D.C.I.T Cir - 4,kolkata, Kolkata v. M/s Tata Tea Limited, Kolkata

ITA 2006/KOL/2013 | 2006-2007
Pronouncement Date: 21-10-2016

Appeal Details

RSA Number 200623514 RSA 2013
Assessee PAN RULES1962R
Bench Kolkata
Appeal Number ITA 2006/KOL/2013
Duration Of Justice 3 year(s) 3 month(s) 27 day(s)
Appellant D.C.I.T Cir - 4,kolkata, Kolkata
Respondent M/s Tata Tea Limited, Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 21-10-2016
Appeal Filed By Department
Bench Allotted C
Tribunal Order Date 21-10-2016
Date Of Final Hearing 25-08-2016
Next Hearing Date 25-08-2016
Assessment Year 2006-2007
Appeal Filed On 24-06-2013
Judgment Text
ITA NOS. 2006 2007 & 2008/KOL/2013 M/S. TATA TEA LIMITED 1 IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA C B ENCH KOLKATA BEFORE SHRI M.BALAGANESH ACCOUNTANT MEMBER AND SHRI S.S. VISWANETHRA RAVI JUDICIAL MEMBER I.T.A. NO.2006/KOL/ 2013 ASSESSMENT YEAR: 2006-07 I.T.A. NO.2007/KOL/ 2013 ASSESSMENT YEAR: 2007-08 I.T.A. NO.2008/KOL/ 2013 ASSESSMENT YEAR: 2008-09 D.C.I.T CIR-4 KOLKATA P-7 CHOWRINGHEE SQUARE KOLKATA-700 069 APPELLANT -VS.- M/S. TATA TEA LTD 1 BISHOP LEFROY ROAD KOLKATA-700 020. PAN:ABCT 0602K RESPONDENT APPEARANCES BY: SHRI G. MALLIKARJUNA CIT DR FOR THE DEPARTMENT SHRI SAURABH KEDIA AR FOR THE ASSESSEE DATE OF HEARING : 25-08- 2016 DATE OF PRONOUNCEMENT : 2 1-10-2016 SHRI. S.S.VISWANETHRA RAVI JM: THESE APPEALS BY THE REVENUE AGAINST THE SEPARATE O RDERS DT: 05-03- 2013 PASSED BY THE COMMISSIONER OF INCOME TAX-(APPE ALS) U/SEC 250 OF THE ACT FOR THE ASSESSMENT YEAR 2006-07. SINCE THE ISSU ES INVOLVED IN ALL THESE APPEALS ARE COMMON THEREFORE THEY ARE HEARD TOGET HER AND COMMON ORDER IS BEING PASSED FOR THE SAKE OF CONVENIENCE. ITA NOS. 2006 2007 & 2008/KOL/2013 M/S. TATA TEA LIMITED 2 2. THE APPELLANT REVENUE RAISED FOLLOWING GROUNDS I N ITA NO. 2006/KOL/2013 A.Y 2006-07 ITA NO. 2006/KOL/2013 A.Y 2006-07 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE TH E LD. CIT (A) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS.5001369/- ON ACCOUNT OF CESS ON GREEN LEAF WITHOUT CONSIDERING THE FACT THAT EXPENS ES ON ACCOUNT OF CESS ON GREEN LEAF IS RELATED TO 100% AGRICULTURAL OPERATIO N AND SLP IS PENDING BEFORE THE HON'BLE SUPREME COURT AGAINST THE DECISIO N OF CALCUTTA HIGH COURT IN THE CASE OF AFT INDUSTRIES LTD. -VS- CIT (2 70 ITR 167) IN THE LIGHT OF WHICH LD. CIT (A) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE THE LD. CIT (A) HAS JUSTIFIED IN LAW IN DELETING THE DISALLOWANCE OF RS.71.09 LAKH/- ON ACCOUNT OF NOTIONAL INTEREST ON LOAN ADVANCED TO HPL NOT ACCOUNTED FOR THOUGH THE A.O. HAS ADDED IT BACK. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE HON'BLE ITAT HAS ERRED IN LAW IN DIRECTING THE A.O. TO ALLOW THE CLA IM OF THE ASSESSEE OF RS.8.09 CRORE ON ACCOUNT OF DEPRECIATION SINCE THE AMEN DMENT TO SECTION 43(6) WAS INTRODUCED IN PARLIAMENT TO SHOW INTENTION OF LEGISLATURE AS CLEARLY MENTIONED IN HON'BLE FINANCE MINISTER'S SPEECH IN PAR LIAMENT AND ACCEPTING THE DECISION WILL DEFEAT THE PURPOSE OF LEGISLATURE. 