2015 (8) TMI 176 - HC - Income Tax

Computation of the quantum of deduction u/s 33AB - legislative purpose, purposive interpretation versus literal construction - activities of sale of tea manufactured out of bought green leaves and sale of purchased tea after blending with the tea manufactured by the appellant were other business activities or were not part and parcel of the business of growing and manufacturing tea - Held that - As decided in case of Goodricke Group Ltd. vs. Commissioner of Income-Tax(No.1) 2011 (4) TMI 863 - CALCUTTA HIGH COURT the assessee has utilized his entire tea grown by it in its garden and by blending the same with some other amount of tea purchased from outside has manufactured the final product and, thus, the entire profit arising out of such manufacture will get the benefit of section 33AB notwithstanding the fact that for the purpose of blending, some small amount was purchased from outside. It appears that the purchased amount is very trifling in comparison to the amount grown by the assessee and thus, it is not a case where it can be alleged that the purpose of maintenance of the garden by growing insignificant amount of tea in comparison to the final product is only a device to get the benefit of the section. In our opinion, a purposive interpretation of the aforesaid provision should be made instead of literal construction of the same otherwise, the legislative purpose will be frustrated and in rare cases, where a very few fortunate assessees who grow and manufacture different varieties of tea and consequently, do not require purchase of any tea for blending with the final product, can only get the benefit of section 33AB of the Act - Decided in favour of assessee.

Summary

Issues: Interpretation of Section 33AB of the Act

Analysis:
The High Court of Calcutta addressed the interpretation of Section 33AB of the Act in this judgment. The appellant pressed on the question regarding the justification of the Tribunal's decision in excluding profits arising from certain activities for the purpose of deduction under Section 33AB. The Court referred to a previous judgment in the case of Goodricke Group Ltd. vs. Commissioner of Income-Tax(No.1) to provide clarity on the matter. The previous judgment highlighted the requirement that the assessee must grow and process tea leaves to qualify for the deduction under Section 33AB. It emphasized that the purchased tea for blending should form part of the manufacturing process of the final tea product. The judgment differentiated scenarios where the substantial tea is grown by the assessee versus purchased from outside, outlining the conditions for eligibility for the deduction.

The Court examined the case at hand where the assessee utilized tea grown in its garden and blended it with a small amount of purchased tea to manufacture the final product. It noted that the purchased tea was insignificant compared to the amount grown by the assessee, ensuring compliance with the requirements of Section 33AB. The Court emphasized the need for a purposive interpretation of the provision to fulfill the legislative intent and prevent misuse. The revenue/respondent did not contest the applicability of the previous judgment to the current case. Consequently, the Court answered the question in the negative, favoring the assessee and allowing the appeal to that extent.

In conclusion, the judgment provided a detailed analysis of the interpretation of Section 33AB of the Act concerning the activities related to growing and manufacturing tea. It clarified the conditions under which profits from such activities could be excluded for the purpose of deduction. By referencing a previous judgment and applying a purposive approach to interpretation, the Court ensured that the legislative purpose was upheld while granting relief to the assessee in this case.