2011 (9) TMI 1134 - AT - Income Tax

Summary

Issues involved: Appeal filed by Revenue against CIT(A) order regarding deletion of disallowance of Cess payable by assessee company to State Government for cultivation of green tea leaves.

Issue of disallowance of Cess: The AO disallowed &8377; 1,75,78,282/- as Cess on Green leaf debited to Profit and Loss account, stating it should be deducted against agricultural income only as per Rule 8 of Income Tax Rules. The AO observed that the assessee claimed the entire expenditure before applying Rule-8, hence disallowed the proportionate claim against non-agricultural component. The CIT(A) disallowed the disallowance following the Calcutta High Court's decision in AFT Industries Ltd. vs CIT (270 ITR 167).

Arguments and Decision: The Revenue's DR supported the AO's order, while the assessee's counsel relied on CIT(A)'s decision. The Tribunal upheld CIT(A)'s order, citing the Calcutta High Court's decision in CIT vs AFT Industries Ltd., where Cess payment was allowed as deduction in computing composite income under Rule 8 of IT Rules. The Tribunal also mentioned a similar case of M/s. Empire Plantations (India) Ltd. where the claim was allowed. The fact that SLP is pending before the Supreme Court against the Calcutta High Court's decision in AFT Industries Ltd. case was noted, but it was stated that it does not affect the current decision as the Supreme Court has not set aside the High Court's orders or granted any stay.

Conclusion: The appeal of the Revenue was dismissed, and the order was pronounced on 05.09.2011.