Income Tax Appellate Tribunal - Kolkata
Dcit, Cir-4(1), Kolkata, Kolkata vs M/S Goodricke Group Ltd, Kolkata on 6 September, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL "C" BENCH : KOLKATA
[Before Hon'ble Shri A.T.Varkey, JM & Shri M.Balaganesh, AM ]
I.T.A Nos. 892 & 893/Kol/2015
Assessment Years : 2003-04 & 2005-06
DCIT, Cir-4(1), Kolkata -Vs- M/s Goodricke Group Ltd.
[PAN : AABCG 1614 O]
(Appellant) (Respondent)
For the Appellant : None, Sr. DR
For the Respondent : Shri P.N. Rajendran, AR
Date of Hearing : 23.08.2017.
Date of Pronouncement : 06.09.2017
ORDER
Per M.Balaganesh, AM
1. These two appeals by the Revenue arise out of the order of the Learned Commissioner of Income Tax (Appeals) -2 , Kolkata [ in short the ld CITA] in Appeal Nos. 579/CIT(A)-2/(03-04)/14-15 and 581/CIT(A)-2/(05-06)/14-15 dated 27.02.2015 against the orders passed by the ACIT, Range-4, Kolkata [ in short the ld AO] under section 143(3) of the Act dated 31.03.2006 and 27.12.2007 for the Asst Years 2003-04 & 2005-06 respectively. As the issues involved in these two appeals are identical in nature, the same are taken up together and disposed of by a common order for the sake of convenience.
2. Disallowance of Cess on Green Leaf Ground No. 1 of Assessment year 2003-04 - Rs. 1,18,20,026/- Ground No. 1 of Assessment year 2004-05 - Rs. 90,44,665/-
The facts of Assessment Year 2003-04 are taken up for adjudication herein and the decision rendered thereon would apply with equal force for assessment year 2005-06 also except with variance in figures, if any.
2ITA Nos.892 & 893/Kol/2015 M/s Goodricke Group Ltd.
A.Yrs.03-04 & 05-06 2.1. Brief facts of this issue is that the assessee is engaged in the manufacturing and growing of tea including instant tea. The assessee company has 17 tea gardens of which 12 gardens are in Doars, 3 in Darjeeling and 2 in Assam. The assessee has blending unit in Siliguri and in instant tea unit at Matelli, Jalpaiguri. The assessee made payment of Rs. 1,18,20,026/- on account of Cess on green leaf and claimed the same as deduction. The ld. AO observed that in view of the judgment of Guwahati High Court in the case of Jorahat Group Ltd. vs. Agricultural ITO reported in 226 ITR 622, the cess on green leaf is deductible from the agricultural income only and not from the composite income. The assessee contended that the Hon'ble Jurisdictional High Court in the case of CIT vs. A.F.T. Industries Ltd. reported in 270 ITR 167 (Kol) has decided that the same was to be fully allowed from the composite income only. The Ld. AO however proceeded to make disallowance of the same in the assessment. The assessee submitted that the State of West Bengal and State of Assam levied cess on green leaf plucked and utilized for production of tea and during the year the assessee had paid an aggregate sum of Rs. 1,18,20,026/- towards cess on green leaf as under:-
Cess levied by Government of West Bengal - Rs. 84,96,681/-
Cess Levied by Government of Assam - Rs. 33,23,345/-
Total - Rs. 1,18,20,026/-
The assessee also submitted that the issue in question has been decided in favour of the assessee by the Hon'ble Jurisdictional High Court, and also the subsequent decision of Hon'ble Guwahati High Court in the case of Assam Co. Ltd. vs. Union of India and others reported in 275 ITR 609 which was rendered after consideration of earlier Guwahati High Court decision relied upon by the Ld. AO. Accordingly, it prayed that the payment of cess on green leaf was to be allowed as deduction in computing the composite income before applying Rule 8 of the Income Tax Rules, 1962. The Ld. 2 3 ITA Nos.892 & 893/Kol/2015 M/s Goodricke Group Ltd.
A.Yrs.03-04 & 05-06 CIT(A) appreciated the contention of the assessee and deleted the disallowance made thereon. Aggrieved, the Revenue is in appeal before us:
I.T.A. No. 892/Kol/2015
1. That on the facts and circumstances of the case, the Ld. CIT(A) erred on facts was in law in holding that the disallowance of Cess on green leaves of Rs.
