Case Law Details
Stewart Holl (India) Limited Vs Asistant Director of Income Tax (ITAT Kolkata)
The case began with the assessee, Stewart Holl (India) Ltd, appealing against the Commissioner of Income Tax (Appeals) order that confirmed the entire disallowance of Rs. 2,51,10,171/- pertaining to late deposit of employees’ share towards Provident Fund contribution. The assessee contended that the income should be computed after making the disallowance, in accordance with Rule 8(1) of the Income Tax Rules, 1962. This rule states that the income from the business of tea growing and manufacturing is computed as 40% of total income determined under the Act.
The case ascended to ITAT Kolkata, which after hearing the contentions and examining the case material, upheld the assessee’s argument. The Tribunal ordered that the income should first be computed after making the disallowance, and only 40% of the resultant income should be treated as taxable income, as per Rule 8(1) of the Income Tax Rules, 1962.
Conclusion: The ITAT’s ruling sets a significant precedent, affirming that the income computation must occur post disallowance and only 40% of the resultant income is to be treated as taxable. The decision provides clarity in income tax computation, particularly for businesses in the tea growing and manufacturing sector. With this order, the Tribunal has undoubtedly left an indelible mark on the landscape of tax litigation in India.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
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