Karnataka High Court
M/S Joonktollee Tea And Industries Ltd vs The State Of Karnataka on 19 October, 2022
Author: P.S. Dinesh Kumar
Bench: P.S. Dinesh Kumar
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CRP No. 345 of 2021
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 19TH DAY OF OCTOBER, 2022
PRESENT
THE HON'BLE MR. JUSTICE P.S. DINESH KUMAR
AND
THE HON'BLE MR. JUSTICE T.G. SHIVASHANKARE GOWDA
CIVIL REVISION PETITION NO. 345 OF 2021 (TAX)
BETWEEN :
M/S JOONKTOLLEE TEA
AND INDUSTRIES LTD
GOOMANKHAN ESTATE
HIREBILE-577121
MUDIGERE TALUK
Digitally signed
CHIKMAGALUR DISTRICT. ...PETITIONER
by S P SUDHA
Location: High (BY SHRI. M. KAUSHIK, ADVOCATE)
Court Of
Karnataka
AND :
1. THE STATE OF KARNATAKA
2. THE JOINT COMMISSIONER
OF COMMERCIAL TAXES (APPEALS)
MALNAD DIVISION
SHIVAMOGGA-560 058.
3. THE ASST. COMMISSIONER
AGRICULTURAL INCOME TAX
HASSAN-573 201. ...RESPONDENTS
(BY SHRI. JEEVAN J. NEERALGI, AGA)
....
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CRP No. 345 of 2021
THIS CRP FILED IS UNDER SECTION 55 OF THE KARNATAKA
AGRICULTURAL INCOME TAX ACT, 1957 AGAINST THE ORDER
DATED 02.03.2021 PASSED IN STA No. 208/2017 ON THE FILE OF
THE KARNATAKA APPELLATE TRIBUNAL, BENGALURU DISMISSING
THE APPEAL AND UPHOLDING THE ORDER DATED 21.01.2017
PASSED IN APPEAL No. KAIT/AP-07/2015-2016 ON THE FILE OF THE
JOINT COMMISSIONER OF COMMERCIAL TAXES (APPEALS),
MALNADU DIVISION, SHIMOGA, PARTLY ALLOWING THE APPEAL
FILED UNDER SECTION 32(5)(b) OF THE KAIT ACT 1957 FOR THE
ASSESSMENT YEAR 2009-10.
THIS CRP, COMING ON FOR HEARING, THIS DAY,
P.S. DINESH KUMAR J., MADE THE FOLLOWING:
ORDER
This Civil Revision Petition by the assessee, directed against order dated March 2, 2021 in STA No.208/2017 passed by the Karnataka Appellate Tribunal, Bengaluru, has been admitted to consider the following question of law:
Whether on the facts and in circumstances of the case, the Karnataka Appellate Tribunal was right in confirming the disallowance of Rs.18,00,000/- being 60% of the amount deposited / invested by the petitioner which claimed as a deduction against the taxable income declared as per the provisions of the Karnataka Agricultural Income Tax, 1957 thereby overlooking the provisions of Section 8 of the Karnataka Agricultural Income Tax, 1957 read along with provisions of Central Income Tax Act, 1961?-3- CRP No. 345 of 2021
2. Briefly stated the facts of the case are, appellant is a Public Limited Company and owns Coffee, Tea and Pepper Estates. Assessee's claim for deduction under Section 33AB of the Income Tax Act, 1961 ('IT Act' for short) for the A.Y. 2009-10 was rejected by the Assessing Officer1 and confirmed by the First Appellate Authority2, Malnad Division, Shivamogga, as also the KAT3. Hence, this appeal.
3. The assessee filed its annual returns under the under the Karnataka Agricultural Income Tax, 1957 ('KAIT Act' for short) for the assessment year 2009-10 for the year ending March 31, 2009 declaring an income of Rs.98,82,291/- and filed a revised return declaring a taxable income of Rs.1,00,54,135/-. The AO disallowed various expenses including the deposit made under Section 1 Assistant Commissioner of Agricultural Income Tax 2 Joint Commissioner of Commercial Taxes (Appeals) 3 (Karnataka Appellate Tribunal) -4- CRP No. 345 of 2021 33AB of the Income Tax Act, 1961 ('IT Act' for short) amounting to Rs.18,00,000/- holding that the said amount is not an expenditure made for deriving agricultural income. The FAA and the KAT concurred with the view taken by the AO.
4. Shri. M. Kaushik, learned Advocate for the assessee submitted that under Section 33AB of the IT Act, an assessee carrying on business of manufacturing Tea in India is required to deposit with a Nationalized Bank in an account maintained by the assessee, a sum equivalent to 40% of the profits of such business. Tax payable is computed under the Income tax Act after deduction of the deposit made under Section 33AB of the IT Act. Therefore, the total sum which can be treated as income in the hands of the assessee is the amount after the deposit. Therefore, the reason recorded by the AO is perverse. In support of -5- CRP No. 345 of 2021 his contention, he placed reliance on Tata Tea Ltd., & another Vs. State of West Bengal & Others4.
