JCIT(OSD), Circle - 4, Kolkata, Kolkata v. M/s. T & I Global Ltd., Kolkata

ITA 1770/KOL/2011 | 2007-2008
Pronouncement Date: 22-04-2014

Appeal Details

RSA Number 177023514 RSA 2011
Assessee PAN AAACT8460G
Bench Kolkata
Appeal Number ITA 1770/KOL/2011
Duration Of Justice 2 year(s) 3 month(s) 30 day(s)
Appellant JCIT(OSD), Circle - 4, Kolkata, Kolkata
Respondent M/s. T & I Global Ltd., Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 22-04-2014
Appeal Filed By Department
Bench Allotted A
Tribunal Order Date 22-04-2014
Assessment Year 2007-2008
Appeal Filed On 23-12-2011
Judgment Text
ITA NO. 1770/KOL/2011- M/S. T & I GLOBAL LTD A-JM 1 A IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KO LKATA () . # BEFORE HONBLE SRI MAHAVIR SINGH JM & HONBLE SRI ABRAHAM.P GEORGE AM & I.T.A NO. 1770/KOL/2011 / ASSESSMENT YEAR : 2007-08 J.C.I.T (OSD) CIRCLE-4 KOLKATA VS. M/S. T & I GLOBAL LTD. PAN: AAACT 8460G ( /APPELLANT ) (-. / RESPONDENT ) / FOR THE APPELLANT/ DEPARTMENT : MD. GAYASUDDIN A NSARI JCIT LD.SR.DR -. / FOR THE RESPONDENT/ ASSESSEE: / SHRI J.M THARD ADVOCATE LD.AR 2 3 /DATE OF HEARING: 22-04-2014 2 3 /DATE OF PRONOUNCEMENT: 22-04-2014 / ORDER SHRI MAHAVIR SINGH JUDICIAL MEMBER: THIS APPEAL BY REVENUE IS ARISING OUT OF ORDER OF CIT(A) KOLKATA IN APPEAL NO. 190/CIT(A)-IV/09-10 DATED 28.07.2011. ASSESSMENT W AS FRAMED BY D.C.I.T CIRCLE-4 KOLKATA FOR THE ASSESSMENT YEAR 2007-08 U/S 143(3) OF THE INCOME TAX ACT 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORD ER DATED 30-10-2009. 2. THE FIRST ISSUE IN THIS APPEAL OF REVENUE IS AG AINST THE ORDER OF CIT(A) IN DIRECTING THE AO AS REGARDS TO DEDUCTION OF EXPENDITURE ON A CCOUNT OF GREEN LEAF. FOR THIS REVENUE HAS RAISED THE FOLLOWING GROUND :- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE LD. CIT(A) HAS ERRED IN LAW IN DIRECTING THE AO TO TAKE RS.59 73 1 00/- INSTEAD OF RS. 77 76 130/- AS EXPENDITURE CORRESPONDING TO AMOUNT RECEIVED ON ACCOUNT OF SALE OF GREEN LEAF FOR RS. 61 16 572/- STATING T HAT AO SHOULD HAVE EXCLUDED DEPRECIATION MISCELLANEOUS EXPENSES PERS ONAL EXPENSES MAINTENANCE EXPENSES FROM THE FIGURE OF DISALLOWABL E EXPENSES OF AGRICULTURAL INCOME BUT WITHOUT EXPLAINING IN THE ORDER AS TO HOW THESE EXPENSES ARE UNRELATED TO THE PRODUCTION AND SALE OF GREEN LEAF. ITA NO. 1770/KOL/2011- M/S. T & I GLOBAL LTD A-JM 2 3. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS OF THE CASE. WE FIND THAT THE ASSESSEE HAS CLAIMED EXPENSES OF AGR ICULTURAL INCOME OUT OF GREEN LEAF SOLD FROM GREEN LEAVES FROM ITS OWN TEA GARDEN. THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS HAS DETERMINED EXPENSES FROM SALE OF G REEN LEAVES AT RS. 77 76 132/- AS AGAINST WORKED OUT BY THE ASSESSEE AT RS.59 73 100/ -. THE CIT(A) HAS DELETED THE ADDITION OF EXPENSES AT RS.59 73 100/- BY OBSERVING AS UNDER:- THE APPELLANT HAS FILED THE DETAILS OF EXPENSES RE LATED TO AGRICULTURAL INCOME VIS A EXPENSES DISALLOWED BY THE AO AS PER