3. GROUND NO.1 IS RELATING TO DELETION OF ADDITION OF RS.50 01 369/- MADE ON ACCOUNT OF CESS OF GREEN LEAF. THE AO FOUND THAT TH E ASSESSEE HAS DEBITED A SUM OF RS.367.76 LAKHS UNDER THE HEAD CESS ON GREE N LEAF AND SUCH PAYMENT WAS MADE TO THE GOVERNMENT OF ASSAM. THE ASSESSEE C ONTENDED THAT THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CI T VS. AFT INDUSTRIES LTD (2004) 270 ITR 167 (CAL) HAS DECIDED THAT THE SAME WAS TO BE FULLY ALLOWED FROM THE COMPOSITE INCOME AND THE SAME IS TO BE FOL LOWED IN THE CASE OF THE ASSESSEE. THE AO FOLLOWING THE DECISION IN THE CASE OF JORHAT GROUP LTD VS. AGRICULTURAL ITO (226 ITR 622) PASSED BY THE HONBL E HIGH COURT OF GUWAHATI WHICH HELD THE CESS ON GREEN LEAF IS DEDUCTIBLE FROM THE AGRICULTURAL INCOME ONLY AND NOT FROM THE COMPOSITE INCOME. ACCORDING T O AO THE DEPARTMENT HAS NOT ACCEPTED THAT DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF ITA NOS. 2006 2007 & 2008/KOL/2013 M/S. TATA TEA LIMITED 3 SUPRA AND FILED AN APPEAL IN HONBLE SUPREME COURT. THE A MOUNT OF RS.367.76 LAKHS WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE COMPANY. A SLP HAS BEEN ADMITTED IN THE SUPREME COURT NEVERTHELESS THE SU PREME COURT HAS NOT STAYED THE ORDER OF THE HIGH COURT OF KOLKATA. THE CIT-A DELETED THE ADDITION OF RS.367.76 LAKHS PENDING ADJUDICATION OF SLP BY T HE HONBLE SUPREME COURT. 4. AS MATTER STOOD THUS THE HONOURABLE SUPREME COU RT DISMISSED THE SLP FILED BY THE APPELLANT REVENUE AND AGREED WITH THE INTERPRETATION OF SCOPE OF RULE 8 OF INCOME TAX RULES 1962 RENDERED BY THE HON OURABLE HIGH COURT OF CALCUTTA. THE LEARNED AR PLACED COPY OF SUCH ORDER BEFORE US AND SUBMITTED THAT THE PRESENT APPEAL MAY BE DISPOSED OF IN PURSU ANCE OF THE DECISION OF HONOURABLE SUPREME COURT AND LEARNED DR SUBMITS THA T THE APPELLANT REVENUE DID NOT SUCCEED IN SLP AND THE DECISION OF HONOURAB LE HIGH COURT OF CALCUTTA HAS BECOME FINAL AND BINDING ON THE APPELLANT REVEN UE IN VIEW OF THE CONFIRMATION OF THE SUCH DECISION BY THE HONOURABLE SUPREME COURT. THE RELEVANT PORTION OF WHICH IS REPRODUCED HEREIN BELO W: THE RESPONDENT-ASSESSEE HAD PAID CESS ON GREEN LEA F TO THE GOVERNMENT OF ASSAM WHICH WAS LEVIED UNDER ASSAM TAX ATION ( ON SPECIFIED LAND) ACT 1990. IN ITS INCOME TAX RETURN IT HAD CLAIMED THE SAME AS DEDUCTION WHICH HAS BEEN ALLOWED BY THE HIGH COU RT. THE RELEVANT DISCUSSION IN THIS BEHALF IS AS UNDER:- 'HOWEVER THE LEARNED TRIBUNAL HAD HELD THAT THE DE DUCTION IS ELIGIBLE AFTER COMPUTING THE INCOME UNDER RULE 8 AN D THE APPORTIONMENT IS TO BE MADE ONLY AFTER THE INCOME IS S O COMPUTED. SUCH APPORTIONMENT CANNOT BE MADE BEFORE THE DEDUCTIO N. RULE 8 OF THE INCOME TAX: RULES 1962 REQUIRES THAT THE COMPUTA TION IS TO BE MADE AS IF BY FICTION THE ENTIRE INCOME OUT OF THE TE A GROWN AND MANUFACTURED AS INCOME ASSESSABLE UNDER THE INCOME T AX ACT 1961. IN VIEW OF RULE 8 THE INCOME SO COMPUTED IS TO BE AP PORTIONED 60: 40 OF WHICH 40 IS ASSESSABLE TO TAX UNDER THE ACT . IT DOES NOT PROVIDE THAT AFTER ITA NOS. 2006 2007 & 2008/KOL/2013 M/S. TATA TEA LIMITED 4 APPORTIONMENT OF THE 60 % OF THE INCOME SO COMPUTED SHA LL AGAIN BE REQUIRED TO BE COMPUTED UNDER THE AGRICULTURAL