Income Tax Appellate Tribunal - Kolkata
Warren Tea Ltd., Kolkata vs Department Of Income Tax on 19 October, 2016
आयकर अपील य अ
धकरण, कोलकाता यायपीठ 'ए', कोलकाता।
IN THE INCOME TAX APPELLATE TRIBUNAL "A", BENCH KOLKATA
BEFORE SHRI WASEEM AHMED, AM & SHRI K. NARASIMHA CHARY, JM
आयकर अपील सं./ITA No.110 TO 113/Kol/2014
( नधा रण वष / Assessment Year :2003-2004 to 2006-2007)
DCIT, CC-XXV, Kolkata, Vs. M/s W arren Tea Ltd., 4B,
110, Shanti Pally, 5th Floor, Hungerford Street, Suvira
Kolkata-700107 House, Kolkata-700017
थायी ले खा सं . /जीआइआर सं . /PAN/GIR No. : AAACW 2894 H
(अपीलाथ /Appellant) .. ( यथ / Respondent)
राज व क ओर से /Revenue by : Shri Bishwanath Das, JCIT
नधा रती क ओर से /Assessee by : Shri Agnibesh Sengupta
सन
ु वाई क तार ख / Date of Hearing : 06/10/2016
घोषणा क तार ख/Date of Pronouncement 19/10/2016
आदे श / O R D E R
Per Shri K. Narasimha Chary, JM:
The above four appeals are directed by the Revenue against the respective orders passed by the ld. Commissioner of Income Tax (Appeals)-XXV, Kolkata in case of one assessee for the different assessment years i.e. AYs.2003-04, 2004-05, 2005-06 & 2006-07, respectively.
2. Since common grounds are involved in all the appeals of the revenue, therefore, for the sake of convenience, we proceed to dispose off all the appeals by this consolidated order.
3. Brief facts of the case are that the assessee involved in the business of growing, manufacturing and trading of tea and travels services. In the assessment years 2003-04, 2004-05, 2005-06 & 2006-07, the assessee filed returns of income declaring total income of 2 ITA Nos.110-113/14 Rs.40,94,950/-, Rs.8,43,75,420/-, 3,33,13,452/- and Rs.3,02,12,856/-, respectively. While processing the returns, the AO, however, refused to allow the deductions claimed by the assessee u/s.33AB(7) of the Act and added back such amounts to the income of the assessee. In respect of assessment year 2003-04, the assessee claimed damage to the tea in the transport to a tune of Rs.20,307 kgs. and reduced to its closing stock by such an extent. The AO compared the same with the damage claimed in the earlier years and added back a sum of Rs.2 lakhs on estimate being disallowance of claim on this account. Aggrieved by the addition of the amounts in respect of assessment years 2003-04 to 2006-07, the assessee carried the matters in appeal before the ld. CIT(A). Ld. CIT(A) while disposing off these appeals by separate orders, agreed with the contention of assessee and deleted the additions made by the AO, on account of Section 33AB(7) in respect of assessment years and the addition of Rs.2 lakhs in respect of damage to tea for the assessment year 2003-04. Challenging the said orders of ld. CIT(A), the revenue carried the matter in these appeals on the following grounds :-
Grounds raised in ITA No.110/Kol/2014 (AY : 2003-2004) are as under :-
The following grounds of appeal are approved for filing appeal to ITA.T,Kolkata against the order dt. 17.09.2013 of the CIT(A) IV,Kolkata in Appeal No.76/ CIT(A)-IV/06-07 in case of M/s Warren Tea Ltd., for A.Y. 2003-04:
1. In the facts and circumstances of the case the Ld. CIT(A) has erred in deleting the addition of withdrawal from NABARD and granting relief to the assessee without considering the fact that the expenditure claimed as utilization of NABARD withdrawal made in the A.Y 2003-04 was in fact incurred in the A.Y 2002- 03 instead of A.Y 2003-04, i.e. year of withdrawal violating provisions of sec. 33AB(7) of the IT.Act,1961 and thus not eligible for claim of deduction as per provision of the Act.3
ITA Nos.110-113/14
2. In the facts and circumstances of the case of the CIT(A) has erred in deleting disallowance made by the A.O in the respect of 'loss on damaged tea' without properly appreciating the rationale behind such disallowance as stated in the assessment order, Grounds raised in ITA No.111/Kol/2014 (AY : 2004-2005) are as under :-
The following grounds of appeal are approved for filing appeal to ITA.T,Kolkata against the order dt. 17.09.2013 of the CIT(A) IV,Kolkata in Appeal No.183/CIT(A)-IV/06-07 in case of M/s Warren Tea Ltd., for A.Y. 2004-05:
1. In the facts and circumstances of the case the Ld. CIT(A) has erred in deleting the addition of withdrawal from NABARD and granting relief to the assessee without considering the fact that the expenditure claimed as utilization of NABARD withdrawal made in the A.Y 2004-05 was in fact incurred in the A.Y 2003- 04 instead of A.Y 2004-05, i.e. year of withdrawal violating provisions of sec. 33AB(7) of the IT.Act,1961 and thus not eligible for claim of deduction as per provision of the Act.