APPELLANT THE DISALLOWABLE EXPENSES COMES TO RS.59 73 100/- I N PLACE OF AS TAKEN BY AO RS.77 76 132/-. THE A.R HAS EXPLAINED THE AMOUN T OF RS.77 76 132/- INCLUDES ALL EXPENSES OF TEA PRODUCED. THE ABOVE EX PENSES INCLUDE EXPENSES RELATED TO FACTORY AND DEPRECIATION RELATE D TO THE FACTORY WHICH SHOULD NOT BE INCLUDED TO CALCULATE THE CORRESPOND ING EXPENSES TO GREEN LEAVES SOLD. AS PER A.R THE EXPENSES FOR GREEN LEAV ES SOLD SHOULD COMES TO RS.59 73 100/- AND NOT RS.. 77 76 132/-. I HAVE GONE THROUGH THE DETAILS FILED BY THE APPELLANT AND HEARD ARGUMENT OF A.R WH ICH SEEMS JUSTIFIED. THE AO SHOULD HAVE CONSIDERED THAT FACTORY EXPENSES AND DEPRECIATION SHOULD NOT BE INCLUDED WHILE CALCULATING THE FIGURE OF DISALLOWABLE EXPENSES OF AGRICULTURAL INCOME. IN VIEW OF THE FAC T DISCUSSED ABOVE I DO NOT FIND ANY JUSTIFICATION IN CONCLUSION MADE BY AO AS THE METHOD AND ACCOUNTING STANDARD FOLLOWED BY APPELLANT IS MORE R EASONABLE AND ACCURATE AND IT IS ALSO REQUIRED TO BE FOLLOWED S TATUTORILY AND REGULARLY. I THEREFORE DIRECT THE AO THAT EXPENDITURE ATTRIBUTA BLE TO THE SALE OF GREEN LEAVES SHOULD BE TAKEN AT RS.59 73 100/- AGAINST RS .77 76 132/-. THE ADDITION MADE BY AO IS THEREFORE DIRECTED TO BE DEL ETED. 4. AGGRIEVED THE REVENUE CAME IN APPEAL BEFORE US. 5. WE FIND THAT THIS ISSUE IS COVERED BY THE DECIS ION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. AFT INDUSTRIES LTD REPORTED IN (2004) 270 ITR 167 (CAL) WHEREIN IT IS OBSERVED AS UNDER:- HAVING REGARD TO THE PROVISIONS CONTAINED IN RULE 8 WITH WHICH WE HAD OCCASION TO DEAL IN UNION OF INDIA V. WARREN T EA LTD [2004] 266 ITR 226(CAL) A.P.O NO.792 OF 1999 DISPOSED OF BY US O N JANUARY 15 2004 IT APPEARS THAT IN RESPECT OF COMPUTATION OF INCOME OF TEA GROWN AND MANUFACTURED A FICTION HAS BEEN CREATED UNDER WHIC H BOTH THE AGRICULTURAL COMPONENT AND THE BUSINESS COMPONENT OF THE INCOME WOULD BE ASSESSED TOGETHER FOR THE PURPOSE OF COMPUTING THE INCOME UNDER THE ACT AND ONLY ITA NO. 1770/KOL/2011- M/S. T & I GLOBAL LTD A-JM 3 AFTER THE COMPUTATION OF THE TOTAL INCOME THE APP ORTIONMENT IS TO BE MADE DETERMINING 60 PER CENT AS AGRICULTURAL INCOME AND 40 PER CENT AS EXIGIBLE TO TAX UNDER THE ACT. DURING THE PROCESS OF THE C OMPUTATION ALL DEDUCTIONS ALLOWABLE AT THE TIME OF COMPUTATION ARE TO BE ALL OWED AND THAT RIGHTLY ALLOWED. INASMUCH AS IF THE INCOME FOR TEA GROWN WA S ASSESSED UNDER THE AGRICULTURAL INCOME-TAX IN THAT EVENT THE SAME C ESS PAID OF GREEN LEAF WOULD HAVE BEEN ELIGIBLE FOR DEDUCTION AT THE TIME OF COMPUTATION OF THE AGRICULTURAL INCOME. BUT WHEN BY FICTION IN RESPECT OF TEA GROWN AND MANUFACTURED THE AGRICULTURAL COMPONENT OF THE INC OME OUT OF THE TEA GOWN IS ALSO COMPUTED UNDER THE INCOME-TAX ACT ALO NG WITH THE INCOME OUT OF THE TEA MANUFACTURED FROM THE TEA GROWN. WHEN B Y FICTION THE INCOME AS COMPUTED AS AN INCOME UNDER THE ACT ALL DEDUCTIONS AS ARE AVAILABLE BOTH FOR THE AGRICULTURAL COMPONENT AND FOR THE