INCO ME TAX ACT. ON THE OTHER HAND THIS 60% IS EXPOSED AND BECOMES EXIG IBLE TO TAX UNDER THE AGRICULTURAL INCOME TAX ACT. WITHOUT BEIN G REQUIRED TO BE ASSESSED UNDER THE SAID ACT BY REASON OF THE FICTION SO CREATED. THEREFORE THE CESS PAID HAS RIGHTLY BEEN EXCLUDED W HILE COMPUTING THE INCOME UNDER RULE 8 OF THE TEA GROWN AND MANUFAC TURED.' IN ARRIVING AT THE AFORESAID CONCLUSION THE HIGH COU RT 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 THU S FIND NO MERIT IN THIS APPEAL WHICH IS ACCORDINGLY DISMISSED. 5. WE FIND THAT THE CIT-A HAD FOLLOWED THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF SUPRA WHICH HAS BEEN FURTHER STRENGTHENED BY DISMISSAL OF SLP BY REVENUE. HENCE WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT-A. THUS GROUND NO-1 RAISED IS ACCORDINGLY DISMISSED. 6. GROUND NO. 2 IS RELATING TO DELETION OF DISALLOW ANCE OF RS.71.09 LAKHS ON ACCOUNT OF NOTIONAL INTEREST ON LOAN ADVANCED TO HALDIA PETROCHEMICALS LTD FOR SHORT HPL . THE AO SHOW CAUSED THE ASSESSEE TO EXPLAIN AS T O WHY THE PROPORTIONATE INTEREST RELATING TO INTEREST -FREE ADVANCE GIVEN OUT OF INTEREST BEARING LOAN TO HPL AMOUNTING TO RS 989.21 LAKHS SHOULD NOT BE DISALLOWED. THE ASSESSEE EXPLAINED AS UNDER: 'THE ADVANCE WAS GIVEN TO HPL DURING THE PERIOD WHEN TTL (ASSESSEE) WAS PROMOTER OF HPL PRIOR TO COMMENCEMENT 0F PRODUCTION FAC ILITIES ALONG WITH OTHER JOINT VENTURE PARTNERS. THE ADVANCE PROVIDED T O HPL WAS AGREED TO BE ADJUSTED AGAINST THE EQUITY CONTRIBUTION AND THEREFOR E IT WAS AGREED THAT NO INTEREST WAS TO BE CHARGED ON SUCH ADVANCE. SUBSEQU ENTLY TTL HAD DECIDED TO WITHDRAW FROM FURTHER PARTICIPATION IN THE PROJECT . HOWEVER. AS HPL WAS NOT IN A POSITION TO REPAY THE MONEY ADVANCED IT WA S AGREED THAT UNTIL COMMENCEMENT OF COMMERCIAL PRODUCTION. HPL WOULD NOT B E COMPELLED TO MAKE ANY REFUND NOR WOULD PAY ANY INTEREST ON SUCH ADV ANCES. WE WOULD ITA NOS. 2006 2007 & 2008/KOL/2013 M/S. TATA TEA LIMITED 5 LIKE TO INFORM YOU THAT IN THE INCOME TAX LAW THERE IS NO CONCEPT OF SUBJECTING TO TAX ANY NOTIONAL INCOME. WHICH DOES NOT A CCRUE IN FAVOUR OF THE ASSESSEE. WE INVITE YOUR ATTENTION TO THE DECISION REPORTED IN 46 ITR 144 (SC) IN THIS REGARD. WE WOULD THEREFORE REQUEST YOU N OT TO MAKE ANY ADDITION ON THIS ACCOUNT. 7. THE AO BASING ON THE ASSESSMENTS FOR AYS 1999-2 000 TO 2003-2004 WHEREIN THE RESPONDENT REVENUE REJECTED THE SAME S UBMISSIONS AS MADE ABOVE AND ADDED INTEREST TO AN EXTENT OUT OF RS.71. 09 LAKHS OUT RS.989.21 LAKHS TO THE INCOME OF THE ASSESSEE. 8. BEFORE THE CIT-A THE ASSESSEE SUBMITTED AS UND ER: ' 1) IT IS HUMBLY SUBMITTED THAT THE APPELLANT HAD SU FFICIENT SURPLUS FUNDS IN THE YEARS IN WHICH SUCH ADVANCES WERE MADE AND SUCH ADV ANCES WERE GIVEN OUT OF OWN FUNDS OF THE APPELLANT. THE DETAILS OF SURPLUS FUNDS AS AVAILABLE DURING THE RELEVANT YEARS IN WHICH THE ADVANCES WERE GIVEN WER E ALSO SUBMITTED IN THE COURSE OF ASSESSMENT THE DETAILS OF SUCH SURPLUS FUND HAVE BEEN MENTIONED IN THE ASSESSMENT ORDER. SINCE THE APPELLANT HAD SUFFI CIENT SURPLUS FUNDS IN THE YEAR OF ADVANCES/ THE ADVANCE MADE TO HALDIA PETROCHE