TMI Blog2013 (6) TMI 803X X X X Extracts X X X X X X X X Extracts X X X X ..... n income derived from business and 40 per cent of such income is, in terms of the r. 8 of the IT Rules, 1962, is deemed to be income subject to the IT Act, 1961, whereas the balance 60 per cent of the income is treated as the agricultural income for the purpose of levy under the Assam Agricultural IT Act, 1939. In the asst. yr. 2004-05, the appellant submitted its return of inc6me claiming a sum of ₹ 2,73,40,080 as part of composite income before apportionment thereof under the r. 8 of the IT Rules, 1962. The income, as reflected by the appellant, included as under : Heads Amount (Rs.) Premium on import licence 1,20,25,812 Sale of scrap 2,12,218 Miscellaneous garden income 1,44,32,310 Excise duty 6,69,740 (ii) During the course of assessment proceeding, the appellant, vide its letter dt. 1st Dec., 2006, replied to the questionnaires for the assessment proceeding and gave details of the aforesaid receipts. However, the AO, vide order of assessment dt. 29th Dec., 2006, exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provides for computation of only those income, which have been derived from the sale of tea that are grown and manufactured by the seller, and, therefore, the miscellaneous receipts, in the present case, cannot be said to have been derived from the sale of tea grown and manufactured by the appellant. The CIT(A) also took the view that the miscellaneous receipts, in the present case, might be 'attributable to' the tea business, but it cannot be treated as income 'derived from' the tea business. The miscellaneous expenses, which the appellants had shown in the IT return, were, according to the CIT, not income derived from the activity of growing and manufacturing of tea and do not, therefore, bear direct nexus with the sale of the tea grown or manufactured by the appellant. The appellate authority further took the view that the composite income, referred to in r. 8, shall arise out of the core activity of growing and manufacturing of tea and must, therefore, directly relate to the operational activities of tea and not to extraneous activities thereof. With the reasonings, so assigned, the appeal was dismissed by the appellate authority. (v) Aggrieved by the order o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice that the appellant, as an assessee, had claimed four kinds of receipts as composite income before apportionment thereof under r. 8 of the IT Rules, 1962, these four receipts being, premium on import licence, amounting to ₹ 1,20,25,812, sale of scrap, amounting to ₹ 2,12,218, miscellaneous garden income, arising out of receipts of insurance claim, amounting to ₹ 1,44,32,310, and excise duty amounting to ₹ 6,69,740. The learned Tribunal further points out Ms. Hawelia, learned counsel, has committed manifest error of law in refusing to treat the income 'derived by' the assessee-appellant from the sale of import licence, amounting to ₹ 1,20,25,812, as the appellant's composite income before apportionment thereof under r. 8 of the IT Rules, 1962, in as much as the learned Tribunal failed to appreciate the fact that, as per s. 28(iiia) of the IT Act, 1961, profits on sale of a licence granted under the Imports (Control) Order, 1955, under the Imports and Exports (Control) Act, 1947, is chargeable to income-tax under the head 'Profits and gains of business or profession', and the same is an income 'derived from' the sale of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he composite income before apportionment under r. 8 of the IT Rules, 1962. 10. As regards exclusion of a sum of ₹ 6,69,740, on account of excise duty rebate, from the composite income before apportionment under r. 8 of the Rules, Ms. Hawellia, learned counsel, submits that the exclusion of the said sum of ₹ 6,69,740, from being treated as composite income, is wholly illegal and not tenable in law in as much as the learned Tribunal failed to note that the said sum of ₹ 6,69,740 related to excise duty rebate, which was deductible in computing the composite income paid by the appellant in terms of s. 28(iiic) of the IT Act, 1961, whereunder any duty of customs or excise, repaid or repayable as drawback to any person against exports under the Customs and Central Excise Duties Drawback Rules, is chargeable to income-tax under the head 'Profits and gains of business or profession'. Therefore, excise duty rebate, being of such a nature, as described hereinbefore, ought to be included, according to Ms. Hawellia, as the part of composite income before application of r. 8 of the IT Rules, 1962. 11. Based on the above submissions, Ms. Hawellia, learned counsel, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee-appellant has claimed to be its composite income, are, in law, composite income and fall within the ambit of r. 8 of the IT Rules, 1962 ? 15. For the purpose of correct appreciation and clarity, what needs to pointed out, at the very outset, is that the IT Rules, 1962 (hereinafter referred to as 'the Rules'), having taken note of the fact that an assessee may derive income partially from agriculture and partially from business, introduced a mechanism for the purpose of making assessment of income as 'derived from business' vis-a-vis income, which is treatable as agricultural income. Part II of the Rules deals with the determination of income derived from various sources. Under the heading 'D-Special cases', various incomes have been taken into account in order to show as to how they are to be computed and apportioned for the purpose of imposition of tax. Rule 7 of the Rules which falls under the heading 'D-Special cases', deals with income, which is partially agricultural and partially from business, and lays down as to what are the various components, which are to be taken into account for the purpose of assessment of a receipt treatable as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mports and Exports (Control) Act, 1947. (iiic) any duty of customs or excise repaid or repayable as drawback to any person against exports under the Customs and Central Excise Duties Drawback Rules, 1971. 19. From a bare reading of s. 28(iiia), it becomes clear that the profits on sale of a licence, granted under the Customs and Central Excise Duties Drawback Rules, 1971, are to be treated as income derived from the sale of tea grown and manufactured. Similarly, s. 28(iiic) provides that duty of customs or excise repaid or repayable as drawback to any person against exports under the Customs and Central Excise Duties Drawback Rules, 1971, has to be treated as an income chargeable under the IT Act, within the purview of the head of 'Profits and gains of business and profession'. 20. In the present case, the assessee-appellant, in its annual return of income, showed the premiums paid (sic) by it on import licence, amounting to ₹ 1,20,25,812, as a composite income. It is noteworthy, in this regard, that s. 28(iiia) clearly lays down that the profits and gains derived from business and profession' are chargeable to income-tax under the head of 'Profits a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could have been refused to be treated as composite income of the assessee-appellant before apportionment thereof in terms of r. 8 of the Rules. 24. Turning to the assessee-appellant's claim of miscellaneous garden income amounting to Rs, 1,44,32,310. arising out of the amount received from insurance claim, lodged with the insurer on account of loss caused to the business of tea, finished plantation, etc., due to flood and heavy rains, it is noteworthy that the amount paid, in terms of the insurance claims, in the circumstances as indicated hereinbefore, and in respect of the items, as mentioned hereinbefore, ought to be treated as part of the composite income of the assessee-appellant before apportionment thereof under r. 8. 25. What surfaces from the above discussion that the assessee-appellant's claim for the sum of ₹ 1,20,25,812 as receipt from premium on import licence, ₹ 2,12,218, as receipt from sale of scrap, ₹ 1,44,32,310 as the amount receipt from miscellaneous garden income and ₹ 6,69,740 as receipt from excise duty, were but the income derived from the business of tea, or from the activities of growing, manufacturing and selling of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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