TMI Blog2015 (11) TMI 747X X X X Extracts X X X X X X X X Extracts X X X X ..... e insurance on account of delayed remittance, i.e., beyond the date prescribed in the respective enactments - Held that:- Assessing Officer has not given the details of date of payment of the employees' provident fund/employees' State Insurance, etc., in the assessment order. The learned Commissioner of Income-tax (Appeals) has also not examined the same.Since the details of dates of payment are not available on record, we are of the view that this issue requires fresh examination in all the years. If the payments have been made before the due date prescribed under section 139(1) of the Act for filing return of income, no disallowance is required to be made. Otherwise, the disallowance should be made in respect of the amounts paid after the due date prescribed under section 139(1) of the Act. Accordingly, we set aside the order of the learned Commissioner of Income-tax (Appeals) on this issue in all the years referred to above and direct the Assessing Officer to examine the same Addition of the amount realised on sale of old and unyielding rubber trees - applicability of rule 7A of the Income-tax Rules - CIT(A) deleted the addition - Held that:- Commissioner of Income-tax (Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 015 - V. DURGA RAO (Judicial Member) and B. R. BASKARAN (Accountant Member) M. Anil Kumar for the appellant. Dilip S Damle for the respondent. ORDER 1. All these appeals filed by the Revenue are directed against the orders passed by the learned Commissioner of Income-tax (Appeals)-II, Kochi and they relate to the assessment years 2003-04, 2007-08 to 2010-11 respectively. Since most of the issues urged in these appeals are identical in nature, they were heard together and are being disposed of by this common order, for the sake of convenience. 2. We have heard the parties and perused the records. The assessee is a public limited company engaged in growing and manufacturing of tea, rubber, etc. The Revenue has filed these appeals on being aggrieved by the decision of the learned Commissioner of Income-tax (Appeals) in deleting various disallowances made by the Assessing Officer. 3. The first issue relates to the disallowance of part of interest expenditure on the ground that the assessee has diverted interest bearing funds to its subsidiary companies. This issue arises in the assessment years 2003-04, 2007-08 to 2009-10. 4. Both parties have agreed that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loss account filed in the paper book that it has made a cash profit of ₹ 7,305 lakhs. These sources generated during the year were more than sufficient to make the average investments stated above. Besides the above, it was also stated that the assessee is having interest-free funds in the form of share capital and reserves to the tune of ₹ 30,168.70 lakhs, which were more than the investment made in subsidiaries, viz., ₹ 21,221.04 lakhs. 11. Thus, we notice that the assessee has established the commer cial expediency in making interest-free advances to its subsidiary companies and it has also established that it has utilised only interest- free funds for the said purpose. Accordingly, the decision of the hon'ble Supreme Court in the case of S. A. Builders Ltd. v. CIT (Appeals) [2007] 288 ITR 1 (SC) and the decision of the hon'ble Delhi High Court in the case of Bharti Televentures Ltd., referred to supra apply to the facts of the instant case. In view of the foregoing dis cussions, we do not find any infirmity in the decision of the learned Commissioner of Income-tax (Appeals) in deleting the disallowance of interest claim. 5. According to the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on'ble Supreme Court, the test in such cases should be as to whether the advances were as a meas ure of commercial expediency . . . . Holding that what is relevant is whether the assessee advanced the money to its sister concern as a measure of commercial expediency, the Supreme Court remanded the matter to the Tribunal, since such facts were never examined. In the instant case, the specific contentions of the assessee is that borrowals were made for its day to day business activities and the loans advanced to the subsidiary companies were from the receipts of the assessee's business. The assessee, hence, clearly distinguishes the loans granted to subsidiary companies from its business expenses and hence such advances to subsidiary companies cannot at all be treated as a measure of commercial expediency. 7. A careful reading of the order of the hon'ble jurisdictional High Court would show that the High Court has expressed the view that the diversion of funds to subsidiary companies out of loan funds meant for business expenses (purposes) would not be a measure of commercial expediency. Thus the matter of commercial expediency as discussed by the hon'ble High C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cal claims made in the earlier years. The learned Commissioner of Income-tax (Appeals), however, by following the decision of the Tribunal rendered in the assessee's own case in earlier years, deleted the disallowance. 9. Both parties agreed that this issue is covered by the decision of the co- ordinate Benches rendered in the assessee's own case in the earlier years. For the sake of convenience, we extract below the observations made by the co-ordinate Bench in its order dated June 29, 2012 rendered in I. T. A. No. 77/Coch/2010 : 3. The first issue relates to the disallowance of licence fee paid to RPG Enterprises amounting to ₹ 60 lakhs. We notice that the Assessing Officer has disallowed the licence fee payments by follow ing his order in the earlier years. In those years, the assessee has carried the matter in appeal before the learned Commissioner of Income-tax (Appeals) and then to the Tribunal. The Cochin Bench of the Tribunal in its appellate order dated May 11, 2007 in I. T. A. Nos. 104 to 106 of 2005 relating to the assessment years 2001-02 to 2003- 04 has held that the licence fee paid to M/s. RPG Enterprises was an allowable expenditure. The said vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision rendered by the co-ordinate Bench, vide its order dated June 29, 2012 passed in I. T. A. No. 77/Coch/2010 in the assessee's own case relating to the assessment year 2006-07. We notice that the learned Commissioner of Income-tax (Appeals) has followed the decision rendered by the hon'ble Delhi High Court in the case of CIT v. AIMIL Ltd. [2010] 321 ITR 508 (Delhi) and also the decision of the hon'ble Supreme Court rendered in the case of CIT v. Alom Extrusions Ltd. [2009] 319 ITR 306 (SC) in deciding this issue in favour of the assessee. 