MICALS CANNOT BE SAID AS MADE OUT OF LOAN FUNDS AND HENCE NO DISALLOWANCE OF INTEREST CAN BE MADE. RELIANCE IS PLACED ON THE FOLLOWING JUDGMENTS WHEREIN THE CONCURRENT VIEW IS THAT WHERE THE AMOUNT OF ANY INTEREST-FREE LOAN IS S UFFICIENTLY COVERED BY THE NON-INTEREST -BEARING FUNDS AVAILABLE WITH THE ASSE SSEE/ THEN THE QUESTION OF DISALLOWANCE OF INTEREST ON BORROWED FUNDS DOES NOT ARI SE: WOOLCOMBERS OF INDIA LIMITED - VS. - CIT 134 ITR 219 (CAL) CIT VS. 8RITANNIA INDUSTRIES LTD [2006} 280 ITR 5 25 (CAL) CIT VS. ITC LTD [2008} 299 ITR (AT) 341 (KOLKATA) (SB) CIT VS. ROCKMAN CYCLE INDUSTRIES LTD [2009} 176 T AXMAN 21(P & H) CIT VS. PREM HEAVY ENGINEERING WORKS PVT.LTD [200 6} 285 ITR 554 (ALL) 2) WITHOUT PREJUDICE TO THE ABOVE IT IS HUMBLY SUBMIT TED THAT THE LOANS AS EXISTED IN FY 1989-90 TO FY 1993-94 BEING THE FYS IN WHICH SUCH ADVANCES WERE MADE WERE SQUARED UP AND WERE NO MORE EXISTING IN FY 2005-06 RELEVANT TO AY 2006- 07 BEING THE YEAR IN WHICH THE DISALLOWANCE HA S BEEN INFLICTED BY THE ASSESSING OFFICER. THE INTEREST CLAIMED BY THE APPE LLANT DURING THE RELEVANT YEAR WAS IN RESPECT OF FRESH LOANS AND THUS SINCE THE LOAN WHICH COULD HAVE GONE TO ITA NOS. 2006 2007 & 2008/KOL/2013 M/S. TATA TEA LIMITED 6 FUND THE INTEREST FREE ADVANCE WERE NOT EXISTING QU ESTION OF DISALLOWANCE OF INTEREST ON SUCH LOAN DID NOT ARISE AT ALL. THIS NEW FACT WHICH WAS NOT IN EXISTENT IN EARLIER YEARS WAS BROUGHT TO THE ATTENTION OF THE ASSESSING OFFICER IN THE COURSE OF ASSESSMENT PROCEEDINGS. HOWEVER THE ASSESSING OFFICER FAILED TO CONSIDER THE SAID FACT AND INFLICTED THE DISALLOWANCE MERELY BASED ON SIMILAR DISALLOWANCE MA DE IN EARLIER YEARS. COPY OF THE LETTER DATED 22-09-2008 FILED IN THIS REGARD IS ENCLOSED AS ANNEXURE-2. 3) WITHOUT PREJUDICE IT IS SUBMITTED THAT THE ADVA NCES MADE TO HALDIA PETROCHEMICALS WHICH WAS OUTSTANDING AS ON THE BEGINNI NG OF THE YEAR OF RS. 989.21 LAKHS WAS FULLY REPAID DURING THE RELEVANT P REVIOUS YEAR 2005-06. HENCE NO DISALLOWANCE OF INTEREST WAS CALLED FOR DURING THE RELEVANT ASSESSMENT YEAR. 4) WITHOUT PREJUDICE TO THE AFORESAID AND ASSUMING TH OUGH NOT ADMITTING EVEN IF THE ADVANCES ARE CONSIDERED AS MADE OUT OF LOAN FUNDS NO DISALLOWANCE OF INTEREST IS CALLED FOR SINCE THE: ADVANCES WERE GIV EN OUT OF COMMERCIAL EXPEDIENCY OF BUSINESS OF THE APPELLANT. IT IS SUBMITTED THAT THE ADVANCE WAS GIVEN AS A MEA SURE OF COMMERCIAL EXPEDIENCY AND AROSE 0:7 A PURE BUSINESS DECISION FOR BECOMING A PROMOTER OF HPL. THE SAID DECISION WAS DULY APPROVED BY THE BOARD AND THE SHAREHOLDERS. HOWEVER DUE TO DELAY IN PROJECT AND AT THE REQUEST OF WEST BENGAL STATE GOVERNMENT THE APPELLANT BACKED OUT OF THE PROJECT SINCE IT WAS NOT PREPARED TO INVEST FURTHER FUNDS. FURTHER SINCE HPL WAS NOT IN A POSITION TO IMMEDIATELY REFUND THE ADVANCE AMOUNT THE SAME WAS CONVERTED IN TO INTEREST FREE ADVANCE TILL THE COMMENCEMENT OF COMMERCIAL PRODUCTION AS PER THE TERMS OF AGREEMENT MUTUALLY AGREED THUS EVEN FOR THE SAKE OF ARGUMENT IF IT IS ASSUMED THOUGH NOT ADMITTED THAT THE APPELLANT COMPANY HAD INCURRED INT EREST EXPENDITURE ON LOAN WHICH WAS UTILIZED