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

ITA 1235/BANG/2009 | 2005-2006
Pronouncement Date: 26-04-2010 | Result: Dismissed

Appeal Details

RSA Number 123521114 RSA 2009
Bench Bangalore
Appeal Number ITA 1235/BANG/2009
Duration Of Justice 3 month(s) 28 day(s)
Appellant M/s Namdhari Seeds Pvt. Ltd.,, Bangalore
Respondent ACIT, Bangalore
Appeal Type Income Tax Appeal
Pronouncement Date 26-04-2010
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 26-04-2010
Date Of Final Hearing 13-04-2010
Next Hearing Date 13-04-2010
Assessment Year 2005-2006
Appeal Filed On 29-12-2009
Judgment Text
PAGE 1 OF 6 ITA NO .1235 & 1147/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.1235/BANG/09 (ASST. YEAR 2005-06) 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 ITA NO.1147/BANG/09 (ASST. YEAR 2005-06) (BY REVENUE) THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-12(21) BANGALORE. - APPELLANT VS M/S NAMDHARI SEEDS PVT. LTD. URAGAHALLI VILLAGE BIDAI POST BANGALORE-9. - RESPONDENT ASSESSEE BY : SMT. SHEETAL ADVOCATE REVENUE BY : SHRI JASON P BOAZ CIT-I O R D E R PER GEORGE GEORGE : THESE APPEALS FILED BY THE ASSESSEE AND THE REVEN UE ARE DIRECTED AGAINST THE CIT(A)'S ORDER DATED 20.2.2009 IN RELATION TO ASST. YEAR 2005-06. PAGE 2 OF 6 ITA NO .1235 & 1147/BANG/2009 2 2. SINCE COMMON ISSUES ARE INVOLVED IN THESE APPEA LS THEY ARE HEARD TOGETHER AND DISPOSED OF BY THIS CONSOLID ATED ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. 3. THE BRIEF FACTS OF THE CASE ARE AS FOLLOWS:- THE ASSESSEE IS A COMPANY ENGAGED IN THE ACTIVIT Y OF PRODUCTION OF HYBRID SEEDS AND SALE OF PROCESSED SE EDS. FOR THE CONCERNED ASST. YEAR RETURN OF INCOME WAS FILED ON 26.10.2005 DECLARING A TOTAL INCOME OF RS.32 08 690/- AND CLAI MED AN AGRICULTURAL INCOME OF RS.15 57 03 107/- AS EXEMPT U/S 10(1) OF THE I T ACT. IN THE ASSESSMENT COMPLETED U/S 143(3) OF THE ACT ON 10.12 .2007 THE ASSESSING OFFICER TREATED THE AGRICULTURAL INCOME O F THE ASSESSEE AS BUSINESS INCOME ON THE GROUND THAT ASSESSEE'S BUSIN ESS DOES NOT AMOUNT TO AGRICULTURE BUT IT CAN ONLY BE HELD AS A MANUFAC TURE ACTIVITY. THE ASSESSING OFFICER ALSO DISALLOWED THE LOSS ON TRADI NG IN IMPORTED SEEDS CLAIMED BY THE ASSESSEE TO THE TUNE OF RS.92 63 766 /- HOLDING IT TO BE MAINLY DUE TO APPORTIONMENT OF ADMINISTRATIVE EXPEN SES AND SELLING AND DISTRIBUTION EXPENSES. 4. BEFORE THE FIRST APPELLATE AUTHORITY THE ASSES SEE SUBMITTED THAT INCOME GENERATED BY THE ASSESSEE WAS DERIVED F ROM AGRICULTURE OPERATION CONDUCTED BY THE ASSESSEE AND THE SAME IS LIABLE TO BE TREATED AS AGRICULTURAL INCOME EXEMPT U/S 10 OF THE I T ACT . IT WAS FURTHER SUBMITTED THAT THE ASSESSING OFFICER OUGHT TO HAVE ALLOWED THE LOSS CLAIMED ON ACCOUNT OF TRADING IN IMPORTED SEEDS. PAGE 3 OF 6 ITA NO .1235 & 1147/BANG/2009 