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TMI Blog2009 (5) TMI 124X X X X Extracts X X X X X X X X Extracts X X X X ..... pleted under Section 143(3) of the Act. 3. In the course of assessment proceedings, the Assessing Officer has made certain disallowances/additions whereby the assessable income has been determined at Rs. 39,24,14,587, as book profit under Section 115JB. The first disallowance/addition made by the assessing authority was in respect of depreciation claimed by the assessee in its tea division which amounted to Rs. 95,52,231; The second addition/disallowance was again in respect of depreciation, but in the rubber division of the assessee, which amounted to Rs. 59,54,017; The third addition/disallowance made by the Assessing Officer was also in respect of depreciation vis-a-vis rubber division, amounting to Rs. 74,85,588; The fourth addition/disallowance made by the Assessing Officer was in respect of loss claimed by the assessee in the computation of capital gains relating to the sale proceeds of trees, amounting to Rs. 17,58,746; The fifth addition/disallowance made by the assessing authority was in respect of replanting expenses amounting to Rs. 6,93,096; and The sixth addition/disallowance was in respect of expenses debited in the plantation division amounting to Rs. 37 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Income-tax Act, 1961. 11. The case of the appellant is that the payments were made before the due date for filing the return and therefore deductions should be allowed as prayed for. The Assessing Officer found that the contributions being employees' contribution, it cannot be allowed as a deduction and the Commissioner of Income-tax (Appeals) upheld the disallowance in the light of the order of the Tribunal passed in the assessee's own case for the assessment years 2001-02 to 2003-04. In that order, the Tribunal has held that Section 43B(B) was applicable only in respect of employer's contribution and not to employees' contribution. The learned chartered accountant appearing for the assessee invited our attention to the judgment of the hon'ble Supreme Court in the case of CIT v. Vinay Cement ltd. [2007] 213 CTR 268 : [2009] 313 ITR (St.) 1 where it has upheld the judgment of the Gauhati High Court in the case of CIT v. George Williamson (Assam) Ltd. [2006] 284 ITR 619 in which the Gauhati High Court has held that the payments to provident fund, etc. made after the close of the accounting year but before the due date for filing of the return is entitled for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Gauhati High Court has now been upheld by the Supreme Court in the case of Vinay Cement Ltd. [2007] 213 CTR 268; [2009] 313 ITR (AT) 1. It means, the court has also taken note of the judgment of the Kerala High Court in the case of CIT v. South India Corporation Ltd. [2000] 242 ITR 114 and thereafter upheld the judgment of the Gauhati High Court in the case of George Williamson (Assam) Ltd. [2006] 284 ITR 619. It means that the issue has now been decided by the Supreme Court, in the case of Vinay Cement Ltd. [2007] 213 CTR 268; [2009] 313 ITR (AT) 1 that the payments made to provident fund and employees' state insurance scheme etc. are to be allowed as deductions, if the payments were made before the due date for filing of the return. This judgment is applicable to both the employees' and employer's contribution, as no distinction has been made by the Gauhati High Court in the case of George Williamson (Assam) Ltd. [2006] 284 ITR 619. Therefore, in the facts and circumstances of the case, we allow this ground of the assessee and direct the Assessing Officer to give deductions for delayed payments made by the assessee in respect of the employees' contribution to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le High Court of Kerala has also held the same view as reflected in the judgment of their Lordships in the case of CIT v. Alanickal Co. Ltd. [1986] 158 ITR 630. The hon'ble jurisdictional High Court held that where the rubber estate sold by an assessee was in a rural area, transaction of sale of a rubber estate with rubber trees standing on it did not involve transfer of any capital asset and as such the sale of rubber estate along with rubber trees amounts to sale of agricultural land alone and the transaction cannot be split up as sale of agricultural land and sale of trees and any gains arising from that sale of trees are not liable to tax on capital gains. 18. Obviously, the profit on sale of agricultural land is agricultural income and the court further held that standing trees also form part of the immovable property and therefore contributed to agricultural income alone. 19. The hon'ble Supreme Court in the case of CIT v. All India Tea and Trading Co. Ltd. [1996] 219 ITR 544 has held that the compensation received on requisition of agricultural land amounted to agricultural income. The Supreme Court again in the case of Singhai Rakesh Kumar v. Union of India [2001] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e relating to the assessment of profits made on sale of "Boyce Estate", as capital gains under Section 50B of the Act. 25. As already stated in this order, the assessee has accounted for the profit on sale of its "Boyce Estate" at Rs. 32,65,94,751 but claimed exemption from levy of tax on the ground that the property was not a capital asset within the meaning of Section 2(14) and the profit arising on sale of that rubber estate would not form part of long-term capital gains tax. The basis of this argument is that the rubber estate is an agricultural land and therefore profits arising on sale of agricultural land partakes of the character of agricultural income itself and would not come within the purview of computation of total income under the provisions of the Income-tax Act. 26. The above position was accepted by the Assessing Officer, as there was no dispute on the factual aspects of the issue. The asset sold by the assessee was a rubber estate. It was sold in a running condition and as a going concern basis. The asset was a rubber estate with all supporting facilities and paraphernalia. The land situated outside 8 k.m. of any municipality. The property was agricultural land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee contained not only the standing rubber trees but also plant/factory, accommodation, other facilities and other movable properties and all those properties both movable and immovable have been sold by the assessee and as such the entire rubber estate as a working unit was transferred as such, which in fact, satisfies all the attributes of a slump sale. 31. The Commissioner of Income-tax (Appeals) held that the assessee is having a number of rubber estates and it is one of the rubber estates, viz., "Boyce Estate" which is in the nature of an undertaking as provided in Explanation 2 to Section 