TO GIVE INTEREST FREE ADVANCE N O DISALLOWANCE/ADDITION WAS CALLED FOR SINCE THE SAID ADVANCE AROSE PURELY FOR A BUSINESS PURPOSE AND WAS EXTENDED FOR REASONS OF COMMERCIAL EXPEDIENCY. IT IS HUMBLY SUBMITTED THAT GRANTING OF INTEREST FREE ADVANCE WAS A COMMERCIAL D ECISION TAKEN BY THE APPELLANT COMPANY. RELIANCE IN THIS REGARD IS PLACED ON THE SUPREME COU RT JUDGMENT IN THE CASE OF S.A. BUILDERS -VS. - CIT (2007) 288 ITR 1 (SC) WHEREIN THE SC HELD AS UNDER: 'IN ORDER TO DECIDE WHETHER INTEREST ON FUNDS BORROWED BY THE ASSESSEE TO GIVE AN INTEREST FREE LOAN TO A SISTER CONCERN (E.G. A SUB SIDIARY OF THE ASSESSEE) SHOULD BE ALLOWED AS A DEDUCTION UNDER SECTION 36(L)(I II) OF THE INCOME TAX ACT 1961 ONE HAS TO ENQUIRE WHETHER THE LOAN WAS GIVEN B Y THE ASSESSEE AS A MEASURE OF COMMERCIAL EXPEDIENCY. THE EXPRESSION 'CO MMERCIAL EXPEDIENCY' IS AN EXPRESSION OF WIDE IMPORT AND INCLUDES SUCH EXPEND ITURE AS A PRUDENT BUSINESSMAN INCURS FOR THE PURPOSE OF BUSINESS. THE EXPENDITURE MAY NOT HAVE BEEN INCURRED UNDER ANY LEGAL OBLIGATION BUT YET IT IS ALLOWABLE AS A BUSINESS EXPENDITURE IF IT WAS INCURRED ON GROUNDS OF COMMERC IAL EXPEDIENCY. ' RELIANCE IS ALSO PLACED ON THE DECISION OF THE HON'BLE CALCUTTA HIGH COURT IN THE DECISION OF BRITANNIA INDUSTRIES LIMITED REPORTED IN 280 ITR 525 (CAL). ITA NOS. 2006 2007 & 2008/KOL/2013 M/S. TATA TEA LIMITED 7 IN VIEW OF THE ABOVE SUBMISSION IT IS HUMBLY PRAYED T HAT THE ADDITION MADE BY THE AO OF RS. 71 09 000/- MAY PLEASE BE DELETED.' 9. THE CIT-A DELETED THE ADDITION MADE ACCOUNT OF D ISALLOWANCE TOWARDS NOTIONAL INTEREST ON HIS SATISFACTION THAT THE ASSE SSEE FURNISHED THE COMPLETE DETAILS OF SURPLUS FUND AVAILABLE WITH THE ASSESSEE FOR ADVANCING THE LOAN TO HPL AND SUCH EXAMINATION THE CIT FOUND THAT THE ASS ESSEE DISCHARGED ITS ONUS OF EXPLAINING THE SOURCE OF FUNDING OF THE LOA N. THE RELEVANT PORTION OF WHICH IS REPRODUCED HEREIN BELOW: 4.3 I AM OF THE OPINION THAT BY GIVING THE COMPLETE DE TAILS OF SURPLUS FUND AVAILABLE THE APPELLANT FOR FINANCING THE LOAN TO M/ S. HPL THE APPELLANT COMPANY HAD DULY DISCHARGED ITS ONUS OF EXPLAINING T HE SOURCE OF FUNDING OF THE LOAN. THE ONUS WAS THEN ON THE A.O. TO EXAMINE T HE AVAILABILITY OF SURPLUS FUND AND ITS DEPLOYMENT TOWARDS LOAN BEFORE COMING TO AN Y CONCLUSION AS TO WHETHER THERE EXISTED A DIRECT NEXUS BETWEEN THE AD VANCES GIVEN AND SURPLUS FUND UTILIZATION. NO SUCH ANALYSIS SEEMS TO HAVE BEE N DONE BY THE A.O. IN THE ASSESSMENT ORDER. ON THE OTHER HAND THE APPELLANT H AS CITED SEVERAL JUDGEMENTS THAT NO DISALLOWANCE OF INTEREST ON BORROWED FUND WILL BE MADE IF THE INTEREST FREE LOAN IS SUFFICIENTLY COVERED BY T HE NON INTEREST BEARING FUND AVAILABLE WITH THE APPELLANT. HUMBLY FOLLOWING THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASES OF WOOLCOMBERS OF INDIA LTD. VS. CIT 134 ITR 219 AND CIT VS. BRITANNIA INDUSTRIES LTD. 280 ITR 525 I DELETE THE DISALLOWANCE OF NOTIONAL INTEREST MADE BY THE A.O. FOR RS. 71.091A KHS. 10. BEFORE US AT THE TIME OF HEARING THE LD. AR SU BMITTED THAT THIS ISSUE HAS BEEN SET ASIDE BY THIS TRIBUNAL IN THE IMMEDIAT ELY