M/s Namdhari Seeds Pvt. Ltd.,, Bangalore v. ACIT, Bangalore

PAGE 1 OF 5 ITA N O.1233/BANG/2009 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH A' BEFORE DR. O K NARAYANAN VICE PRESIDENT AND SHRI GEORGE GEORGE K J.M. ITA NO.1233/BANG/09 (ASST. YEAR 2002-03) M/S NAMDHARI SEEDS PVT. LTD. URAGAHALLI VILLAGE BIDAI POST BANGALORE-9. - APPELLANT VS THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-12(21) BANGALORE. - RESPONDENT APPELLANT BY : SMT. SHEETAL ADVOCATE RESPONDENT BY : SHRI JASON P BOAZ CIT-I O R D E R PER GEORGE GEORGE : THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST T HE CIT(A)'S ORDER DATED 20.2.2009 IN RELATION TO ASST. YEAR 2002-03. THE IMPUGNED ORDER OF THE CIT(A) EMANATES FROM THE ORDER PASSED U/S 154 DATED 24.8.2007. 2. THE BRIEF FACTS OF THE CASE ARE AS FOLLOWS:- THE ASSESSEE IS A PRIVATE LIMITED COMPANY. IT IS ENGAGED IN THE BUSINESS OF GROWING AND PROCESSING O F HYBRID SEEDS. THE CASE OF THE ASSESSEE FOR THE CONCERNED YEAR WAS SELECTED FOR SCRUTINY AND ORDER U/S 143(3) WAS PASSED ON 22.3.20 06. IN THE SAID PAGE 2 OF 5 ITA N O.1233/BANG/2009 2 ORDER THE ENTIRE AGRICULTURAL INCOME CLAIMED BY TH E ASSESSEE AS EXEMPT U/S 10 OF THE I T ACT WAS BROUGHT TO TAX AS BUSINESS INCOME. ON APPEAL BY THE ASSESSEE THE CIT(A) VIDE ORDER IN ITA NO.30 31 & 32/CIT(A)III/BNG/06-07 DATED 28.9.2006 FOLLOWING THE ORDER OF THE ITAT BANGALORE IN ITA NO.3102/BANG/2004 DATED 14.7.2006 FOR THE AY 2001-02 IN THE ASSESSEE'S OWN CASE HELD THAT INCOME ARISING OUT OF CONTRACT FARMING WAS AGRICULTURAL IN COME AND INCOME ARISING OUT OF CONVERSION OF HYBRID SEEDS INTO CERT IFIED SEEDS WAS BUSINESS INCOME. THE AO WHILE GIVING EFFECT TO THE ABOVE ORDER OF THE CIT(A) IN THE SAME ORDER (DATED 24.8.2007) HAS SIMULTANEOUSLY PASSED AN ORDER U/S 154 DETERMINING THE INCOME OF T HE ASSESSEE U/S 115JB. 3. AGGRIEVED BY THE ORDER U/S 154 THE ASSESSEE FI LED AN APPEAL BEFORE THE CIT(A). 4. BEFORE THE FIRST APPELLATE AUTHORITY IT WAS SU BMITTED THAT THE ASSESSING AUTHORITY OUGHT TO HAVE APPRECIA TED THAT THERE IS NO MISTAKE APPARENT FROM RECORD AND HIS ACTION OF I NVOKING THE PROVISIONS OF SECTION 154 TO LEVY TAX ON ASSESSEE U NDER THE PROVISIONS OF SECTION 115JB IS WITHOUT LEGAL SANCTI ON. IT WAS FURTHER SUBMITTED THE ASSESSING AUTHORITY SHOULD H AVE APPRECIATED THAT WHEN COMPUTING THE BOOK PROFITS UNDER THE PROV ISIONS OF SECTION 115JB HE OUGHT TO HAVE REDUCED THE AGRICUL TURAL INCOME FROM THE NET PROFITS AS SHOWN IN THE P&L ACCOUNT IN VIEW OF EXPLANATION 2 TO SECTION 115JB OF THE ACT. PAGE 3 OF 5 ITA N O.1233/BANG/2009 3 5. AS REGARDS THE PRELIMINARY ISSUE THAT THE PROCE EDINGS U/S 154 CANNOT BE INVOKED FOR THE PURPOSE OF COMPUT ATION OF MAT LIABILITY THE CIT(A) HELD THAT THE PROVISIONS OF S ECTION 115JB BEING MANDATORY THERE CANNOT BE A DEBATE ON ITS