90,44,665/- was not warranted, ignoring the fact that cess on green leaves is attributable to agriculture activities of the assessee beyond the purview of Central Income Tax and on the same issues SLP is pending in the case of AFT Industries.
I.T.A. No. 893/Kol/2015
1.That on the facts and circumstances of the case, the Ld. CIT(A) erred on facts as well as in law in holding that the disallowance of Cess on green leaves of Rs. 90,44,655/- was not warranted, ignoring the fact that cess on green leaves is attributable to agricultural activities of the assessee beyond the purview of Central Income Tax and on the same issue SLP is pending in the case of AFT Industries.
2.2. None appeared on behalf of the Revenue . The adjournment petition preferred by the Revenue has been rejected by the Bench as most of the issues involved in the grounds are already covered.
2.3. We have heard the Ld. AR. We find that the issue under dispute is squarely covered by the decision of the Hon'ble Supreme Court in favour of the assessee in the case of CIT vs. APEEJAY Tea Co. Ltd. in Civil Appeal No. 1105 of 2006 dated 06.08.2015 wherein it was held as under:
"The respondent-assessee had paid cess on green leaf to the Government of Assam which was levied under Assam Taxation (On Specified Land) Act, 1990. In its income tax return, it had claimed the same as deduction which has been allowed by the High Court. The relevant discussion in this behalf is as under:
"However, the learned Tribunal had held that the deduction is eligible after computing the income under Rule 8 and the apportionment is to be made only after the income is so computed. Such apportionment cannot be made before the deduction. Rule 8 of the Income Tax Rules, 1962 requires that the computation is to be made as if by fiction the entire income out of the tea grown and 3 4 ITA Nos.892 & 893/Kol/2015 M/s Goodricke Group Ltd.
A.Yrs.03-04 & 05-06 manufactured as income assessable under the Income Tax Act, 1961. In view of Rule 8, the income so computed is to be apportioned 60:40 of which 40 is assessable to tax apportionment of the 60% of the income so computed shall again be required to be computed under the Agricultural Income Tax Act. On the other hand, this 60% is exposed and becomes exigible to tax under the Agricultural Income Tax Act, without being required to be assessed under the said Act by reason of the fiction so created. Therefore, the cess paid has rightly been excluded while computing the income under Rule 8 of the tea grown and manufactured."
In arriving at the aforesaid conclusion, the High Court has referred to the various judgments of this Court.
We are of the opinion that the High Court has rightly interpreted the scope of Rule 8 of the Income Tax Rules, 1962. We, thus, find no merit in this appeal which is, accordingly, dismissed".
Respectfully following the aforesaid decision, we dismiss the Ground No.1 raised by the revenue for both the years.
3. Disallowance of Lease Rent paid Ground No. 2 of Assessment Year 2003-04 - Rs. 36,48,000/-
Ground No. 2 of Assessment Year 2005-06 - Rs. 36,48,000/-
The facts of Assessment Year 2003-04 are taken up for adjudication herein and the decision rendered thereon would apply with equal force for assessment year 2005-06.
3.1. Brief facts of this issue is that the assessee paid lease rent to Koomber Properties & Leasing Co. Ltd. (KPLCL) for the premises used for assessee's business. The Ld. AO going by the decision taken by the Department in the earlier years i.e. from assessment year 1988-89 onwards disallowed the same in order to maintain judicial consistency. The assessee before the Ld. CIT(A) submitted that this issue has been decided in favour of the assessee by the decision of this Tribunal for various assessment years. The Ld. CIT(A) by placing reliance on the said decision of the Tribunal deleted the disallowance. Aggrieved the Revenue is in appeal before us:
4 5ITA Nos.892 & 893/Kol/2015 M/s Goodricke Group Ltd.
A.Yrs.03-04 & 05-06 I.T.A. No. 892/Kol/2015
2. That on the facts and circumstances of the case, the Ld. CIT(A) erred on facts as well as in law in holding that addition of Rs. 36,48,000/- was not warranted, ignoring the fact that decision is pending before High Court.
