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2017 (7) TMI 531 - AT - Income TaxCess on green leaf - allowable expenditure - whether directly attributable to core agriculture activities which is taxable under state agriculture income tax, beyond the purview of Central Income Tax ? - Held that - The issue is concluded by the decision in the case of CIT vs AFT Industries Ltd. (2004 (7) TMI 81 - CALCUTTA High Court) where the amount paid as cess was held as eligible for deduction in computing the composite income under Rule 8 of I.T. Rules. This issue is, therefore, decided in favour of the assessee The fact that the SLP is pending before the Hon ble Supreme Court against the decision of the Hon ble Calcutta High Court in respect of AFT Industries Ltd. vs CIT (supra) will not have any effect since the Hon ble Apex Court has neither set aside the orders of the Calcutta High Court nor granted any stay. The learned counsel for the Assessee also brought to our notice the decision of the Hon ble Supreme Court in the case of CIT Vs. M/S.Apeejay Tea Co. Ltd. 2015 (8) TMI 1260 - SUPREME COURT wherein the Hon ble Supreme Court has upheld view as was taken in the case of AFT Industries Ltd. (supra). In view of the above, the appeal by the revenue is dismissed.
Issues:
- Allowability of Cess on green leaf as expenditure for computation of composite income from tea business. Analysis: The appeal by the Revenue was against the order of CIT(A)-IV, Kolkata related to A.Y.2009-10, specifically challenging the allowance of Cess on green leaf as an expenditure for computing income from the manufacture and sale of tea. The Assessee, a tea company, argued that the entire green leaf cess should be deducted before applying Rule 8(1) of the Income Tax Rules, where 40% of the income is deemed taxable. The AO contended that the Cess on green leaf, attributable to growing tea, should not be allowed as a deduction. However, the CIT(A) relied on the decision of the Calcutta High Court in AFT Industries Ltd. vs CIT, holding that the Cess should be allowed as a deduction before applying Rule 8(1). The Tribunal considered the arguments and the precedents cited. It noted that the issue was settled by the Calcutta High Court's decision in AFT Industries Ltd. vs CIT, where the Cess on green leaf was deemed eligible for deduction in computing composite income under Rule 8 of the Income Tax Rules. The Tribunal upheld the CIT(A)'s order, emphasizing that the pending SLP before the Supreme Court did not impact the decision, as there was no stay or reversal of the High Court's ruling. Additionally, the Tribunal referenced the Supreme Court's decision in CIT Vs. M/S.Apeejay Tea Co. Ltd., which supported the view taken in the AFT Industries Ltd. case. Consequently, the appeal by the Revenue was dismissed, affirming the allowance of Cess on green leaf as an expenditure for computing the composite income from the tea business. In conclusion, the Tribunal's judgment favored the Assessee, confirming the deduction of Cess on green leaf before applying the taxable income percentage under Rule 8(1) of the Income Tax Rules. The decision aligned with the established legal precedents set by the Calcutta High Court and the Supreme Court, emphasizing the eligibility of the Cess as a deductible expense in determining the composite income from tea business activities.
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