2(19AA). He held that "Boyce Estate" itself is a functional unit in the nature of an independent undertaking and therefore in the light of the terms and conditions stipulated in the transfer deed, the sale was that of a slump sale. The Commissioner of Income-tax (Appeals) further held that as the property was sold as a going concern with all the assets both movable and immovable along with the personnel, it is a clear case of transfer of an undertaking in its entirety and therefore there is every reason to hold that the sale is a slump sale. He was of the view that once the sale is found t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estates growing tea, rubber, cocoa, cardamom, etc. In the case of rubber itself, the assessee is having about 12 different estates. During the previous year relevant to the assessment year under appeal, the assessee-company has sold one of its rubber estates known as "Boyce Estate". The estate has been sold on the basis of a detailed agreement executed between the vendor and vendee. The total consideration stipulated for the transfer of the estate has been spilt over different assets both movable and immovable enumerated in different schedules and annexure. 35. The assessee-company has assigned specific consideration/value for the rubber plantation as such along with the standing trees. The consideration for the extent of land has been specifically mentioned. Thereafter, the assessee has listed out every item of movable property transferred to the buyer and value has been assigned to those movable assets. Vehicles and other assets were shown and sold separately. The assessee-company has not transferred the estate with all the assets and liabilities. All the financial assets available to the assessee up to the date of the transaction were not transferred as per the agreement but ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ". 38. Therefore, it is to be seen that while adding an expression in the agreement that the rubber estate was transferred as a going concern, the purpose was only to refer to the state of affairs and refer to an existing fact and not to create any legal proposition in the context of the sale deed. 39. Therefore, in the facts and circumstances of the case, we are of the considered view that the Commissioner of Income-tax (Appeals) has been highly carried away by the commercial expression reflected in the agreement like "going concern". At the cost of repetition, we have to state that a rubber plantation is always a "going concern". Even if the parties to the contract do not say so, still the estate in the nature of a rubber plantation is a going concern. Therefore, the said expression is not a test to be relied on to decide the exact nature of the transaction for the purpose of income-tax law. 40. The Income-tax Appellate Tribunal, Cochin Bench in the case of Accelerated Freeze Drying Co. Ltd. v. Deputy CIT in I.T.A. No. 611/Coch/08 has considered the issue of "slump sale" in its order dated December 15, 2008. In that case, the Tribunal found that there was a bifurcation of sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e a case of slump sale, if all the assets and liabilities of an undertaking have not been transferred to the vendee. 45. As rightly relied on by the learned chartered accountant appearing for the assessee, the same view was taken by the Income-tax Appellate Tribunal, Ahmedabad Bench, in the case of Camphor and Allied Products Ltd. v. Deputy CIT [2001] 79 ITD 489. 46. In the present case, the rubber estate has been sold by the assessee excluding cash in hand, stock in hand, receivables, finance, assets and liabilities. It was not a case of sale by lock, stock and barrel. The assessee-company has made conscious exclusions. The assets sold by the assessee have been listed out in different schedules and annexure. The consideration has been specifically assigned to the sale of immovable property by way of rubber estate. Separate consideration has been assigned to the sale of movable properties including vehicles and other properties. Therefore, it is not a case of slump sale for a lump sum amount of consideration where the consideration is not attributable to any particular item of asset. There is no such a statement of blanket consideration in the present case. Here, the sale of ever ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee in the subsidiary company was transferred to M/s. Surendra Jain and Family in terms of an agreement dated November 3, 2004, for a consideration of Rs. 17,54,400. The loss suffered on sale of these shares was returned by the assessee under the head "Long-term capital gains". After considering the indexed cost, the long-term capital loss was worked out at Rs. 3,39,44,694 and the same was assessed by the Assessing Officer as "capital gains". In the first appeal, the Commissioner of Income-tax (Appeals) directed the Assessing Officer to treat the loss as speculation loss and therefore held that the said loss would not be available for setting off against positive long-term capital gains. 50. It is to be seen that since 1995-96 onwards, the shares of M/s. Harrison Universal Flowers Ltd. (HUFL) were disclosed by the assessee-company in its balance-sheet as "Long-term investment". These shares were also reflected in the balance-sheet at cost. The assessee-company has no activities of business in purchase and sale of shares. 51. In the case of Deputy CIT v. Jindal Exports Ltd. [2006] 287 ITR (AT.) 172 : [2006] 101 ITD 129 (Delhi) (TM), by majority decision, the Tribunal ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is the view of the Assessing Officer that the expenditure was disallowable under Section 14A of the Act. The Appellate Tribunal deleted similar disallowances made by the Assessing Officer for the assessment years 2002-03 and 2003-04. Following the order of the Tribunal, the Commissioner of Income-tax (Appeals) deleted the said disallowance. The application of Sections 37 and 14A made by the Assessing Officer in disallowing 10 per cent. of the replanting expenditure is an exaggerated interpretation of the statutory provisions. The replanting expenditure by itself is a separate block of expenses incurred for the business of the assessee, which is partly agricultural in nature. There is no provision to straight away disallow any part of the business expenditure only for the reason that it is attributable to agricultural operations and the assessee is equally deriving agricultural income. Therefore, the order of the Commissioner of Income-tax (Appeals) is justified especially in the light of the orders of the Tribunal available on the subject. This ground of the Revenue is accordingly rejected. 56. The next ground is in respect of the disallowance of Rs. 1,00,01,290, being licence ..... X X X X Extracts X X X X X X X X Extracts X X X X
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