3 5. THE CIT(A) FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEE'S OWN CASE (ITA NO. 3102/BANG/2004 FOR THE ASST. YEAR 2001- 02 DATED 14.7.2006) PARTLY ALLOWED THE ASSESSEE'S CLAIM OF AGRICULTURAL INCOME EXEMPT U/S 10 OF THE I T ACT. THE CIT(A) DI RECTED THE ASSESSING OFFICER (I) TO TREAT THE INCOME FROM CONT RACT FARMING AS AGRICULTURAL INCOME AND (II) TO TREAT THE ACTIVITY OF PROCESSING OF HYBRID SEEDS TO CONVERT THEM INTO CERTIFIED SEEDS AS BUSIN ESS INCOME. AS REGARDS THE ASSESSEE'S PLEA AGAINST THE DISALLOWANC E OF LOSS ON TRADING OF IMPORTED SEEDS THE CIT(A) DECIDED THE ISSUE IN FAVOUR OF ASSESSEE. THE RELEVANT PORTION OF THE CIT(A)'S ORDER READS AS FOLLOWS:- 'THE NET RESULT OF THE ABOVE TWO ACTIONS WOULD HAVE BEEN THE REDUCTION OF THE LOSS CLAIMED BY THE APPELLANT. HOWEVER I FIND THAT THE AO HAS NOT ARRIVED AT ANY FINDING ON ANY OF THE TWO GROUNDS NOTED BY HIM AND INSTEAD STRAIGHT AWAY PROCEEDED TO DISALLOW THE LOSSES CLAIMED BY THE APPELLANT. I N MY OPINION THE DISALLOWANCE OF LOSS BY THE AO IN THE ABSENCE OF REASONS FOR SUCH DISALLOWANCE IS NOT TENABLE AND THEREFORE THE ADDITIONS OF RS.92 63 766/- MADE ON THIS ACCOUNT IS DELETED'. 6. BEING AGGRIEVED BY THE ORDER OF THE CIT(A) BOT H THE ASSESSEE AND THE REVENUE ARE IN APPEAL BEFORE US RA ISING THE FOLLOWING EFFECTIVE GROUNDS:- ITA NO.1147 (REVENUE'S APPEAL): II) THE LEARNED CIT(A) ERRED IN DIRECTING THE AO TO TREAT THE INCOME FROM CONTRACT FARMING AS AGRICULTURAL INCOME RELYING ON THE DECISION OF THE PAGE 4 OF 6 ITA NO .1235 & 1147/BANG/2009 4 HON'BLE ITAT BANGALORE BENCH 'B' BANGALORE VIDE ITS ORDER IN ITA NO.3102/BANG/2004-05 FOR THE ASST. YEAR 2001-02 DATED 14.7.2006 WITHOUT APPRECIATING THE FACT THAT THE DECISION OF THE HON'BLE ITAT ON THIS ISSUE HAS NOT BECOME FINAL AND THE DEPARTMENT HAS FILED APPEAL U/S 260A BEFORE THE HON'BLE HIGH COURT. III) THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE ITO BY DISALLOWING THE LOSS ON TRADING OF IMPORTED SEEDS WITHOUT APPRECIATING THE FACT THA T THE ASSESSEE HAS NOT MAINTAINED SEPARATE BOOKS OF ACCOUNT IN RESPECT OF ITS TRADING OF IMPORTED SEEDS SO AS TO JUSTIFY THE CLAIM OF LOSS. ITA NO.1235 (ASSESSEE'S APPEAL): 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 TH E 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 N ET PROFIT AT 10% FROM THE PROCESSING ACTIVITY TREATIN G IT AS BUSINESS INCOME. 7. THE LEARNED DR SUBMITTED THAT THE CIT(A)'S CONC LUSION THAT INCOME FROM CONTRACT FARMING IS AGRICULTURAL I NCOME IS ERRONEOUS AND LEGALLY NOT CORRECT. HE FURTHER SUBMITTED THAT DECISION OF THE TRIBUNAL IN ASSESSEE'S OWN CASE CITED SUPRA HAS BEE N TAKEN UP IN APPEAL PAGE 5 OF 6 ITA NO .1235 & 1147/BANG/2009 5 BEFORE THE HON'BLE HIGH COURT U/S 260A OF THE I T A CT AND HENCE THE ISSUE HAS NOT BECOME FINAL. AS REGARDS THE ALLOWAN CE OF LOSS ON ACCOUNT OF TRADING OF IMPORTED SEEDS THE LEARNED D R SUBMITTED THAT THE ASSESSEE HAS NOT MAINTAINED ANY SEPARATE BOOKS OF A CCOUNTS IN RESPECT OF TRADING OF IMPORTED SEEDS TO JUSTIFY ITS CLAIM O F LOSS. 8. ON THE OTHER HAND THE LEARNED AR SUPPORTED THE ORDER OF THE CIT(A). 