I.T.A. No. 893/Kol/2015
2. That on the facts and circumstances of the case, the Ld. CIT(A) erred on facts as well as in law in holding that addition of Rs. 36,48,000/- on account of lease rent was not warranted, ignoring the fact that decision is pending before High Court on this issue.
3.2. We have heard the Ld. AR. We find that the issue under dispute is squarely covered by the Co-ordinate Bench of this Tribunal in assessee's own case in I.T.A. No. 2577/Kol/2004 for assessment year 2001-02 dated 10.06.2005, wherein, by placing reliance of this Tribunal in assessee's own case for earlier years, the Tribunal had deleted the disallowance. We find that this issue has been allowed in favour of the assessee year on year. Accordingly, we do not find any justifiable reason to interfere with the order of the Ld. CIT(A) as he has rightly followed the decision of the Tribunal in assessee's own case. Accordingly, ground no. 2 raised by the Revenue in this regard for both the years are dismissed.
4. Disallowance of depreciation on assets acquiring with NABARD fund - Rs. 13,36,356/-
Ground No. 3 of assessment year 2003-04 The Ld. AO observed that the assessee acquired an office asset out of withdrawals from NABARD and claimed depreciation on such assets. The Ld. AO by referring to Section 33AB(6) of the Act had stated that utilization of the amount standing to the credit of the Tea Deposit Account for any 'expenditure' in connection with business should not be allowed in computing the income chargeable under the head 'profits and gains from 5 6 ITA Nos.892 & 893/Kol/2015 M/s Goodricke Group Ltd.
A.Yrs.03-04 & 05-06 business and profession'. The Ld. AO however fairly observed that this issue has been deleted by this Tribunal in assessee's own case for assessment year 2001-02 in I.T.A. No. 2557/Kol/2004 dated 10.06.2005 and that this disallowance is required to be made in order to maintain judicial consistency as the Revenue had appealed against the order of the Tribunal before the Hon'ble Calcutta High Court.
4.1. The assessee submitted before the Ld. CIT(A) that the Ld. AO disallowed the depreciation on assets acquired by utilizing the amount withdrawn from NABARD deposit by treating it as an expense within the meaning of Section 33AB(6) of the Act. The assessee by referring to the Scheme of the Tea Board regarding the condition to be fulfilled for withdrawal from NABARD deposit, submitted that, no withdrawal can be made on account of depreciation and accordingly the question of utilization of the NABARD deposit for depreciation purpose does not arise. The issue for consideration is not as to whether the depreciation is an expenditure as referred to in Section 33AB(6) of the Act, but the real issue is as to whether any specific withdrawal has been made from NABARD on account of depreciation as an expenditure. In case no withdrawal has been made on account of depreciation the question of invoking sub-section (6) of Section 33AB of the Act does not arise. It is found from materials on record that the appellant withdrew an aggregate amount of Rs. 1,04,24,400/- from NABARD deposit and utilized it for acquisition of depreciable and non-depreciable assets. Thus, the expenditure was capital in nature. The assessee in support of the said contentions furnished the necessary documents filed that were already available filed in the assessment proceedings.
4.2. The assessee furnished a copy of the Scheme of the Tea Board and drew the attention of Ld CIT(A) to Clause (9) of the said Scheme dealing with withdrawal and utilization of the amount deposited into NABARD. It was further argued that the expenditure envisaged in Section 33AB(6) of the Act is paying out or spending of money and that the assessee has not spent any amount for depreciation to be debited in 6 7 ITA Nos.892 & 893/Kol/2015 M/s Goodricke Group Ltd.
A.Yrs.03-04 & 05-06 the account. Thus, depreciation cannot be an expense. Reference is made to the decision of the Supreme Court in the case of Indian Molasses Co. Ltd. vs. CIT vs. 37 ITR 66. The assessee further submitted that this issue had been decided in favour of the assessee by this tribunal in I.T.A. No. 2557/Kol/2004, dated 10.06.2005, and submitted that the decision of the Tribunal should have been followed while considering the disallowance of depreciation of Rs. 13,36,356/- on assets acquired by utilizing the amount withdrawn from NABARD deposit.