PRECEDING ASSESSMENT YEARS 2000-01 2001-02 2002-03 2003-04 AND 2005-0 6. IN SOME OF THE ASSESSMENT YEARS THE MATTER IS STILL PENDING WITH T HE AO. IN THIS ASSESSMENT YEAR ALSO THE PECULIAR FACTS OF THIS ISSUE ARE THAT THE OLD LOANS HAS ALREADY BEEN RE-PAID AND FRESH LOANS HAS BEEN GRANTED TO M/ S. HALDIA PETRO CHEMICAL LIMITED. THEREFORE THE AO SHOULD GIVE A FRESH LOOK WHILE DECIDING THIS ISSUE BASED ON THE PECULIAR FACTS. LD. DR REPORTED NO OBJ ECTION. ITA NOS. 2006 2007 & 2008/KOL/2013 M/S. TATA TEA LIMITED 8 11. HEARD BOTH AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE ORDER DT:14-07-2011 PASSED BY THE COORDINATE BENCH OF KOL KATA IN ITA 1235/KOL/2009 FOR AY 2005-06 IS PLACED AT PAGE 276 OF PAPER BOOK WHEREIN THE ISSUE SIMILAR TO THE ISSUE ON HAND WERE REMANDE D TO THE FILE OF AO TO DECIDE THE ISSUE AFRESH THE RELEVANT PORTION OF WH ICH IS REPRODUCED HEREIN BELOW: 5. HAVING HEARD THE RIVAL SUBMISSIONS AND ON CAREFUL PERUSAL OF THE MATERIAL AVAILABLE ON RECORD KEEPING IN VIEW OF THE FACT THAT THE TRIBUNAL HAS SET ASIDE THE MATTER TO THE FILE OF THE AO IN THE PRECEDING YEA RS WE SET ASIDE THE ISSUE TO THE FILE OR THE AO FOR THE YEAR UNDER CONSIDERATION A LSO WITH THE DIRECTION TO DECIDE THE ISSUE AFRESH IN THE LIGHT OF THE PECULIAR FACTS NARRATED BY THE ID. COUNSEL FOR THE ASSESSEE AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE OF BEING HEARD AS PER LAW. 12. IN VIEW OF THE ABOVE WE REMAND THE ISSUE TO TH E FILE AO TO DISPOSE OF THE SAME IN THE FACTS AND CIRCUMSTANCES OF THE CASE . ACCORDINGLY GROUND NO- 2 IS ALLOWED FOR STATISTICAL PURPOSES 13. GROUND NO-3 IS RELATING TO DIRECTION TO THE AO TO ALLOW THE CLAIM OF RS.8.09 CRORE ON ACCOUNT OF ADDITIONAL DEPRECIATION BY THE ITAT. THE ASSESSEE COMPANY CLAIMED DEPRECIATION ON THE WDV OF DEPRECIABLE ASSETS USED IN ITS BUSINESS OF GROWING AND MANUFACTURING T EA ON THE BASIS OF THE PRINCIPLE LAID DOWN BY THE HONBLE CALCUTTA HIGH CO URT IN THE CASE OF CIT VS SUMAN TEA & PLYWOOD INDUSTRIES PVT. LTD IN REPORTED IN 204 ITR 719. THE ASSESSEE CLAIMED THE DEDUCTION THROUGH THE REVISED RETURN FILED TOGETHER WITH THE SUPPORTING STATEMENT OF DEPRECIATION SCHED ULE DULY CERTIFIED IN SUPPORT OF ITS CLAIM. THE AO FOUND THAT SIMILAR CLA IM OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2003-04 TO ASSESSMENT YEAR 2005-06 WAS NOT ALLOWED AND THE ABOVE CLAIM OF THE ASSESSEE WAS REJECTED AND DI SALLOWED RS. 8.09 CRORES ITA NOS. 2006 2007 & 2008/KOL/2013 M/S. TATA TEA LIMITED 9 AND ADDED TO THE INCOME FOR A.Y 2006-07. SIMILAR AD DITION WAS MADE FOR A.YS 2007-08 & 2008-09. 14. BEFORE THE CIT-A THE RESPONDENT ASSESSEE FILED WRITTEN SUBMISSIONS AND RELEVANT TO THE ISSUE IS REPRODUCED AS UNDER: ''IT IS HUMBLY SUBMITTED THAT THE CLAIM OF DEPRECIAT ION MADE BY THE APPELLANT BY FILING REVISED RETURN IS ALLOWABLE IN VIEW OF THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT -VS.- SUMAN TEA & PLYWO OD INDIA (P) LIMITED 204 ITR 719 (CAL.) WHICH WAS BINDING ON THE ASSESSING O FFICER. THE HON'BLE SUPREME COURT IN THE CASE OF CFT-VS. - DOOM DOOMA INDIA LIMITED (2009) 310 ITR 392 (SE) HAS CONFIRMED THE PRINCIPLES LAID DOWN BY THE JURISDICTIONAL HC IN THE CASE OF CIT -VS.