BUSINE SS COMPONENT OF THE INCOME ARE TO BE ALLOWED AS A NATURAL COROLLARY TO THE FICTION SO CREATED. SUCH DEDUCTIONS WHICH ARE ALLOWED IN ORDER TO ARRI VE AT THE TOTAL INCOME EXIGIBLE TO TAX ARE TO BE ALLOWED AND THE APPORTI ONMENT OF THE TOTAL INCOME SO COMPUTED IS TO BE MADE. IF THE AGRICULTU RAL PART OF THE DEDUCTIONS IS MADE APPLICABLE FOR DEDUCTION FROM TH E 60 PER CENT OF THE TOTAL INCOME SO COMPUTED IN THAT EVENT THIS 60 PE R CENT WOULD BE AGAIN MADE ASSESSABLE UNDER THE AGRICULTURAL INCOME-TAX ACT WHICH IS NOT PERMISSIBLE. IN THAT EVENT THE PURPOSE OF CREATIN G FICTION WOULD STAND FRUSTRATED. IT WOULD THEN BE A CONCEPT COMPLETELY FOREIGN TO THE FICTION SO CREATED. THEREFORE THE ENTIRE AMOUNT PAID AS CESS ON GREEN LEAF SEEMS TO BE ELIGIBLE FOR DEDUCTION WITH REGARD TO WHICH WE DO NOT FIND ANY CONFUSION. 6. AS THE FACTS ARE NOT DISPUTED BEFORE US BUT TH E LD. SR.DR HAS STATED THAT THE REVENUE IS IN APPEAL BEFORE THE HONBLE SUPREME COU RT AGAINST THE SAID JUDGMENT OF THE HONBLE CALCUTTA HIGH COURT. HOWEVER WE FIND THA T THIS ISSUE IS CLEARLY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HON BLE CALCUTTA HIGH COURT IN THE CASE OF AFT INDUSTRIES LTD (REFER TO SUPRA). ACCORDINGLY WE DISMISS THIS GROUND OF REVENUES APPEAL. 7. THE NEXT ISSUE IN THIS APPEAL OF REVENUE IS AGAI NST THE ORDER OF THE CIT(A) RESTRICTING THE DISALLOWANCE MADE BY THE AO U/S. 14 A AT 1% OF DIVIDEND INCOME . FOR THIS REVENUE HAS RAISED FOLLOWING GROUND :- 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE LD. CIT(A) HAS ERRED IN LAW IN RESTRICTING THE DISALLOWANCE U/S. 1 4A TO RS.360/- BEING 1% OF DIVIDEND INCOME SINCE RULE-8D IS APPLICABLE F ROM A.YR 2008- ITA NO. 1770/KOL/2011- M/S. T & I GLOBAL LTD A-JM 4 09 AND IN THE INSTANT A.YR. THE SPIRIT BEHIND INTR ODUCTION OF RULE-8D CANNOT BE IGNORED. 8. BRIEFLY STATED THE FACTS ARE THAT THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS HAD APPLIED THE RULE 8-D OF THE I.T RUL ES 1962 R.W.S 14A OF THE I.T ACT 1961 AND MADE DISALLOWANCE OF EXPENSES TO THE EXTEN T OF RS.3 57 907/- FOR EARNING OF DIVIDEND INCOME TO THE EXTENT OF RS.36 022/-. THE C IT(A) HAD NOTED THAT THE PROVISIONS OF RULE 8D OF THE I.T RULES 1962 COMES INTO EFFECT FROM 24-03-2008 AND WILL APPLY FROM ASSESSMENT YEAR 2008-09 AND NOT IN ASSESSMENT YEAR 2007-08. WE FIND THAT THIS ISSUE IS ALSO SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. L TD. VS. DCIT REPORTED IN (2010) 328 ITR 81(BOM.) WHEREIN IT IS HELD THAT RULE 8D OF THE RULES AS INSERTED BY THE IT (FIFTH AMENDMENT) RULES 2008 W.E.F 24-03-2008 IS PR OSPECTIVE AND NOT RETROSPECTIVE. THE HONBLE BOMBAY HIGH COURT HAS ALSO HELD THAT TH IS RULE-8D WILL APPLY FROM ASSESSMENT YEAR 2008-09. THE RELEVANT ASSESSMENT Y EAR IN THIS APPEAL IS 2007-08. THE CIT(A) HAS RIGHTLY RESTRICTED THE DISALLOWANCE MAD E U/S. 14A AT 1% OF DIVIDEND INCOME. WE CONFIRM THE SAME. THIS ISSUE OF REVENUES APPEAL IS DISMISSED. 