4.3. The Ld. CIT(A) appreciated the contention of the assessee and by placing reliance on the decision of this Tribunal in assessee's own case for assessment year 2001-02 (supra) deleted the disallowance of Rs. 13,36,356/- on account of depreciation. Aggrieved the Revenue is in appeal before us on the following grounds:
3. That on the facts and circumstances of the case the Ld. CIT(A) erred on facts as well as in law in holding that addition of Rs. 13,36,356/- as depreciation on assets purchased out of withdrawals from NABARD ignoring the fact that on this issue decision is pending before High Court.
4.4. We have heard the Ld. AR. We find that the issue, as rightly pointed out by the lower authorities in their respective orders, is already decided in favour of the assessee by the order of this Tribunal in assessee's own case in I.T.A. No. 2557/Kol/2004 dated 10.06.2005 wherein it was held as under:
5. The Learned Counsel for the assessee drew our attention to page 16 of the paper book filed which is Annexure-I enclosure to Clause -9 of form 3AC for the year ending on 31st March, 2001 of the respondent assessee. Further, he carried our attention to page 7 of the Tea Development Accounts Scheme, 1990, as per the approval of the Tea Board. As per Clause 9 on page 7 the details of withdrawal and utilization of the amounts deposited has been mentioned as follows:
9. Withdrawal and utilization of the amounts deposited:
A depositor shall be entitled to withdraw the amount deposited or such part thereof as may be appropriate and such withdrawals shall be used for any of the following purposes set out which, however, shall be subject to review from time to time.7 8
ITA Nos.892 & 893/Kol/2015 M/s Goodricke Group Ltd.
A.Yrs.03-04 & 05-06
(a) On extension planting, replanting, replacement or Garden planting of planted areas including preparation of land, care and maintenance of such areas for a period of four years and provision of nurseries and shade trees;
(b) On construction or extension of roads, culverts, bridges and fencing within the tea estate;
( c ) On construction and extension of factories and godowns;
(d) On construction of labour quarters and clerical staff quarters, hospitals, creches, weighment sheds, lorry and tractor sheds;
(e) In purchase of tractors, road rollers, trucks, tracks and ambulances, jeeps and motor cycles;
(f) In measures for controlling soil erosion and water logging including drainage;
(g) In provision of irrigation equipment, dams, reservoirs, sluices, wells, water spraying equipment, pumps, engines, electrical connections, piping and canals;
(h) On spraying equipment for weed control and plant protection measures;
(i) On purchase of plant and Machinery, weighbridges, electrical motors, power generation equipment, electric and gas grid connections, electrification of factories and labour quarters, process. control equipment and acquisition and energy saving devices;
(j) On repayment of the principal amount of term loans, deferred payment credits, Hire purchase, lease rental and equipment finance taken after 31st March 1990 for a period of three years or more from a public financial institution, Housing Development Finance Corporation, any State Housing Board, a scheduled bank, the Tea Board or from any such other institution as the Central Government may, by notification, specify in this behalf.
(k) On purchase of computers and ancillary or related equipment."
He further made analysis of clause 3 and 4 of Section 33AB and submitted that Section 33AB(4) is not applicable to the case of the assessee and he gave stress on Clause 8 of Section 33AB and submitted that as the assets sold or transferred within a period of 8 years from the year of acquisition is to be treated as profit and gains, Clause 4 is not applicable to the case of the assessee. He further drew our attention to page 4 of the assessment order wherein the A.O. has noted the contention of the assessee along with quarries raised by him the course of assessment proceedings. Besides this, he also cited case law reported in 37 ITR 66 in order to show that the Hon'ble Supreme Court in the case of Indian Molasses Co. Pvt. Ltd. vs. CIT has held that expenditure means what is to be paid out or away and is something going inrretrievably and thus, depreciation cannot be an expense.
8 9ITA Nos.892 & 893/Kol/2015 M/s Goodricke Group Ltd.
A.Yrs.03-04 & 05-06
6. On hearing the rival submissions and going through the case laws, we find force in the arguments made by the learned Counsel on behalf of the respondent assessee and we very much appreciate the conclusion arrived at by the Ld. CIT(A) while deleting the addition. Going through the provisions of law and appreciating the Scheme of NABARD the Ld. CIT(A) has rightly allowed the depreciation on the assets purchased from out of withdrawal of NABARD fund. We, therefore, uphold the order of the Ld. CIT(A) and dismiss the Revenue's appeal".
