms of deposit scheme of Tea Board for tea plantation in terms of section 33AB(1) of the IT Act. It has reclaimed the amount from the said funds and utilized for the business purpose. However, he found that the amounts of Rs.48,73,891/- was utilized for the purpose as mentioned us.33AB(4) of the IT Act, therefore, the amount so utilized was deemed to be the profit and gain off the business and accordingly found to be chargeable to income tax. However, the appellant submitted that the Assessing Officer had not understood the Scheme of Section 33AB at ITA No.1259 & CO.80/Kol/2014 A.Y. 2010-11 ACIT Cir-34, Kol. Vs. M/s Bisseswarlall Mnnalal & Sons Page 12 all. Sub-section 4 of Section 33AB had been reproduced by the Assessing Officer in the Assessment Order. The provisions stereo are very clear. The amount withdrawn by the appellant from deposit account with NABARD and utilized for the purpose mentioned in Clauses (a),
(b), (c) and (d) of Sub-section 4 alone, had to be assessed as income of the withdrawee appellant. The Assessing Officer had admitted that the appellant had withdrawn the funds to the extent of Rs.48,73,891/- and utilized the same for purchase of Scorpio vehicle, construction of Labour Quarters, Staff Quarters and 3 Nos. Bridges. A copy of the Tea Development Scheme was also submitted. These withdrawals very clearly show their utilization for construction of Labour Quarters, Staff Quarters and Bridges which were covered by the purpose of scheme. In fact, NABARD would not allow any withdrawal unless it was satisfied that the withdrawal had been utilized by the appellant for the purpose mentioned in the Scheme only. The Assessing Officer had totally mis-
understood the provisions of Section 33AB. The decision relied upon by the Assessing Officer, reported in 35 ITR 537 is not at all applicable and irrelevant. The addition made by the Assessing Officer was totally unjustified and against all cannons of law. After going through the facts and circumstances of the case, I find merit in the argument of the appellant that the funds withdrawn from the deposits were not utilized for the purpose as mentioned u/s. 33AB(4) of the IT Act, therefore, the AO was not justified to make the such addition.
The Revenue, being aggrieved, is in appeal before us.
21. Before us both parties relied on the order of Authorities Below as favourable to them.
22. We have heard rival contentions of both the parties and perused the material available on record. In the instant case, the benefit of the provision of Section 33AB was denied by AO on the ground that the amount withdrawn has not been utilized in accordance with the scheme of Tea Board. However, Ld. CIT(A) observed that the amount was withdrawn as per the provision of the scheme and accordingly granted relief to assessee. At the time of argument, Ld. DR has also not brought anything on record contrary to the finding of Ld. CIT(A). Hence, we find no reason to interfere in the order of Ld. CIT(A). We uphold the same. This ground of Revenue is dismissed.
23. Last issue raised by Revenue in ground No.5 is that Ld. CIT(A) erred in treating the sale proceed of tea waste for ₹5,69,804/- as income from business though the AO treated the same as income from other source.
ITA No.1259 & CO.80/Kol/2014 A.Y. 2010-11 ACIT Cir-34, Kol. Vs. M/s Bisseswarlall Mnnalal & Sons Page 13
The assessee in the year under consideration has made the sale of ₹5,69,804/- out of tea waste which was offered as business income. However, the AO treated the same as income from other source.
24. Aggrieved, assessee preferred an appeal before Ld. CIT(A). The assessee before Ld. CIT(A) submitted that tea waste is a by-product and arising out of cultivation and manufacturing of tea. Therefore, the same should be treated as part of tea business only. Ld. CIT(A) after considering the submission of assessee directed the AO to treat the same as business income.
The Revenue, being aggrieved, is in appeal before us.
25. Before us both parties relied on the order of Authorities Below as favourable to them.
26. We have heard the rival contentions of both the parties and perused the material available on record. At the outset, we find that the tea waste is nothing but a by-product of tea manufacturing activities. Therefore, in our considered view, same should be treated as business income of assessee as it is an integral part of tea business. Therefore we find that no interference is called for in the order of Ld. CIT(A). Hence, this ground of Revenue's appeal is dismissed.
27. In the result, Revenue's appeal is dismissed.
Coming to assessee's CO No.80/Kol/2014.
28. Grounds raised by assessee per its CO are as under:-
"1. That the Ld. CIT(A), Kolkata, after admitting the following additional grounds, submitted in the course of hearing and explained vide Written Submission, erred in not deciding upon the same while passing Appellate Order dated 18.92.2014.
'i) That he Assessing Officer erred in assessing the Appellant's income from other Sources the Interest Subsidy of Rs.11,54,016/- , received by the Appellant on account of interest paid in the earlier years and in respect of which deduction was allowed only to the extent of 40% on the basis that interest expenditure pertains to Appellant's business of cultivation and manufacture of Tea.
ITA No.1259 & CO.80/Kol/2014 A.Y. 2010-11 ACIT Cir-34, Kol. Vs. M/s Bisseswarlall Mnnalal & Sons Page 14
ii) That on the facts and circumstances of the case, the Assessing Officer erred in making addition of Rs13,69,660/- on account of purported Bogus Creditors.'
29. At the outset, it was observed that assessee has raised additional grounds before Ld. CIT(A) which was also admitted by Ld. CIT(A). But on perusal of appellate order, we find that both the above grounds have not been adjudicated by the Ld. CIT(A). In this view of the matter and in the interest of natural justice and fair play we restore the grounds raised by assessee in CO before Ld. CIT(A) for fresh adjudication in accordance with law. Hence, the grounds raised by assessee are treated as allowed for statistical purpose.
29. In the result, for statistical purpose, the CO of assessee is treated as allowed and that of Revenue stands dismissed, Order pronounced in the open court 06/09/2017 Sd/- Sd/-
( या'यक सद य) (लेखा सद य) (N.V.Vasudevan) (Waseem Ahmed) (Judicial Member) (Accountant Member) Kolkata, *Dkp, Sr.P.S )दनांकः- 06/09/2017 कोलकाता । आदे श क त ल प अ े षत / Copy of Order Forwarded to:-
1. आवेदक/Assessee-M/s Bisseswarloll Manalal & Sons 12, Pretoria St,5th, Floor, Kolkata-01
2. राज व/Revenue- ACIT,Circle-34, Aayakar Poorva, 7th Floor, 110, Shantipally Kolkata-107
3. संब4ं धत आयकर आय5 ु त / Concerned CIT Kolkata
4. आयकर आय5 ु त- अपील / CIT (A) Kolkata
5. 8वभागीय 'त'न4ध, आयकर अपील य अ4धकरण, कोलकाता / DR, ITAT, Kolkata
6. गाड= फाइल / Guard file.
By order/आदे श से, /True Copy/ Sr. Private Secretary, Head of Office/DDO आयकर अपील य अ4धकरण, कोलकाता ।