Case Law Details

Case Name : Tata Global Beverages Ltd Vs Deputy Commissioner of Income-tax (ITAT Kolkata)
Appeal Number : I.T.A No.511/Kol/2010
Date of Judgement/Order : 03/02/2017
Related Assessment Year : 2004-05
Courts : All ITAT (4197) ITAT Kolkata (263)

Amount Paid as Cess on Green Leaf is Deductible from Composite Income and not from mere agricultural income

The brief facts of this issue is that the ld AO observed that the assessee had debited a sum of Rs. 369.88 lakhs under the head ‘Cess on green leaf’ which were paid to Governments of Assam and West Bengal.

The ld AO placed reliance on the decision of the Hon’ble Gauhati High Court in the case of Jorhat Group Ltd vs Agricultural ITO reported in 226 ITR 622 (Gau) wherein it was held that the cess on green leaf is deductible from the agricultural income only and not from the composite income.

The assessee placed reliance on the decision of the Hon’ble Calcutta High Court in the case of CIT vs A.F.T. Industries Ltd reported in (2004) 270 ITR 167 (Cal) wherein it was held that the same was to be fully allowed from the composite income. As the appeal against the order of the Hon’ble Calcutta High Court was preferred before the Hon’ble Apex Court by the revenue, the ld AO in order to keep the matter alive thought it fit to make the disallowance and accordingly made the same. The ld CITA however followed the decision of the Hon’ble Jurisdictional High Court relied upon by the assessee supra and deleted the disallowance. Aggrieved, the revenue is in appeal before us on the following ground :-

“1. That on the facts and circumstances of the case, Ld. CIT(A), Kolkata has erred in law in deleting the addition of Rs.3,69,88,000/- on account of cess on green leaf without considering the fact that expenses on account of cess on green leaf is related to 100% agricultural operation and SLP is pending before the Hon’ble Supreme Court against the decision of Calcutta High Court in the case of AFT Industries Ltd. -vs- CIT (270 ITR 167) in the light of which Ld. CIT(A) decided the issue in favour of the assessee.”

The ld DR fairly agreed that the issue decided by the order of the Hon’ble Calcutta High Court in the case of AFT Industries Ltd supra have been approved by the Hon’ble Apex Court in the case of M/s Apeejay Tea Co Ltd in Civil Appeal No. 1105 of 2006 and accordingly agreed with the order of the ld CITA in this regard.

We have heard the rival submissions. We find that the issue is squarely covered by the decision relied upon supra in favour of the assessee and essence of the decision is already discussed in the facts above. Respectfully following the same, we dismiss the Ground raised by the revenue.

Disallowance of Rs. 5,50,000/- u/s 40A(9) of the Act on account of expenditure incurred towards employees recreation club allowable if routed through employee recreation club

The brief facts of this issue is that the ld AO observed that the assessee had paid a sum of Rs. 5,50,000/- to its Employees Recreation Club. The ld AO sought to disallow the same in the assessment for which show cause notice was issued to the assessee. In response to the show cause notice, the assessee replied that a sum of Rs. 5,50,000/- was spent towards employee welfare activities i.e Annual sports / employee holiday home etc. This expenditure was routed through employee recreation club and the same are not in the nature of any contribution or towards setting up or formation of any trust, society or any AOP etc and hence does not fall under the ambit of disallowance u/s 40A(9) of the Act.

Assessee relied on the Tribunal, Kolkata Bench in the case DCIT vs Chloride Industries Ltd reported in 76 ITD 1 (Kol) which has deleted the addition by observing as under:

“The Commissioner (Appeals) had deleted the said addition by following the Tribunal’s order in the case of DCIT vs APE Belliss India Ltd (IT Appeal Nos. 527 to 531 (Cal) of 1989) . The Tribunal observed that section 40A(9) is not applicable because this section stands for any funds, institutions, where the assessee made the subscription for the purpose of welfare of the employees. That means that there should be a complete identity between the donor and the done. Here staff recreation club and the staff club were a part and parcel of the organization itself and they were given money by way of subsidy, an age old practice . In various Government departments also subsidies are given as a matter of course for carrying on welfare activities. So finally the Tribunal upheld the order of the Commissioner (Appeals) who had deleted the said addition. By respectfully following the earlier order of the Tribunal there was no infirmity with the order of the Commissioner (Appeals) who had rightly deleted the said additions pertaining to the staff welfare.

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