Respectfully following the aforesaid judicial precedent, we find no infirmity in the order of the Ld. CIT(A) in this regard. Accordingly, ground no. 3 raised by the Revenue is dismissed.
5. Disallowance of loss incurred on instant tea - Rs. 55,85,662/- Ground No. 4 of assessment year 2003-04 Brief facts of this issue is that in the course of assessment proceedings, the assessee submitted that the loss on account of instant tea business was wrongly included in composite income instead of in 100% centrally taxable income and requested to adjust loss against 100% centrally taxable income in the assessment. The Ld. AO observed that the assessee had not filed any revised return in this regard and based on the decision taken by the Ld. AO in the earlier years in the case of the assessee for the very same issue, he disallowed the claim of the assessee for this year also.
5.1. The assessee stated before the Ld. CIT(A) that the instant tea activities resulted in a loss of Rs. 55,85,662/- and such loss was erroneously included in the composite business income arising from cultivation and manufacturing activities. The assessee also stated that the details relating to such loss were also furnished at the time of hearing before the Ld. AO and he did not dispute the amount of instant tea loss claimed. However, the Ld. AO rejected the claim of said loss for technical reason [i.e. non-filing of revised return u/s 139(5) for claiming the said loss from 100% income chargeable to income tax]. The assessee argued that the application of Rule 8 is only in case of the income derived from cultivation and manufacture of tea and it does not extend to an 9 10 ITA Nos.892 & 893/Kol/2015 M/s Goodricke Group Ltd.
A.Yrs.03-04 & 05-06 income earned not involving the twin activities of agricultural and manufacturing. The assessee by referring to the audited accounts furnished along with the return of income stated that instant tea activity is a distinct and separate activity and the details relating to production, consumption, stock, purchase, sales etc. were separately disclosed in the said account. He also stated that the manufacture of instant tea involves purchase of made tea, tea waste and consumption of green leaf. These details are separately available in the profit and loss account furnished along with the return of income. The assessee stated that it had inadvertently included such loss in computing the composite income and the said error was brought to the notice of the Ld. AO vide letter dated 21.12.2005 and requested him to rectify the said mistake and compute the total income in accordance with the law. The assessee stated that filing the revised return arose only in a case an assessee discovers any omission or any wrong statement in the return furnished. In this case, there is no omission or any wrong statement in the return filed and, therefore, there is no requirement under the law to file a revised return to rectify such mistake. The assessee further stated that the requirement of filing of revised return arises where the assessee makes a fresh claim for deduction after the return is filed. In such cases the Ld. AO has no power to entertain such claim otherwise than by way of a revised return. In support of it he referred to the decision of the Hon'ble Supreme Court in the case of Goetze (India) Limited Vs. CIT (284 ITR 323). In the said case, the Hon'ble Supreme Court made it clear that the said decision was restricted to the power of Assessing Officer to entertain the claim for deduction otherwise than by a revised return and it did not infringe on the power of the appellate authorities under the Income Tax Act. The assessee therefore, submitted that the said decision of the Hon'ble Supreme Court is not applicable to the facts of this case as no fresh deduction was claimed after the return is filed. The assessee also referred to the decision of the Hon'ble Delhi High Court in the case of CIT Vs Bharat Aluminium Co. Ltd. (303 ITR 256). In this case a revised claim was made after the return is filed and held that the revised claim was not a new claim but enhancing the quantum of expenses and the assessment 10 11 ITA Nos.892 & 893/Kol/2015 M/s Goodricke Group Ltd.
A.Yrs.03-04 & 05-06 based on revised claim is valid without any revised return filed as required u/s 139(5) of the Act. He further stated that the Income Tax Tribunal, Mumbai, 'F Bench, considered the question of admission of additional claim by the appellate tribunal where such claim was made by letter in course of assessment proceedings and held that the Tribunal has the power to admit an additional ground or claim made by the assessee when all the facts of the case are on record. Since the facts had been brought on records before the Assessing Officer in a letter, the claim of the assessee was admitted. In deciding the said case, the decision of the Hon'ble Supreme Court in 284 ITR 323 (supra) was referred to. In this case, it was contended that even if a fresh claim was made before the Tribunal, the decision of the Hon'ble Supreme Court in 284 ITR 323 (supra) does not in any way effect the power of the Tribunal to admit an additional ground or additional claim when all the facts of the case are on record. The assessee by referring to the case of Jute Corporation of India Ltd Vs. CIT (187 ITR 688 - Supreme Court) submitted that the appellate authority has all powers which the original authority may have in deciding the questions before it subject to restrictions or limitations, if any, prescribed by statutory provisions. In the absence of any such limitations, the appellate authority is vested with all the plenary powers which the subordinate authority may have in the matter and it is within the power of the A.A.C. to entertain the grounds raised by the assessee in seeking modification of the order of the assessment passed by the Assessing Officer provided he is satisfied that the grounds raised were bona fide and exercised his discretion in permitting or not permitting the assessee to raise the additional ground in accordance with the law.