- SUMAN TEA & PLYWOOD INDUSTRIES PVT. LIMITED (SUPRA) AND THEREBY HAS AFFIRMED THE VALIDI TY OF LAW AS LAID DOWN BY THE JURISDICTIONAL HC FOR THE RELEVANT YEAR. THE LD. CIT(APPEALS) HAS ALLOWED SIMILAR CLAIM OF DE PRECIATION MADE IN EARLIER YEARS BY FOLLOWING THE JURISDICTIONAL HC DECISION IN THE CASE OF SUMAN TEA(SUPRA) SINCE CONFIRMED BY THE SC VIDE CONSOLIDAT ED ORDER FOR APPEAL NO. 84-91/CIT(A)- IV/05-06 PASSED FOR AY 1993-94/ AY 19 94-95 TO AY 1996-9~ 1998-99 TO 2001- 02 WHEREIN CLAIM WAS MADE BY FILIN G 154 PETITION AND VIDE ORDER DATED 25-08-2005 & 27-11-2006 FOR A Y 2002-03 & AY 2003-04 RESPECTIVELY WHEREIN CLAIM FOR DEPRECIATION WAS MADE IN THE COURSE OF ASSESSMENT. THE ISSUE BEING ALREADY DECIDED IN FAVO UR OF THE APPELLANT BY THE LD. CIT(APPEALS) IN EARLIER YEARS THE CLAIM OF THE APPELLANT FOR THE RELEVANT ASSESSMENT YEAR MAY PLEASE BE ALLOWED AND ADDITION M ADE BY THE AO MAY PLEASE BE DELETED. COPY OF THE LD.CIT(APPEALS) ORDERS IS COLLECTIVELY ENCLOSED HEREWITH AND MARKED AS ANNEXURE-3. ' 5.3. I FIND THAT THE PRINCIPLES LAID DOWN BY THE JUR ISDICTIONAL HIGH COURT'S ORDER IN THE CASE OF CIT VS. SUMAN TEA & PLYWOOD INDIA PVT. LT D. 204 ITR 719 STANDS DULY CONFIRMED BY THE ORDER OF THE APEX COURT IN THE CA SE OF CIT VS. DOOM DOOMA INDIA LTD. (2009) 310 ITR 392. FURTHER AS ST ATED BY THE APPELLANT IN THE EARLIER YEARS TOO THE CIT( A) HAS CONFIRMED IN T HE CASE OF THE APPELLANT THE PRINCIPALS OF DEPRECIATION AS LAID DOWN IN THE CASE OF CIT VS. SUMAN TEA & PLYWOOD INDUSTRIES PVT. LTD. THEREFORE FOLLOWING THE ORDER OF THE JURISDICTIONAL HIGH COURT THE SUPREME COURT AND THE APPELLATE ORDERS OF MY PREDECESSORS TO ALLOW THE CLAIM OF DEPRECIATION IN APPELLANTS OWN CAS E FOR EARLIER YEARS (A.Y. 2002-03 & A.Y. 2003-04) THE ADDITIONAL CLAIM OF DEPR ECIATION FOR RS. 8.09 CRORES IS ALLOWED. 15. THE CIT-A BY RELYING ON THE HONBLE SUPREME COU RT IN THE CASE OF CIT VS. DOOM DOOMA INDIA LTD. (2009) 310 ITR 392 WHERE IN THE HONBLE ITA NOS. 2006 2007 & 2008/KOL/2013 M/S. TATA TEA LIMITED 10 SUPREME COURT CONFIRMED THE DECISION OF HONBLE JUR ISDICTIONAL HIGH COURT OF CALCUTTA IN THE CASE OF CIT VS. SUMAN TEA & PLYWOOD INDIA PVT. LTD. THE CIT- A ALSO FOUND THAT APPELLANT ALLOWED SUCH DEPRE CIATION TO THE ASSESSEE IN EARLIER YEARS AND DELETED THE ADDITION. 16. BEFORE US AT THE TIME OF HEARING THE LD. AR SU BMITTED THAT THE PRESENT ISSUE IS COVERED BY THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT OF CALCUTTA IN THE CASE OF CIT VS. SUMAN TEA & PLYW OOD INDIA PVT. LTD REPORTED IN 204 ITR 719 AND WHICH WAS CONFIRMED BY THE THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. DOOM DOOMA IN DIA LTD. (2009) 310 ITR 392 AND COORDINATE BENCH ALLOWED SUCH DEPRECIAT ION FOR ASSESSMENT YEARS 1997-98. THE LD. DR CONCEDED TO THE FACT OF S UBMISSIONS AS MADE BY THE LD.AR. 17. HEARD BOTH AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE ORDER DT:14-07-2011 PASSED BY THE COORDINATE BENCH OF KOL KATA IN ITA 366 & 367/KOL/2011 FOR A.Y 2007-08 DATED 4-1-2012 WHERE IN THE ISSUE SIMILAR TO THE