APPLICAB ILITY ON THE ASSESSEE COMPANY. AS REGARDS THE ISSUE ON MERITS T HE CIT(A) HELD THAT ' IN DETERMINING THE BOOK PROFIT OF THE APPELLANT FOR THE PURPOSE OF COMPUTING INCOME U/S 115JB THE AO IS DIRECTED T O REDUCE THE APPELLANT'S AGRICULTURAL INCOME (DETERMINED AS PER ORDER OF CIT(A)/HON'BLE ITAT) FROM THE NET PROFIT OF THE AP PELLANT AS SHOWN IN THE PROFIT AND LOSS ACCOUNT FOR THE RELEVANT PRE VIOUS YEAR PREPARED U/S 115JB(2)'. 6. AGGRIEVED BY THE ORDER OF THE CIT(A) THE ASSES SEE IS IN APPEAL BEFORE US RAISING THE FOLLOWING EFFECTIVE GROUNDS:- II) THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THAT THE PROCESSING ACTIVITY UNDERTAKEN BY THE APPELLANT ON THE SEEDS WAS A PROCESSING ORDINARILY EMPLOYED BY THE CULTIVATOR TO MAKE THE SEEDS FIT TO BE TAKEN TO THE MARKET. III) THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THAT THE PROCESS OF CONVERTING THE HYBRID SEEDS BY CERTIFICATION AND TREATMENT WITH THIRAM WAS A PROCESS ORDINARILY EMPLOYED AND A STATUTORY REQUIREMENT TO MAKE THE SEEDS FIT TO BE TAKEN TO THE MARKET AND CONSEQUENTLY THE SAME WAS LIABLE TO BE TREATED ONLY AS AGRICULTURAL INCOME. IV) WITHOUT PREJUDICE THE LEARNED CIT(A) ERRED IN DIRECTING THE ASSESSING AUTHORITY TO QUANTIFY THE NET PROFIT AT 10% FROM THE PROCESSING ACTIVITY TREATING IT AS BUSINESS INCOME. PAGE 4 OF 5 ITA N O.1233/BANG/2009 4 7. AT THE VERY OUTSET THE LEARNED DR SUBMITTED TH AT THE GROUNDS RAISED BY THE ASSESSEE IS NOT CONNECTED WIT H THE ISSUE ARISING FROM THE IMPUGNED ORDER OF THE CIT(A) DATED 20.2.2009. THE CIT(A) IN HIS ORDER DATED 20.2.2009 WAS CONSIDE RING THE ISSUE NAMELY WHETHER THE AO WAS JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 115JB OF THE ACT AND RAISING A DEMAND OF RS .1 31 16 701/- IN A RECTIFICATION PROCEEDINGS U/S 154 OF THE ACT. IT WAS SUBMITTED BY THE LEARNED DR THAT THE ASSESSEE IN THE GROUNDS HAS CHALLENGED THE CIT(A)'S CONFIRMATION OF AO'S ACTION IN TREATIN G 10% OF AGRICULTURAL INCOME DECLARED BY THE ASSESSEE AS BUS INESS INCOME. 8. ON THE OTHER HAND THE LEARNED AR WAS NOT ABLE TO CONTROVERT THE CONTENTION RAISED BY THE LEARNED DR. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD. AS RIGHTLY POINTED OUT BY THE LEARNED DR THE GROUNDS RAISED IN THIS APPEAL DOES NOT ARISE OUT OF THE IMPUGNED ORDER OF THE CIT(A) DATED 20.2.2009; HENCE THE GRO UNDS AGITATED BEFORE US ARE REJECTED. 10. IN THE RESULT THE APPEAL FILED BY THE ASSESSE E IS DISMISSED. THE ORDER IS PRONOUNCED ON .26TH..APRIL 2010 SD/- SD/- (DR. O K NARAYANAN) (GEORGE GEORGE K) VICE PRESIDENT JUDICIAL MEMBER BANGALORE DT.26/4/2010 PAGE 5 OF 5 ITA N O.1233/BANG/2009 5 COPY TO : 1. THE ASSESSEE 2.THE REVENUE 3. THE CIT(A) CONCE RNED. 4. THE CIT CONCERNED. 5. THE DR 6. GUARD FILE. 7. GF ITAT NEW DELHI. MSP/16.4. BY ORDER ASST. REGISTRAR ITAT BANGALORE.