Case Law Details
E.Palaniappan Vs ITO (Madras High Court)
In a recent ruling Madras HC decided the issue in favour of revenue that the essential characteristic of sugarcane in its original form, stands converted after processing, into jaggery and both the commodities are different and distinct from one another.
The issue pertains to whether ‘gur’ and ‘jaggery’ as per Schedule III of the Tamil Nadu General Sales Tax Act, 1959 are different commodities or whether they are one and the same for the purpose of determining taxability of the profits from sale of jaggery.
Assessee argued that the product which had been sold is sugarcane which was an agricultural commodity and not jaggery.
Finally, HC concluded that the Tribunal has decided the issue adverse to the assessee holding that profits from sale of jaggery will be taxable, as such activity has no nexus with agricultural operations. The assessment order categorically records that the assessee was in possession of machinery to convert sugarcane into jaggery. Assessee was unable to corroborate its submission that the sales effected to third parties was of sugarcane and not jaggery. Assessee did not argue that the commodity sold was sugarcane and not jaggery but instead of that he has only been keep on about the distinction between ‘gur’ and ‘jaggery’, contending that the two are different commodities.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
This Tax Case (Appeal) has been filed by the assessee/appellant challenging the order passed by the Income Tax Appellate Tribunal (in short ‘Tribunal’) for assessment year (AY) 2004-05. The substantial questions of law admitted for resolution are as follows:
“1.Whether on the facts and circumstances of the case, the Tribunal was right in law in holding that the profit from the sale of jaggery falls beyond the ken of agricultural income?
2.Whether on the facts and in the circumstances of the case, the Tribunal was right in ignoring a contrary decision exists by the Bombay High Court in the judgment reported in 82 ITR 71 (Bombay) CIT Vs H.G.Date?
3.Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in ignoring item 81 of Part ‘B’ in the third schedule to the Tamil Nadu General Sales Tax Act showing the difference between the jaggery and gur?”
2. The order of the Tribunal is dated 08.11.2021. The grounds raised by the appellant related to whether ‘gur’ and ‘jaggery’ as per Schedule III of the Tamil Nadu General Sales Tax Act, 1959 (in short ‘Act’) are different commodities or whether they are one and the same for the purpose of determining taxability of the profits from sale of jaggery.
3. The Tribunal has decided the issue adverse to the assessee holding that profits from sale of jaggery will be taxable, as such activity has no nexus with agricultural operations. Other orders passed by the Tribunal on the identical issue have been followed.
4. Before us, Mr.Niranjan Rajagopalan, learned counsel for the appellant advances a plea that, in fact, the product sold had been sugarcane which was an agricultural commodity and not jaggery. However, it is too late in the day to entertain this plea, as there are findings in the orders of the lower authorities to indicate that this issue has been looked into in detail and found against the assessee, even at the stage of assessment.
5. The assessment order categorically records that the assessee was in possession of machinery to convert sugarcane into jaggery. It also records a categorical finding that the assessee was unable to corroborate its submission that the sales effected to third parties was of sugarcane and not jaggery.
6. We also find that no ground has been taken, either before the first and second appellate authorities, pursuing the stand that the commodity sold was sugarcane and not jaggery. The assessee has only been harping on the distinction between ‘gur’ and ‘jaggery’, contending that the two are different commodities.
7. The specific point raised before us, that the sales effected are of sugarcane and not jaggery has thus reached finality even at the stage of assessment and the point canvassed now does not arise from the order of the Tribunal. This argument is thus rejected.
8. That apart, the appeal before us has been filed by E. Palaniappan in the capacity of Kartha of a Hindu Undivided Family (HUF). For the earlier assessment year, this very issue was the subject matter of appeal in T.C.(A) Nos.1467 and 1468 of 2008 in the case of the very same assessee E. Palaniappan, in the capacity of individual.
9. After a detailed discussion and relying on various judgments [CIT v H. G. Date (1971) 82 ITR 71, Commissioner of Income-Tax v Kirloskar Bros. Ltd (181 ITR 523), Krishi Utapadan Mandi Samiti and another v M/s. Shankar Industries and Others [(1993) supp (3) SCC 361], Banarsi Das Gupta v Commissioner of Income Tax ((1977) 106 TTR 804)], this Court has come to the conclusion that the essential characteristic of sugarcane in its original form, stands converted after processing, into jagerry and both the commodities are different and distinct from one another.
10. In light of the aforesaid discussion, the substantial questions of law are answered against the assessee and in favour of the revenue. This Tax Case (Appeal) is dismissed. No costs.
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