12. However, we notice that the Assessing Officer has not given the details of date of payment of the employees' provident fund/employees' State Insurance, etc., in the assessment order. The learned Commissioner of Income-tax (Appeals) has also not examined the same. The decisions rendered by the co-ordinate Bench, the High Court and the Supreme Court (referred to supra) shall apply only if the payments have been made before the due date prescribed under section 139(1) of the Act for filing return of income. Since the details of dates of payment are not available on record, we are of the view that this issue requi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the instant case, the expenses incurred on estate expenses and replanting expenses have been claimed by the assessee itself, which shows that the rubber trees are not capital assets. Accordingly, the Assessing Officer brought to tax 35 per cent. of the amount realised on sale of old and unyielding trees. The learned Commissioner of Income-tax (Appeals) allowed the claim of the assessee by holding that rule 7A shall not apply to the sale of old and unyielding trees. 14. The main contention of the Department is that rule 7A shall apply to the income generated on sale of old and unyielding rubber trees. We have gone through rule 7A of the Income-tax Rules and for the sake of convenience, we extract the same below : '7A. Income from the manufacture of rubber.-(1) Income derived from the sale of centrifuged latex or cenex or latex based crepes (such as pale latex crepe) or brown crepes (such as estate brown crepe, remilled crepe, smoked blanket crepe or flat bark crepe) or technically specified block rubbers manufactured or processed from field latex or coagulum obtained from rubber plants grown by the seller in India shall be computed as if it were income derived from busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome derived on sale of old rubber trees. No material change has been brought about by introduction of rule 7A because rule 7A is applicable only when the grower of rubber trees himself carries on manufacturing activity on latex or coagulum sourced from rubber trees grown by him. The judicial principles laid down by the Supreme Court in the earlier decisions continue to hold good even after introduction of rule 7A. In tune with the Supreme Court decisions in the case of Kalpetta Estates Ltd. v. CIT reported in [1996] 221 ITR 601 (SC) and in the case of Commissioner of Agricultural Income-tax v. Kailas Rubber and Co. Ltd. reported in [1966] 60 ITR 435 (SC), I hold that no income charge able to tax accrued on sale of old and unyielding rubber trees.' 15. We notice that the learned Commissioner of Income-tax (Appeals) has taken the view with regard to the application of rule 7A, which is identical with the view expressed by us in the earlier paragraph, i.e., it applies only to a person who carries on the combined activity of growing rubber trees and also manufacturing or processing of field latex or coagulum obtained from rubber plants. The dominant purpose of growing rubber t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... returned a long-term capital loss of ₹ 58,66,409. However, the Assessing Officer took the view that the cost of acquisition as on April 1, 1981 would be negligible as the trees would have been young saplings at that point of time. Accordingly, the Assessing Officer considered 30 per cent. of the sale price as the indexed cost of acqui sition and after deducting the same from the sale price, the Assessing Officer treated the balance amount (i.e. 70 per cent. of sale price) as the long-term capital gains. 18. Before the learned Commissioner of Income-tax (Appeals), the assessee relied upon the decision of the hon'ble Supreme Court in the case of State of Kerala v. Karimtharuvi Tea Estate Ltd. [1966] 60 ITR 275 (SC) to submit that the Grevelia trees constitute capital asset and hence the amount realised on its sale would constitute capital receipt. The assessee also relied upon the decision of hon'ble Calcutta High Court in the case of CIT v. Kanan Devan Hills Produce Company Ltd. [1993] 200 ITR 453 (Cal), wherein the court has held that the profit derived from sale of old and useless Grevelia trees was not taxable under the Central Income-tax as they have to be cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Estates Ltd. v. CIT [1996] 221 ITR 601 (SC). The Assessing Officer has also taken support from the decision of the hon'ble apex court in the case of CIT v. B. C. Srinivasa Setty [1981] 128 ITR 294 (SC). Having taken such a consistent stand over the years, the Assessing Officer has changed his stand in the instant year and has proceeded to assess the capital gain on sale of Grevelia trees. In our view, the legal posi tion with regard to the taxability of the old Grevelia trees, which was discussed at length in the earlier assessment orders, cannot be changed in the year under consideration, merely because the present Assessing Officer has a different view. It is pertinent to note that the Assessing Officer has not brought on record any new fact or any new legal view which would compel him to change the view that was con sistently taken in the earlier years. Accordingly we are of the view that the learned Commissioner of Income-tax (Appeals) was right in adhering to the view taken by the tax authorities in the preceding years. Accordingly, we uphold his order on this issue. 18. Before us, the learned Departmental representative could not furnish any material/order to show tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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