Grounds raised in ITA No.112/Kol/2014 (AY : 2005-2006) are as under :-
The following grounds of appeal are approved for filing appeal to ITA.T,Kolkata against the order dt. 17.09.2013 of the CIT(A) IV,Kolkata in Appeal No.232/CIT(A)-IV/07-08 in case of M/s Warren Tea Ltd., for A.Y. 2005-06:
1. In the facts and circumstances of the case the Ld. CIT(A) has erred in deleting the addition of withdrawal from NABARD and granting relief to the assessee without considering the fact that the expenditure claimed as utilization of NABARD withdrawal made in the A.Y 2005-06 was in fact incurred in the A.Y 2004- 05 instead of A.Y 2005-06, i.e. year of withdrawal violating provisions of sec. 33AB(7) of the IT.Act,1961 and thus not eligible for claim of deduction as per provision of the Act.
Grounds raised in ITA No.113/Kol/2014 (AY : 2006-2007) are as under :-
The following grounds of appeal are approved for filing appeal to ITA.T,Kolkata against the order dt. 17.09.2013 of the CIT(A) IV,Kolkata in Appeal No.236/CIT(A)-IV/08-09 in case of M/s Warren Tea Ltd., for A.Y. 2006-07:
1. In the facts and circumstances of the case the Ld. CIT(A) has erred in deleting the addition of withdrawal from NABARD and granting relief to the assessee without considering the fact that the expenditure claimed as utilization of NABARD withdrawal made in the A.Y 2006-07 was in fact incurred in the A.Y 2005- 4
ITA Nos.110-113/14 06 instead of A.Y 2006-07, i.e. year of withdrawal violating provisions of sec. 33AB(7) of the IT Act,1961 and thus not eligible for claim of deduction as per provision of the Act.
4. It is the argument of ld. DR that u/s.33AB whenever any amount that was realized in previous year by the national bank, was not utilized either in whole or in part in the previous year, such unexpend amount shall be deemed to be the profit and gains of business and accordingly shall be chargeable to income tax as the income of the previous year and while following this mandate of this provision of law the AO disallowed the deduction claimed by the assessee. Inasmuch as, in the returns of income for the assessment years 2003-04 to 2006-07 the assessee claimed the expenses incurred in the financial years 2001-02 to 2004-05, respectively, which happened to be the preceding previous years. On this account, ld. DR justifies the action of ld. AO. He further submitted that in respect of assessment year 2003-04, the assessee did not submit any material before the AO to support and almost hundred percent increased in the damage occurred in that financial year when compared to the relevant previous financial year as such instead of disallowing the total amount the AO has taken a view on estimate basis that addition of amount of Rs.2 lakhs would meet the purpose. On these grounds, ld. DR prayed to allow all the appeals and restore the orders of AO.
5. Per Contra, it is the argument of ld. AR that on earlier occasions also the AO disallowed the deductions claimed u/s.33AB(7) on the ground that the withdrawn amount was not spent in the previous year but in the preceding previous year, and on the appeals preferred by the assessee 5 ITA Nos.110-113/14 the ITAT answered the issues in favour of the assessee holding that the spending and withdrawal of the amount was a continuous process and a particular payment cannot be identified with designated disallowance. Though this point was raised before the AO, ld. AO did not accept the same stating that the revenue has not accepted the finding of the ITAT as settled issue but an appeal was preferred u/s.260A of the Act and to protect the interest of revenue addition was necessary. Ld. AR further justified the finding of ld. CIT(A) in respect of damage tea stating that the damaged portion cannot have any direct or inverse proportion to the total production of the tea and in the options of the evidence whatsoever to the contrary, the ld. AO is not justified in disbelieving the claim of the assessee. For this reasons, ld. AR prayed to dismiss the appeals.