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD. WE HAVE PERUSED THE ORDER OF THE TRIBUNAL IN ASSESSEE'S OWN CASE CITED SUPRA. THE TRIBUNAL IN T HE ABOVE MENTIONED CASE HAD CATEGORICALLY HELD THAT 'INCOME FROM CONTR ACT FARMING IS AGRICULTURAL INCOME AND THE SAME DO NOT FORM PART O F THE TOTAL INCOME BY VIRTUE OF SECTION 10(1) OF THE I T ACT. THE FAC TS FOR ASST. YEAR 2001- 02 BEING IDENTICAL WITH THE ASS. YEAR OF THE INSTA NT CASE WE FOLLOW THE COORDINATE BENCH DECISION OF THE TRIBUNAL IN ASSESS EE'S OWN CASE CITED SUPRA AND DISMISS GROUND NO.2 RAISED BY THE DEPARTM ENT. 9.1 AS REGARDS THE ALLOWANCE OF LOSS ON ACCOUNT OF TRADING OF IMPORTED SEEDS WE FIND IT IS AN UNDISPUTED FACT TH AT THERE IS NO SEPARATE BOOKS OF ACCOUNT MAINTAINED WITH REFERENCE TO TRADI NG OF IMPORTED SEEDS AND THE LOSS CLAIMED IS MAINLY DUE TO APPORTI ONMENT OF ADMINISTRATIVE EXPENSES. UNDER THE ADMINISTRATIVE EXPENSES MAJOR EXPENSES ARE DIRECTOR'S REMUNERATION SALARY AND A LLOWANCES VEHICLE MAINTENANCE REPAIR AND MAINTENANCE PF TRAVELING AND CONVEYANCE STAFF WELFARE RENT ETC. THE EXPENSES UNDER THIS H EAD HAVE NO RELEVANCE TO THE ASSESSEE'S TRADING BUSINESS. WHEN AN ASSESS EE CLAIMS A LOSS THE PAGE 6 OF 6 ITA NO .1235 & 1147/BANG/2009 6 BURDEN OF PROVING THE SAME IS ON THE ASSESSEE. IN THE INSTANT CASE SINCE ASSESSEE HAS NOT MAINTAINED ANY SEPARATE BOOK S OF ACCOUNT IT IS FOR THE ASSESSEE TO PROVE THAT THE APPORTIONMENT IS REASONABLE AND NOT EXCESSIVE. THE ASSESSEE HAS NOT MADE ANY EFFORTS IN THIS DIRECTION. THE CIT(A) WRONGLY ALLOWED THE CLAIM OF LOSS BY PLACING BURDEN ON THE REVENUE. WE FIND THE ORDER OF CIT(A) IS NOT CORREC T ON THIS COUNT AND HENCE WE REVERSE THE SAME. 10. IN THE RESULT GROUND NO.3 RAISED BY THE REVEN UE IS ALLOWED. ITA NO.1235 (ASSESSEE'S APPEAL) 11. THE TRIBUNAL IN ITA NO.3102/BANG/2004 DATED 1 4.7.2006 IN ASSESSEE'S OWN CASE HAS HELD THAT 'INCOME FROM ACTIVITY OF PROCESSING OF HYBRID SEEDS TO CONVERT THEM INTO CER TIFIED SEEDS IS A BUSINESS INCOME '. RESPECTFULLY FOLLOWING THE ABOVE SAID DECISION OF THE TRIBUNAL WE REJECT ASSESSEE'S GROUNDS RAISED A BOVE. 12. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED AND APPEAL OF ASSESSEE IS DISMISSED. THE ORDER IS PRONOUNCED ON 26TH.APRIL 2010 SD/- SD/- (DR. O K NARAYANAN) (GEORGE GEORGE K) VICE PRESIDENT JUDICIAL MEMBE R COPY TO : 1. THE ASSESSEE 2.THE REVENUE 3. THE CI T(A) CONCERNED. 4. THE CIT CONCERNED. 5. THE DR 6. GUARD FILE. 7. GF ITAT NEW DELHI. MSP/16.4. BY ORDER ASST. REGISTRAR ITAT BANGALORE.