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2015 (11) TMI 632 - ITAT CHENNAI

2015 (11) TMI 632 - ITAT CHENNAI - [2015] 43 ITR (Trib) 422 (ITAT [Chen]) - Application of provisions of rule 7B of the Income-tax Rules, 1962 - CIT (Appeals) found that the assessee is not marketing any coffee product and the assessee is only an agriculturist observing that the provisions of rule 7B are not applicable - Held that:- If the assessee derives income from sale of coffee grown, cured, roasted and ground with or without mixing chicory or other flavouring ingredients, then 40 per cent. .....

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tion. Therefore, the Commissioner of Income-tax (Appeals) may not be correct in observing that the provisions of rule 7B are not applicable in case the assessee is selling only the sun dried coffee seeds and not engaged in other processing activity. Therefore, this Tribunal is of the considered opinion that income from coffee estate has to be computed by applying rule 7B of the Income- tax Rules, 1962. Therefore, the order of the Commissioner of Income-tax (Appeals) is set aside and the entire i .....

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income by applying rule 7B of the Income-tax Rules, 1962. Therefore, this issue also needs to be reconsidered by the Commissioner of Income-tax (Appeals). Accordingly, the disallowance is also set aside and remitted back to the file of the Commissioner of Income-tax (Appeals). - Decided in favour of revenue for statistical purposes. - I. T. A. No. 1132 /Mds/ 2013 (assessment year 2006-07). - Dated:- 18-9-2015 - N. R. S. GANESAN (Judicial Member) and A. MOHAN ALANKAMONY (Accountant Member) Milin .....

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on of ₹ 36,53,083 under the head "Income from other sources". According to the learned Departmental representative, the assessee claimed ₹ 23,55,490 as agricultural income from the coffee estate. The Assessing Officer found that the assessee owned a coffee estate to the extent of 21.20 hectares. The Assessing Officer found that the possible yield from one hectare of land is 948 kgs for Robusta variety for the financial year 2005-06. In fact, the Kerala Coffee Board estimate .....

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nce of ₹ 31,02,900 was brought to taxation under the head "Income from other sources". By applying rule 7B of the Income-tax Rules, 1962, the Assessing Officer had taken the income from agriculture at ₹ 3,22,500 and income from business at ₹ 1,07,500 at the ratio of 7.5 per cent. and 25 per cent. respectively. 3. On the contrary, Sh. Philip George, learned counsel for the assessee, submitted that the claim of the assessee before the Assessing Officer was that the asse .....

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ring, roasting, grinding, etc., before the final coffee powder is packed and marked to the final consumer. Learned counsel further submitted that the assessee claimed agricultural income of ₹ 23,55,490. However, the Assessing Officer disallowed a sum of ₹ 49,51,118. According to learned counsel, the Assessing Officer disbelieved the claim of the entire agricultural income. Referring to the order of the Commissioner of Income-tax (Appeals), learned counsel submitted that the disallowa .....

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coffee has to be computed for 34.39 hectares and not for 21.20 hectares of land. Learned counsel further pointed out that the Coffee Board has taken the final production of coffee powder as yield of the coffee, whereas the assessee is not engaged in the business of coffee powder. The assessee is just selling the raw coffee seeds, after sun drying the same. Therefore, the Commissioner of Income- tax (Appeals), after examining the entire activities of the assessee, found that the net agricultural .....

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8377; 1,07,500 by applying the provisions of rule 7B of the Income-tax Rules, 1962. The Commissioner of Income-tax (Appeals) found that the assessee is not marketing any coffee product and the assessee is only an agriculturist. We have carefully gone through the provisions of rule 7B of the Income-tax Rules, 1962, which reads as follows : "7B. (1) Income derived from the sale of coffee grown and cured by the seller in India shall be computed as if it were income derived from business, and t .....

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to it in sub-section (d) of section 3 of the Coffee Act, 1942 (7 of 1942). (2) In computing the incomes referred to in sub-rules (1) and (1A), an allowance shall be made in respect of the cost of planting coffee plants in replacement of plants that have died or become perma nently useless in an area already planted, if such area has not previously been abandoned, and for the purpose of determining such cost, no deduction shall be made in respect of the amount of any subsidy which, under the pro .....

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then 40 per cent. of income shall be treated as from business for the purpose of taxation under the Income-tax Act. The balance 60 per cent. has to be treated as income from business. The Commissioner of Income-tax (Appeals) found that the assessee is not engaged in coffee processing activity and the assessee is only selling the sun dried coffee seeds. In other words, the assessee is selling cured coffee seeds. If the assessee is selling only cured coffee seeds, the provisions of rule 7B(1) woul .....

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