2011 (8) TMI 302 - AT - Income Tax

Agriculture income - sale of green tea leaves - revenue alleges that the assessee has not done the basic operation of the cultivating the tea bushes - Held that - the activity of the assessee in growing tea and sale of green tea leaves is an agricultural activity irrespective of the fact whether it is carried on leased land or self-owned land. Since no part of the expenses as disclosed by the assessee or other details have been disputed by the Assessing Officer, therefore, while reversing the orders of authorities below, we direct the Assessing Officer to accept the declared net income on account of sale of green tea leaves (after deducting expenses as shown) as income from agriculture. Levying interest u/s 234B - the Assessing Officer is directed to charge 234B interest on finally assessed income on giving effect to this order of the Tribunal. Payments to PF and ESI contribution - Clause (va) of sub-section (1) of section 36 of the Income-tax Act, 1961, makes clear that the amounts actually paid by the assessee on or before the due date for filing the return under section 139 are allowable deductions - Decided in favour of assessee.

Issues Involved:
1. Classification of income from sale of green tea leaves as agricultural income or income from other sources.
2. Levy of interest under Section 234B of the Income Tax Act.
3. Disallowance of remittances made to the Central Government on account of PF and ESI contributions.

Detailed Analysis:

1. Classification of Income from Sale of Green Tea Leaves:
The primary issue was whether the income earned by the assessee from the sale of green tea leaves should be classified as agricultural income or income from other sources. The Assessing Officer concluded that the income did not constitute agricultural income because the assessee had leased land with tea bushes and had not engaged in basic agricultural activities such as sowing seeds or tilling the land. This conclusion was based on the Supreme Court's judgment in CIT v. Raja Benoy Kumar Sahas Roy (1957) 32 ITR 466. The CIT(A) upheld this view, stating that the assessee merely tended the bushes and harvested the leaves, without performing primary agricultural operations.

The assessee argued that the income from the sale of green tea leaves should be considered agricultural income, as they carried out various agricultural operations on the leased land. They cited the Supreme Court case Union of India and Another v. Belgachi Tea Co. Ltd. and Others (304 ITR 1), which held that income from the sale of green tea leaves is agricultural income.

The Tribunal found that the assessee had indeed performed significant agricultural activities and followed the precedent set by the Supreme Court in the Belgachi Tea Co. case. Therefore, the Tribunal reversed the orders of the lower authorities and directed the Assessing Officer to treat the income from the sale of green tea leaves as agricultural income.

2. Levy of Interest under Section 234B:
The second issue involved the levy of interest under Section 234B. The assessee's counsel conceded that the charging of interest under Section 234B is consequential and should be based on the income finally assessed after giving effect to the Tribunal's order. The Tribunal directed the Assessing Officer to charge interest under Section 234B based on the finally assessed income.

3. Disallowance of Remittances for PF and ESI Contributions:
For the assessment year 2001-02, the assessee challenged the disallowance of remittances made to the Central Government on account of PF and ESI contributions. The assessee argued that these payments were made within the time allowed under the relevant enactments and before the due date for filing returns under Section 139(1). The assessee relied on the Karnataka High Court's decision in CIT v. Sabari Enterprises (298 ITR 141), which held that contributions made before the due date for filing returns are allowable deductions.

The Tribunal, following the Karnataka High Court's decision, ruled in favor of the assessee and directed the deletion of the disallowance made on this account.

Conclusion:
The Tribunal allowed both appeals of the assessee. The income from the sale of green tea leaves was classified as agricultural income, the levy of interest under Section 234B was directed to be consequential, and the disallowance of PF and ESI contributions was deleted.

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