5. Shri. Jeevan Neeralgi, learned AGA for the State, adverting to Section 8 of the 'KAIT Act' submitted that the deduction under Section 33AB of the IT Act is under the Income Tax Act and such deduction cannot be considered while computing income tax under the KAIT Act, firstly because, the statute does not provide for any deduction and secondly because, it is not an expense made for deriving the agricultural income.
6. We have carefully considered rival contentions and perused the records.
7. Section 33AB of the Income Tax Act reads as follows:
33AB. Tea development account, coffee development account and rubber development account.--(1) Where an assessee 4 1988 AIR 1435 -6- CRP No. 345 of 2021 carrying on business of growing and manufacturing tea or coffee or rubber in India has, before the expiry of six months from the end of the previous year or before the due date of furnishing the return of his income, whichever is earlier,-- (a) deposited with the National Bank any amount or amounts in an account (hereafter in this section referred to as the special account) maintained by the assessee with that Bank in accordance with, and for the purposes specified in, a scheme (hereafter in this section referred to as the scheme) approved in this behalf by the Tea Board or the Coffee Board or the Rubber Board; or (b) deposited any amount in an account (hereafter in this section referred to as the Deposit Account) opened by the assessee in accordance with, and for the purposes specified in, a scheme framed by the Tea Board or the Coffee Board or the Rubber Board, as the case may be (hereafter in this section referred to as the deposit scheme), with the previous approval of the Central Government, the assessee shall, subject to the provisions of this section, be allowed a deduction (such deduction being allowed before the loss, if any, brought forward from earlier years is set off under section 72 ) of-- (a) a sum equal to the amount or the aggregate of the amounts so deposited; or (b) a sum equal to forty per cent.. of the profits of such business (computed under the head ―"Profits and gains of business or profession"
before making any deduction under this section), whichever is less.
(Emphasis Supplied)
8. Thus, the IT Act mandates deposit of a sum equivalent to 40% of the profits of the business by an -7- CRP No. 345 of 2021 assessee carrying on the business of growing and manufacturing Tea. Thus, it is a statutory deduction under the IT Act, which the assessee is required to deposit in the Bank.
9. It was urged by Shri. Kaushik that under Sub- section (3) of Section 33AB of the IT Act, any amount standing in the credit of assessee, shall be released only for specific purpose prescribed in Sub-section (4) of Section 33AB of the IT Act.
10. We have perused the said provision. It provides for the utilization of the amount for purchase of any machinery or plant to be installed in any office premises or residential accommodation; for any office appliances; any machinery or plant or whole of the actual cost or machinery plant; and new machinery or plant to be installed in an Industrial undertaking.
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11. Section 8 of the KAIT Act makes it clear that the agricultural income under the said Act shall be that portion of the income from cultivation, manufacture etc., under the IT Act, which is excluded from taxation under the IT Act as being agricultural income. Thus, the language employed in the Act is unambiguous. What is taxable under the KAIT Act is the income after deducting any allowance authorized by the IT Act. Once the amount to be deposited is deducted from the income, only the remaining sum shall be taxable. Therefore, the reason recorded by the Assessing Officer that the deposit under Section 33AB of the IT Act is not an expenditure for deriving agricultural income, is perverse because such a deduction is mandatory under the Income tax Act.
12. In Tata Tea Ltd., it is held as follows:
A perusal of the aforesaid Rule 8(1) makes it clear that under the said rule, income from the sale of tea grown and manufactured by a seller in India has to be computed as if it were income derived from business which would imply that the deductions allowable under the Act of 1961 in respect of -9- CRP No. 345 of 2021 income derived from business would be allowable in the case of income derived from the sale of tea grown and manufactured by a seller and further allowance would be granted as set out in Rule 8(2) and 40 per cent of the income so computed would be deemed to be income liable to the levy of income-tax and the balance of the income would be liable to tax as agricultural income subject to such further deductions as the law pertaining to the levy of agricultural income-tax might allow. The question is whether Rule 24 of the Income-tax Rules, 1922 and Rule 8 of the Income-tax Rules, 1962 can be said to form part of the definition of the term "agricultural income" under the Act of 1922 and the Act of 1961 respectively.
13. The Apex Court has held that the State Legislature is free to exercise its plenary Legislative power to allow further deductions after the agricultural income is determined post deduction of the statutory deposit made. Therefore, the view taken by the Assessing Officer confirmed by the FAA and the KAT are perverse and therefore, unsustainable in law. Hence, the following:
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ORDER
(a) Civil Revision Petition is allowed.
(b) The order dated 26.08.2015 passed by the Assistant Commissioner of Agricultural Income Tax (Assessing Officer), order dated 21.01.2017 passed by the First Appellate Authority [Joint Commissioner of Commercial Taxes (Appeal)] and order dated 02.03.2021 in STA No.208/2017 passed by the KAT are set-aside.
(c) The question of law is answered in favour of the assessee and against the Revenue.
No costs.
Sd/-
JUDGE Sd/-
JUDGE SPS List No.: 1 Sl No.: 69