ISSUE ON HAND WAS ADJUDICATED. THE RELEVANT POR TION OF WHICH IS REPRODUCED HEREIN BELOW: 20. WE HAVE GIVEN OUR CAREFUL CONSIDERATION TO THE R IVAL SUBMISSIONS MADE BEFORE US AND HAVE PERUSED THE ORDERS OF AUTHORIT IES BELOW. THE ASSESSEE HAD ADVANCED ITS CLAIM ON THE GROUND THAT S INCE ASSESSEES INCOME WAS TO BE COMPUTED AS PER RULE 8 OF THE INCOME -TAX RULES AND 40% OF THE INCOME WAS TO BE TREATED AS INCOME FROM BUS INESS OR PROFESSION THEREFORE DEPRECIATION ONLY TO THE EXTENT OF 40% WAS TO BE TREATED AS ACTUALLY ALLOWED AND TO THE EXTENT THE IN COME WAS TREATED AS AGRICULTURAL INCOME BY VIRTUE OF THE SAME BEING EXE MPT DEPRECIATION COULD NOT BE DEEMED TO HAVE BEING ACTUALLY ALLOWED TO THE ASSESSEE FOR EARNING THE AGRICULTURAL INCOME. AS REGARDS THE INTE RPRETATION OF THE PHRASE ACTUALLY ALLOWED THE ASSESSEE HAD RELIED ON THE DECISION OF THE HONBLE KOLKATA HIGH COURT IN THE CASE OF CIT VS. SUMA N TEA & PLYWOOD INDUSTRIES PVT. LTD (204 ITR 719) WHEREIN IT HAS B EEN HELD THAT THE TERM ACTUALLY ALLOWED CANNOT BE STRESSED TO MEAN NOTIONAL LY ALLOWED OR ITA NOS. 2006 2007 & 2008/KOL/2013 M/S. TATA TEA LIMITED 11 MERELY ALLOWABLE ON NOTIONAL BASIS. THEREFORE DEPREC IATION COULD NOT BE TREATED AS NOTIONALLY ALLOWED AGAINST AGRICULTURAL IN COME. EXPLANATION 7 TO SECTION 43(6) READS AS UNDER:- EXPLANATION 7:- FOR THE PURPOSE OF THIS CLAUSE WHER E THE INCOME OF AN ASSESSEE IS DERIVED IN PART FROM AGRICULTURE AND IN PART FROM BUSINESS CHARGEABLE TO INCOME-TAX UNDER THE HEAD PROFITS AND GAIN OF BUSINESS OR PROFESSION FROM COMPUTING THE WRITTEN DOWN VALUE OF ASSETS ACQUIRED BEFORE THE PREVIOUS YEAR THE TOTAL AMOUNT OF DEPRECI ATION SHALL BE COMPUTED AS IF THE ENTIRE INCOME IS DERIVED FROM TH E BUSINESS OF THE ITA NOS. 366 & 367/KOL/2011 ASSESSEE UNDER THE HEAD PROF ITS AND GAIN OF BUSINESS OR PROFESSION AND THE DEPRECIATION SO COMPUTE D SHALL BE DEEMED TO BE THE DEPRECIATION ACTUALLY ALLOWED UNDER THIS ACT. THIS EXPLANATION HAS BEEN INSERTED BY FINANCE ( N O.2) ACT W.E.F 2009. IT CREATES A DEEMING FICTION AFFECTING SUBSTANTIVE COMPUTATION PROVISION DETERMINING ACTUAL TAX LIABILITY. THEREFOR E LD. CIT(APPEALS) HAS RIGHTLY TREATED IT TO BE PROSPECTIVE. WE ACCORDINGL Y UPHOLD THE ORDER OF LD. CIT(APPEALS) AND REJECT THIS GROUND OF APPEAL TAK EN BY THE REVENUE. 18. IN VIEW OF THE ABOVE WE DO NOT FIND ANY INFIRM ITY IN THE ORDER OF CIT- A. ACCORDINGLY GROUNDS RAISED BY REVENUE ARE DISMI SSED FOR ALL THE YEARS IN THIS REGARD. 19. IN THE RESULT THE APPEALS IN ITA NO. 2006/KOL/ 2013 A.Y 2006-07 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES AND IN ITA NO. 2007 /KOL/2013 FOR AY. 2007-08 AND ITA 2008/KOL/2013 FOR AY 2008-09 OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST OCTOBER 2016. SD/- SD/- M.BALAGANESH S.S. VISWANETHRA RAVI ACCOUNTANT MEMBER JUDICIAL MEMBER DT: 21-10-2016 ITA NOS. 2006 2007 & 2008/KOL/2013 M/S. TATA TEA LIMITED 12 COPIES TO : **PP/SPS (1) APPELLANT/DEPARTMENT: (2) ASSESSEE/RESPONDENT: (3)COMMISSIONER OF INCOME-TAX (APPEALS) (4) COMMISSIONER OF INCOME TAX KOLKATA (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL KOLKATA