5.2. The Ld. CIT(A) duly appreciated the entire contentions of the assessee and directed the Ld. AO to consider the loss on account of instant tea amounting to Rs. 55,85,662/- to the computation of the composite income and exclude the same from the business income computed after application of Rule 8(1) of the Rules. Aggrieved, the revenue is in appeal before us on the following grounds:
11 12ITA Nos.892 & 893/Kol/2015 M/s Goodricke Group Ltd.
A.Yrs.03-04 & 05-06
4. That on the facts and circumstances of the case, the Ld. CIT(A) erred on facts as well as in law in allowing the loss of Rs. 55,85,662/- incurred on instant tea export to be set off from the business income as arrived at after application of Rule 8 while holding the claim made by the appellant is not a fresh claim but only amounts to rectification and therefore, does not require submission of a revised return.
5.3. We have heard the Ld. AR. We find that the detailed submissions made by the assessee were duly appreciated by the Ld. CIT(A) in his order and has been dealt with in detail in his order. We find that the assessee had only sought for rectification of a particular claim vide its letter dated 21.12.2005 before finalization of computing of total income of the assessee. This admittedly had been made by the assessee after due consideration of the provision of Section 139(5) of the Act which permits filing of revised return in the case of any omission or any wrong statement in the return already furnished. In the instant case, the time limit for filing revised return u/s 139(5) of the Act had already expired and in view of fact the assessee is only seeking to rectify the particular claim already made in the return, there is no need to make such a claim only by way of revised return. It is enough if the same is made by way of a letter filed duly before the Ld. AO. This principle has been duly appreciated by the Hon'ble Delhi High Court in the case of CIT vs. Bharat Aluminium Co. Ltd. reported in 303 ITR 256 (Del) which has been rightly relied upon by the Ld. CIT(A). We find that the assessee had brought to the attention of the Ld. AO vide its letter dated 21.12.2005 seeking for rectification of aforesaid mistakes committed by it in the return. This is evident from the copy of the said letter dated 21.12.2005 which is placed on record before us. We find that the Ld. AO had considered the other mistakes pointed out by the assessee while completing the assessment, but had omitted to consider the rectification pleaded on account of loss on instant tea amounting to Rs. 55,85,622/- alone. In view of the same, we find no infirmity in the direction given by the Ld. CIT(A) to the ld. AO to consider the instant tea loss of Rs. 55,85,622/- to the computation of composite income and correspondingly exclude the same from the business income computing after application 12 13 ITA Nos.892 & 893/Kol/2015 M/s Goodricke Group Ltd.
A.Yrs.03-04 & 05-06 of Rule 8(1) of the Rules. Accordingly, ground no. 4 raised by the Revenue is dismissed.
6. In the result, the appeals of the Revenue are dismissed.
Order pronounced in the Court on 06.09.2017
Sd/- Sd/-
[A.T.Varkey] [ M.Balaganesh ]
Judicial Member Accountant Member
Dated : 06.09.2017
SB, Sr. PS
Copy of the order forwarded to:
1. DCIT, Cir-4(1), Kolkata, P-7, Chowringhee Square, Kolkata-700069
2. M/s Goodricke Group Ltd., Camellia House, 14, Gurusaday Road, Kolkata-700019.
3..C.I.T.(A)-2, Kolkata 4. C.I.T.- Kolkata.
5. CIT(DR), Kolkata Benches, Kolkata.
True copy By Order Senior Private Secretary Head of Office/D.D.O., ITAT, Kolkata Benches 13