TMI Blog2016 (3) TMI 325X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has come up in appeal under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the Act ) against an order of the Income Tax Appellate Tribunal, A- Bench, Kolkata dated 28th June, 2005 in ITA 1626/KOL/2004 for the assessment year 2000-01. By the order dated 17th November, 2005 a Division Bench of this Court admitted this appeal on the following substantial question of law:- I) Whether on a true and proper interpretation of Section 33AB of the Act and Rule 8 of the Income Tax Rules the deduction under Section 33AB of the Act is to be allowed while computing the income derived from sale of tea grown and manufactured by the seller which forms the composite income from sale of tea grown and manufactured by the seller and the apportionment in terms of Rule 8 of the Income Tax Rules between agricultural income and non-agricultural income should be made after the said deduction is allowed in the computation of composite income? Briefly stated the facts and circumstances of the case are as follows:- The assessee is a company engaged inter alia, in the business of growing, manufacturing and selling of tea in India and abroad. The assessee claimed a de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e business of growing and manufacturing of tea in India, the deduction under this Section has to be allowed from the composite income itself. The Assessing Officer is directed to allow the claim of deduction u/s 33AB at 5,10,97l/- on1y as per the Return of Income. Aggrieved by the order of the CIT(A) the revenue appealed before the Tribunal. The Tribunal by its order dated 28th June, 2005 partly allowed the appeal of the revenue. The Tribunal relied on an earlier order dated 28th February, 2005 in the case of M/s. Empire Plantation India Ltd. in ITA No.1600/KOL/2004 for the assessment year 2000-01 and held as follows:- Now coming to ground No.2 relating to allowance of deduction u/s.33AB from the composite income, we find that this issue is also is squarely covered by the said order of the Tribunal dated 28.2.2005. The Tribunal in that case after a detailed discussion on the issue and after analyzing several case laws on the subject decided the issue in favour of the department. The relevant portion from that order is reproduced below:- 25. Be that as it may, the correct and rationale meaning to later clause (b) of section 33AB is that the amount of deduction unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... :- 33-AB. Tea development account.-(1) Where an assessee carrying on business of growing and manufacturing tea in India has, before the expiry of six months from the end of the previous year or before furnishing the return of his income 1[whichever is earlier,- (a) deposited with the National Bank any amount or amounts in an account (hereafter in this section referred to as the special account) maintained by the assessee with that Bank in accordance with, and for the purposes specified in, a scheme (hereafter in this section referred to as the scheme) approved in this behalf by the Tea Board; or (b) deposited any amount in an account (hereafter in this section referred to as the Tea Deposit Account) opened by the assessee in accordance with, and for the purposes specified in, a scheme framed by the Tea Board (hereafter in this section referred to as the deposit scheme) with the previous approval of the Central Government, the assessee shall, subject to the provisions of this section;] be allowed a deduction (such deduction being allowed before the loss, if any, brought forward from earlier years is set off under Section 72) of- (a) a sum equal to the am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supreme Court in the case of CIT vs- Williamson Financial Services Ors., reported in (2008) 297 ITR 17(SC). He drew our attention to paragraph Nos. 38 and 41 of the judgment wherein the following views were expressed:- 38. Section 80HHC, inter alia, states that in computing the total income a deduction, to the extent of profits derived by the assessee from exports has to be taken into account. The important words are profits derived from the export. The word derived would mean derived from the source . That source has to be in section 14. Income covered by section 10(1), i.e. agricultural income, which is not chargeable to tax, does not fall in section 14 and, therefore, it will not fall under various computation sections commencing from section 15 to section 59. Section 14 classifies all income into five enumerated heads for the purpose of charge of income-tax and computation of total income. As stated hereinabove, exempted income is different from tax-free income . In the present case, we are concerned with both these types of income. Agricultural income falls in the category of exempted income. It is neither chargeable nor includible in the total income. On t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction cannot be allowed against the entire tea income. Mr. Khaitan submitted that the judgment in the case of CIT vs- Williamson Financial Services (supra) has no manner of application in deciding the issue which is before us. He submitted that the issue in Williamson Financial (supra) was with respect to deduction u/s.80-HHC of the Act which appears in Chapter VI-A of the Act and deals with deduction from gross total income. We have heard the submissions advanced by the learned advocates for the parties and perused the record. In Williamson Financial (supra) the assesse was engaged in growing, manufacturing and exporting of tea. The assesse claimed that deduction u/s.80-HHC was to be allowed against the entire tea income before applying Rule 8(1) of Income Tax Rules, 1962. The Supreme Court held that deduction u/s.80-HHC was to be allowed only from the taxable income which is determined after apportionment of the income from tea under rule 8(1). The Supreme Court while holding that s.80-HHC was not part of the provisions of the Act which deals with computation under the head Profits and Gains from Business observed as follows:- In Section 80-HHC a part of the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of business income Chapter IV of the Act deals with computation of total income . The subheading D under Chapter IV deals with computation of income under the head of Profits and gains of business or profession . Section 28 is the charging provision which identifies the income chargeable to income tax under the head Profits and gains of business or profession . Furthermore section 29 states that income referred to in section 28 shall be computed in accordance with the provisions contained in sections 30 to 43D. Therefore section 33AB is a part of the provisions under the Act which deals with computation of income under the head Profits and gains of business or profession . Hence according to Williamson Financial (supra) apportionment prescribed by Rule 8(1) can be applied only after deducting the allowance under Section 33AB from the composite income. Sub-section (1) of section 33AB states as follows:- Where an assessee carrying on business of growing and manufacturing tea the assesse shall...be allowed a deduction of (a) (b) a sum equal to twenty per cent of the profits of such business (computed under the head Profits and gains of business or p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn and manufactured by the seller in India shall be computed as if it were income derived from business. But, for the purpose of liability to tax under the Act, it is provided that only 40 per cent, of such income shall be deemed to be income liable to tax. According to us, this rule has nothing to do with the deduction provided under section 33AB(1) of the Act, which in clear terms provides that the deduction must be geared to the profits of the business of growing and manufacturing tea in India. In Mahavir Plantations (supra) the Kerala High Court relied on an earlier judgment of the same court in CIT v. C.W.S. (India) Ltd., reported in [2000] 246 ITR 278. The issue in C.W.S. (India) (supra) was whether deduction u/s.80-HHC was to be allowed before application of Rule 8(1). The Court in C.W.S. (India) answered the question in the affirmative and in favour of the assessee. However in view of the authoritative pronouncement by the Apex Court in Williamson Financial (supra) the judgment in C.W.S. (India) (supra) stands overruled. Nevertheless Mahavir Plantations (supra) remains unaffected as the Court came to the right conclusion on the issue which had arisen for determination ..... X X X X Extracts X X X X X X X X Extracts X X X X
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