6. Ground No.1 in all the appeals :-
1. In the facts and circumstances of the case the Ld. CIT(A) has erred in deleting the addition of withdrawal from NABARD and granting relief to the assessee without considering the fact that the expenditure claimed as utilization of NABARD withdrawal made in the A.Y 2003-04 was in fact incurred in the A.Y 2002- 03 instead of A.Y 2003-04, i.e. year of withdrawal violating provisions of sec. 33AB(7) of the IT.Act,1961 and thus not eligible for claim of deduction as per provision of the Act.
A perusal of the record shows that the assessee claimed to have incurred an expenditure of Rs.5,91,90,400/- in the financial year 2001-02 for extension of factory and construction of roads and bridges, an amount of Rs.1,17,49,000/- for construction of labour quarters, modification of labour and staff quarters now, and for providing infrastructural facilities at various tea estates, in the financial year 2002-03, an amount of 6 ITA Nos.110-113/14 Rs.1,06,60,000/- and Rs.80,90,00,000/- in the financial year 2003-04 and in financial year 2004-05 for the purchase of plant and machinery.
7. The assessee withdrew an equal amount from the NABARD in the next financial year i.e. 2002-03 to 2005-06 and reimbursed such amounts towards the expenditure incurred in the assessment year. The assessee claimed this withdrawn amount as deduction u/s.33AB(7). Having observed that the expenditure took place in the preceding previous year and the withdrawal took place in the previous year, the AO held that this deduction cannot be allowed, inasmuch as the utilization of funds had not taken place either in whole or in part in the year in which the withdrawal took place. On this premise, the AO disallowed the claim of deduction and added back such amount to the total income of the assessee.
8. A perusal of the assessment orders clearly established that the AO does not dispute the genuineness of the expenditure incurred by the assessee in the preceding years or the utilization of the amounts withdrawn from the NABARD in the previous year for reimbursement of such expenditure incurred in the preceding previous years. The entire dispute revolves round the question as to whether the expenditure was taken place in the year of withdrawal or the reimbursement of the expended amount is valid to claim the deduction u/s.33AB(7) of the Act.
9. In his order itself, the AO recorded that it was brought to notice that the ITAT Kolkata Bench had already held in assessee's own case for the earlier assessment years, however, the AO further recorded that the revenue has not accepted the decision of ITAT and preferred an appeal 7 ITA Nos.110-113/14 u/s.260A of the Act. As such, in view of the matter being not at settled, to protect the interest of revenue the AO proceeded to add the amount. Ld. CIT(A) also referred to the orders dated 21.04.2004 passed in ITA No.1773/Kol/1997 and order dated 30.09.2005 passed in ITA No.863&864/Kol/2005 & other connected appeals. Copies of orders are produced before us vide page nos.25 to 46 of the paper book. The relevant findings of the ITAT are necessary to be extracted for proper understanding for the approach of ITAT on this aspect. Vide para No.9 in the order dated 21.04.2004 passed in ITA No.1773/Kol/1997, it was held as under :-
"9. We have heard the rival parties and perused the materials available on record. On the point of deleting the disallowance of Rs.3 crores we are in agreement with the findings of the learned CIT(A) inasmuch as the learned CIT(A) on the basis of the scheme as applicable to the assessee for development deposit scheme applied on the appropriate form for withdrawal of a sum of Rs.3 crores. NABARD was the agency it granted Rs.3 crores for directing the assessee's bank for utilization to encourage investment in industrial undertaking. The A.O. misdirected himself to hold that the utilization has to be, from the designated amount only. As per the A.O. himself the remittances after December, 1991 was considered for the purpose of capital expenditure which otherwise was being incurred in accordance with the scheme of capital expenditure by the assessee. 'We are, therefore, inclined to hold that it was a continuous process and no separate payment can be identified from a designated a/c for disallowance. There cannot be direct link between utilization and the expenditure incurred for the specified purpose. This fact is further strengthened on the basis of the arguments as considered by the AO for the purpose of the disallowance of Rs.1.84 crores u/s 32AB(5B). The details of the expenditure vas considered by the CIT(A) and were quantified for allowance on an extension standing at Rs. 80.86 lakhs, repayment of NABARD loan of Rs. 32.43 lakhs and plant and machinery purchased amounting to Rs.1.61 crores. The learned CIT(A) held that the replanting did not comply with the provisions of the Investment Deposit Scheme, 1986 which was revenue in nature. Therefore, we are in conformity with the learned CIT(A) of sustaining the disallowance amounting to Rs.38.46 lakhs. On both these accounts we do not find merit in the arguments of the learned DR supporting the order of the AO land dismiss the same.8