9. THE LAST ISSUE IN THIS APPEAL IS AGAINST THE ORD ER OF THE CIT(A) IN RESTRICTING THE DISALLOWANCE OF PROVISION OF LEAVE SALARY AT RS.59 605/- AS AGAINST THE DISALLOWANCE MADE BY THE AO AT RS.3 47 002/-. FOR THIS REVENUE HAS RAISED FOLLOWING GROUND :- 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE LD.CIT(A) HAS ERRED IN LAW IN RESTRICTING THE DISALLOWANCE OF PROVISION OF LEAVE SALARY OF RS.3 47 002/- TO RS.59 605/- WITHOUT CONS IDERING THE FACT THAT RS. 3 47 002/- IS THE BALANCE OF COLUMN-21(B) OF TAX AUDIT REPORT AND THE A.O ADDED THE UNPAID BALANCE OF THE PREVIOUS YEAR 2006-07 CORRESPONDING TO A.YR. 2007-08. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE TH ROUGH FACTS OF THE CASE. WE FIND THAT THE AO HAS MADE DISALLOWANCE OF THIS AMOUNT ON THE BASIS OF TAX AUDIT REPORT. EVEN THE AO HAS NOT WORKED OUT ANY BASIS FOR MAKING T HIS DISALLOWANCE. THE LD. COUNSEL FOR THE ASSESSEE BEFORE US FILED A CHART OF LEAVE SALAR Y WHEREIN COMPLETE COMPUTATION OF ITA NO. 1770/KOL/2011- M/S. T & I GLOBAL LTD A-JM 5 ACTUAL DISALLOWABLE U/S. 43B OF THE ACT COMES TO RS.59 605/- WHICH HAS BEEN UPHELD BY THE CIT(A). THE RELEVANT WORKING CHART READS AS U NDER :- DISALLOWANCE BY A.O U/S. 43B OPENING BALANCE OF LIABILITY FOR LEAVE ENCASHME NT RS.3 13 384/- LESS : PAID DURING THE YEAR RS.1 42 580/- -------------- RS.1 70 804/- ADD: PROVISION FOR THE YEAR RS.1 76 198/- -------------- DISALLOWED BY A.O RS.3 47 002/- LESS: OUTSTANDING OUT OF OPENING BALANCE WHICH IS ALREADY DISALLOWED IN EARLIER YEAR RS.1 70 804/- ------------- RS.1 76 198/- LESS : PAID AFTER CLOSE OF THE YEAR BUT BEFORE FI LING OF THE RETURN RS.1 16 593/- -------------- ACTUALLY DISALLOWABLE U/S. 43B WHICH IS UPHELD BY C IT(APPEALS) RS. 59 605/- ------------- 11. WE FIND FROM THE ABOVE COMPUTATION THAT THE AO HAS NOT CONSIDERED THE OPENING BALANCE OF LEAVE SALARY AND AMOUNT PAID DURING THE YEAR BEFORE FILING OF RETURN OF INCOME AS ON DUE DATE WHEREIN CONFORMITY WITH THE FINDING OF THE CIT(A) AS WELL AS THE ARGUMENTS OF THE ASSESSEE THAT CURRENT YEARS PROV ISION OF LEAVE SALARY OF RS.1 76 198 MINUS AMOUNT PAID AS PER CLAUSE 21(B)A OF THE TAX A UDIT REPORT AT RS.1 16 593/-. THUS THE DISALLOWANCE COMES TO RS.59 605/-. WE FIND NO I NFIRMITY IN THE ORDER OF THE CIT(A). HENCE THE SAME IS CONFIRMED. THIS ISSUE OF REVENUE S APPEAL IS DISMISSED 12. IN THE RESULT THE APPEAL OF THE REVENUE IS DI SMISSED AS STATED ABOVE. 6 3 ORDER PRONOUNCED IN THE OPEN COURT ON 22-04-2014 SD/- SD/- [ . # ] [ ] ABRAHAM.P. GEORGE ACCOUNTANT MEMBER MAHAVIR SINGH JUDICIAL MEMBER (3) DATED :22 ND APRIL 2014 ITA NO. 1770/KOL/2011- M/S. T & I GLOBAL LTD A-JM 6 *PP 9: ; /SR.P.S. 2 -= >=@ COPY OF THE ORDER FORWARDED TO: 1 . /APPELLANT- JCIT(OSD) CIRCLE-4 P-7 CHOWRINGHEE SQ 8 TH FL. KOL-69. 2 -. / RESPONDENT : M/S. T & I GLOBAL LTD 11 JASSAL HOU SE 4A AUCKLAND SQUARE KOL-17. 3 . / THE CIT 4 . ( )/ THE CIT(A) KOLKATA 5 . - / DR KOLKATA BENCHES KOLKATA .= -/ TRUE COPY / BY ORDER /ASSTT. REGISTRAR