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Commissioner of Income Tax, Kol-II Versus M/s Moran Tea Co. Ltd.

2016 (2) TMI 278 - CALCUTTA HIGH COURT

Addition of cess on green leaf - whether production of green leaf which is 100% agricultural activity and not an admissible deduction under income chargeable ? - Held that:- In Jorehaut Group Ltd. -Vs- Assistant Commissioner of Income-Tax reported in (2006 (12) TMI 98 - GAUHATI High Court) followed the view expressed in Assam Co. Ltd. v. Union of India, [2005 (3) TMI 63 - GAUHATI High Court] wherein it was held that the deduction on cess paid on green tea leaves has to be allowed on 100 per cent .....

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008. The relevant assessment year is 1999-2000. The solitary question of law which arises for determination in the instant case is as follows:- Whether on the facts and in the circumstances of the case the Tribunal was justified in law in deleting the addition of cess on green leaf for an amount of ₹ 56,92,991/- when cess is payable only on production of green leaf which is 100% agricultural activity and not an admissible deduction under income chargeable to tax and more so when judgment r .....

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tible as expenditure for determination of 100% of composite income of growing, manufacturing and selling of tea. The assessee had claimed the expenditure in the profit and loss account as a part of the business expense. The assessing officer by his order dated 19th December 2006, completed the assessment under Section 143(3)/147 of the Income Tax Act and disallowed the expenditure of ₹ 56,92,991/- on account of cess on green leaf paid by the assessee. The reasoning given by the assessing o .....

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e of the judgment of this court in CIT -Vs- AFT Industries Ltd reported in 270 ITR 167. The revenue appealed unsuccessfully before the Tribunal. The revenue is, once again, in appeal before this Court. To fully appreciate the rival contentions it is necessary to reproduce Rule 8 of the Income Tax Rules, 1962, which reads as follows:- "Income from the manufacture of tea. 8. (1) Income derived from the sale of tea grown and manufactured by the seller in India shall be computed as if it were i .....

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lause (30) of section 10, is not includible in the total income." Mr. Das learned Advocate appearing for the assessee relied on the judgement of this Court in the case of AFT Industries (supra) which has been approved by the Apex Court in the case of CIT -Vs- M/s. Apeejay Tea Co. Pvt. Ltd. (Civil Appeal No.1105 of 2006) vide order dated 6th August 2015. He contended that the expenditure on cess should be allowed as a deduction before computing the composite income under Rule 8 and the appor .....

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is 60% of the composite income. In AFT Industries (supra) the Division Bench held as follows:- "3…it appears that in respect of computation of income of tea grown and manufactured, a fiction has been created under which 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 after the computation of the total income, the apportionment is to be made detennining 60% as agricultur .....

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