ITA Nos.110-113/14 However, the third ground agitated by the revenue, we find force in the arguments of the learned DR who has clearly tried to bring on record that the direction by the ITAT was with respect to the deduction u/s.80HHC which did not have any bearing on the exchange loss suffered and accounted for by the assessee as considered for disallowance by the AO in his order u/s.143(3). We are also inclined to hold that the submission by the assessee before the lower authorities for consideration of allowance of the exchange loss was not as brought out which appears to be on hypothetical accounting of a loss as on the date of the balance sheet other than in built for accounting of loss for the purpose of deduction u/s.80HHC. However, in the interest of justice it will be appropriate if the issue is restored to the file of the learned CIT(A) who should consider the claim of exchange loss by the assessee in accordance with the accounting as submitted by the assessee before them instead of being guided by the direction properly in the order of the ITAT for the assessment year 1987-88, during which period the same contention also may have been considered for the remaining assessment years in the case of the assessee and accepted or otherwise by the department. An opportunity be given to the assessee for explaining as to how the direction of the ITAT falls out for this year as in the assessee's own case for the assessment year 1987-88 by the Tribunal. This ground is allowed for statistical purposes as directed above."
Paragraph Nos.25, 26 & 27, in the order dated 30.09.2005, passed in ITA No.863&864/Kol/2005, are as follows :-
25. The revenue has disputed the claim of the appellant observing that the appellant has already acquired such machinery during the preceding year of the previous year whereas the amount was withdrawn by the assessee only in the previous year from NABARD and therefore, no question arises as to utilization of fund prior to release thereof. However, we find that the appellant has utilized the money towards extension of planting, additions to buildings, acquisition of plant and machinery, construction of roads and bridges and purchase of motor cars out of its own resources and subsequently when the equivalent money was withdrawn from NABARD, reimbursed the same to itself. We also find that NABARD released funds only after scrutinizing the details furnished by the assessee for the purposes specified in the Tea Development Account Scheme as applicable. The applications were duly filed with NABARD with all supporting documents and NABARD after fully scrutinizing the details released the funds. The details of the amount of withdrawal is also duly certified by a Chartered Accountant. The revenue has not disputed the genuineness of the purchases/utilizations. The revenue has also not controverted the submissions of the ld. Counsel for the assessee that It was required to furnish the bills before NABARD to enable it to get the amount released against such purchase of machinery.9
ITA Nos.110-113/14
26. We also find that the above provision was inserted with the intention to facilitate mobilization of internal resources of Indian Tea Industry for the purpose of investments in new areas, fresh planting, replanting etc. We are also of the opinion that provisions should be interpreted liberally which derives support from the Judgement of the Hon'ble Supreme Court in the case of Bajaj Tempo Ltd. reported in 196 ITR 188 (SC). Accordingly, in our considered opinion, the contention of the Id. Counsel for the assessee that such utilization of money amounting to Rs.4,12,01,500/- though utilized in the preceding year qualify as assets purchased by the assessee against withdrawal made by it from NABARD is a valid one. The above proposition also derives support from the decision of the coordinate Bench of the ITAT in the case of Scotish Assam India Ltd., Kolkata vs ACIT vide order dated 28.7.2004 in ITA No.2638/K/2004 for assessment year 2001-02.
27. Considering the totality of the facts of the case we set aside the order of the CIT(A) and direct the revenue to allow the claim of the appellant towards deduction U/S 33AB(7) of the amount withdrawn from NABARD.
It, therefore clear that while following the decision reportedin Bajaj Tempo Ltd., 196 ITR 188(SC), the coordinate bench of this Tribunal has chosen to give liberal interpretation to the provisions of Section 33AB(7) and held that the utilization of money in the preceding previous year will qualify as the expenditure incurred by the assessee against the withdrawal made by it from the NABARD. It further found support from the decision reported in Scotish Assam India Ltd., 2638/Kol/2004.
