TMI Blog2012 (8) TMI 1130X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee, a company in the business of, inter alia, growing and manufacture tea in India, by the Assessing Officer (AO) in computing the assessee s business income from the said activity, since deleted by the first appellate authority per the impugned order. Though, only forty per cent (40%) of the composite income from growing and manufacturing tea is deemed as a business income, so that impugned disallowance would have an effect on taxable income only to that extent (i.e., 40%), the Revenue, by indicting the assessee s claim, has indirectly held that the entire amount of cess under reference is to be deducted from the balance 60% of the composite income, deemed as agricultural income, being relatable to agricultural produce in the form of green tea leaves . The issue has admittedly been decided by the hon ble jurisdictional High Court in the case of CIT v. A.F.T. Industries Ltd. (2004) 270 ITR 167 (Cal). However, the AO has yet made the impugned disallowance on the ground that said decision is under challenge by the Revenue before the hon ble apex court. The ld. CIT(A), however, has allowed relief on the basis of said decision, which stands followed by the Tribunal in the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ltural portion of the total activity. However, its deduction from the composite income amounts to a proportionate reduction of the business income, thus, leading to anomaly. Rule 8 of the Income-tax Rules, 1962 ( the Rules hereinafter), which deems the agricultural and business components of the composite activity of growing and manufacturing tea at 60% and 40% thereof respectively, has no application in the instant case. Reference was made to a host of case laws by the hon ble apex court toward the scope of powers available to the Union and State Legislatures in levying taxes on income. None of the decisions cited in favour of the assessee address these issues, so that it becomes incumbent to do so, being pertinent to the issue under reference. 4.2 The Ld. AR, on the other hand, would rely on the cited decision in the case of A.F.T. Industries Ltd. (supra), as well as that by the tribunal in the assessees s own case for A.Y. 2004-05. Further, the decision by the hon ble court in the case of Jorhaut Group Ltd. v. Agrl. ITO (1997) 226 ITR 622 (Gau.) was no longer good law, having been since over-ruled, though he did not cite the decision over-ruling the same. 4.3 In rejoinder ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cess under reference is a tax on certain categories of land; purely a state subject. The same seeks to tax the productivity of the said land by taxing the annual production of specified lands, which is further determined in case of tea estates with reference to the quantity (by weight) of the green tea leaves produced thereon during the year (after allowing deduction for quantity as specified under the provisions of said Act or the rules framed thereunder). Continuing further, without doubt, the said levy would constitute an incidental cost of the composite activity of growing and manufacturing tea, where grown in the state of Assam, and would thus qualify for inclusion in computing the income from the composite activity under rule 8, which has to be considered as one, integrated, business activity, so that the provisions of the Act for computation of business income, as well as principles of commercial accounting, would apply. Why, the said levy would form part of the cost and, consequently, qualify for inclusion in the valuation, of plucked - partly or completely processed unsold green tea leaves in inventory as at the year-end? The tax, at whatever stage of the composite ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h non-recognition of income on the relevant transactions; interest accruing (in most circumstances) by lapse of time, could hold is the failure of the assessee-company to establish its claim u/s. 43D read with rule 6EB. The same is a non obstante provision, prescribing the parameters for a loan or an advance to be considered as sticky and non-performing, stating the law in the matter, and against which there could be no estopple. We observe no finding qua section 43D, which has an application in the instant case. In fact, this is the only aspect of the argument/s raised by the ld. DR, who sought to impugn the action of the ld. CIT(A) on the ground of inapplicability of the real income theory, relying on the decision by the hon ble apex court in the case of Southern Technologies Ltd. v. Jt. CIT (2010) 320 ITR 577 (SC), particularly considering that the same was not available at the time of the decision by the tribunal in the assessee s case for A.Y. 2004-05, that is valid. The concept of real income theory is very much in force and applicable, and in our clear view there has been no dilution in the law in its respect, i.e., as clarified by the apex court in, among others, the cases ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same in any manner it deems fit, and the utilization, stated to be for the construction of an auditorium, which is again unsubstantiated, is a degree apart, i.e., secondary in nature, and by itself of little relevance. In the cited case, the purpose of the expenditure was undisputedly the repairs of a building, which was used as a recreation club for the assessee s employees, so that there was a clear nexus of the payment, clearly revenue in nature, with the assessee s business. The ld. AR, on the other hand, would place reliance on the decision in the case of Madras Refineries Ltd. v. CIT (2004) 266 ITR 170 (Mad). 9. We have heard the parties and perused the materials on record. The facts of the case, even as observed by the tribunal in the assessee s own case for A.Y.2006-07 (in ITA No.2248/Kol/2010 dated 31-01-2012/copy on record), relied upon by the ld. CIT(A), are not clear, as would also be apparent from the arguments advanced before us by the ld. DR. Even as, again as stated by him, the law in the matter is trite; the deduction in the instant case being claimed u/s. 37(1) of the Act, the onus to establish its claim where-under, as in respect of all claims preferred pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eof as met directly or indirectly by any person/s or authority. Actual cost of the relevant plant and machinery would thus only be nil, warranting no claim toward depreciation. The ld. AR, on the other hand, placed reliance on the decision by the Tribunal in the assessee s own case for A.Y. 2004-05 (in ITA No.1573/Kol/2008 date 24-10-2008 / copy on record). 12. We have heard the parties and perused the material on record. The tribunal s decision in the assessee s case for A.Y. 2004-05 is on record. The tribunal decided the same by following its earlier decision in the case of CIT v. Goodrick Group Ltd. (ITA No. 255/Kol/2004 dated 10-06-2005). The basis of its decision, as stated by the tribunal vide it s order in the assessee s case for A.Y. 2004-05 (at para 24-25 at page 6), is that though the purchase of the relevant assets is funded out of withdrawals from NABARD, depreciation is not an expenditure but only a statutory allowance. Though we observe no reference to any decision by any higher authority by either party before us; the same being the consistent view of the tribunal and, further, in the assessee s own case, respectfully following the same we confirm the deletion of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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