10. It is argued by ld. AR before us that in order to get the withdrawals of the amount from the NABARD, the assessee has to submit all the relevant papers supporting the claim that withdrawal and is only after a careful scrutiny of the details the NABARD would release the funds. It suggests that for getting withdrawal of the funds from the NABARD, the assessee has to incur the expenditure and submit the details and documents. This aspect was adverted to by the ITAT vide order dated 10 ITA Nos.110-113/14 30.09.2005 in ITA No.863&864/Kol/2005. Therefore, the circumstances made it clear that the NABARD allows the withdrawal of funds for reimbursement of the expenditure already made and that is the reason why it was held that such utilization of the withdrawal amounts for the purpose of reimbursement will qualify the claim for deduction thereof in the relevant previous year in which the reimbursement took place. Though it is submitted by ld. DR that the orders of ITAT in ITA No.1773/Kol/1997 and in ITA Nos.863&864/Kol/2005 were carried in appeal u/s.260A of the Act, no fact disturbing such reasoning or decision therein is brought to our notice. In these circumstances, we find every force in the reasoning of the ld. CIT(A) and also the argument of ld. AR to sustain the finding of the ld. CIT(A). We, therefore, do not find any reason to interfere with the finding of the ld. CIT(A) in respect of eligibility of the assessee to claim deduction u/s.33AB(7) of the Act. This grounds in all these appeals is accordingly dismissed.
11. Ground No. in ITA No.100/Kol/2014 (AY : 2003-04) is as under :-
" 2. In the facts and circumstances of the case of the CIT(A) has erred in deleting disallowance made by the A.O in the respect of 'loss on damaged tea' without properly appreciating the rationale behind such disallowance as stated in the assessment order."
This ground of revenue relates to disallowance of claim to reduce the closing stock by 20371 kgs. claiming to be damaged in transit. The AO observed that in the immediate preceding year the damage during transit was 10240 and there is an increase in such damage by 100% in the relevant preceding year. The AO looked for satisfactory evidence and 11 ITA Nos.110-113/14 held that since there is no evidence, such huge amount of damage cannot be allowed when the increase in the turnover is only marginal.
12. On this aspect the ld. CIT(A) observed that in tea industry the extent of damage does not depend upon the quantification of turnover but on some other factors surrounding the process of transit. Ld. CIT(A) held that it is not possible to correlate the damage quantity of tea and profits because the assessee will be receiving the insurance claim. It is argued by ld. AR that when the assessee makes insurance claim the Insurance Company will be scrutinize all the factors going in deep claim made by the assessee and as a matter of fact, the AO has not considered this fact at all. While considering all these aspects ld. CIT(A) found that adding a sum of Rs.2 lakhs is purely based on guess and there is no evidence either to support the estimate of the AO also.
13. On a careful consideration of the reasoning given by the AO and ld. CIT(A) we find that the ld. CIT(A) is right in holding that the damage in transit is nothing to do with the increase or decrease in the turnover and at the same time, it may not have any impact on the profit earning of the assessee. Ld. AO proceeded on suspicion and it is settled principle of law that suspicion, however, grave, it cannot take the place of real evidence of proof. In these circumstances, we find that the approach of ld. CIT(A) is quite reasonable in holding the addition of Rs.2 lakh made by the AO on presumption basis.
14. Viewing from many angles, we find that the finding recorded in the impugned orders was unassailable and they do not suffer any illegality or 12 ITA Nos.110-113/14 irregularity. We therefore, inclined to uphold them and consequently proceed to dismiss all the grounds pleaded by the revenue, as a result of which, all these for appeals stands dismissed.
15. In the result, all appeals of revenue are dismissed.
Order pronounced in the open court on this 19/10/2016.
Sd/- Sd/-
(WASEEM AHMED) (NARASIMHA CHARY)
लेखा सद$य / MEMBER ACCOUNTANT या यक सद$य / JUDICIAL MEMBER
कोलकाता /Kolkata; $दनांक Dated 19/10/2016
काश (म*ा/Prakash Mishra, न.स/ PS
आदे श क % त&ल'प अ(े'षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant-DCIT, CC-XXV, Kolkata
2. यथ / The Respondent-M/s Warren Tea Ltd.
3. आयकर आयु4त(अपील) / The CIT(A), Kolkata.
4. आयकर आयु4त / CIT
5. 5वभागीय त न8ध, आयकर अपील य अ8धकरण, कोलकाता / DR, ITAT, Kolkata
6. गाड फाईल / Guard file.
स या5पत त //True Copy// ु ार/ BY ORDER,
आदे शानस
उप/सहायक पंजीकार
(Asstt. Registrar)
आयकर अपील य अ
धकरण, कोलकाता / ITAT, कोलकाता