2018 (2) TMI 1143 - AT - Income Tax

Disallowance on account of levy of cess on green leaves - Held that - As relying on Commissioner of Income Tax Versus AFT Industries Ltd. 2004 (7) TMI 81 - CALCUTTA High Court Cess levied on the production of green leaf would come under the purview of composite income. Thus, ground no-1 raised by the revenue is, accordingly dismissed. Addition made on account of Section 80IE (2)(ii) - only plant and machinery of manufacturing is to be considered - Held that - It is observed that the assessee has two processes in tea business i.e. growing of tea and manufacturing of tea. The assessee grows tea in its own gardens and manufactures tea from such produce. The case of the assessee is that this deduction is available in case a assessee manufacturing of tea and hence only plant and machinery of manufacturing is to be considered. Whether the opening valuations of plant and machineries of water supply system and irrigation system as shown under farm account is to be considered the part and parcel of the value of plant and machinery as on 01.04.2009 for calculating the percentage of addition to plant and machinery for claiming deduction u/s 80IE or not is the issue before us. We find that the water supply system and irrigation system admittedly are not part of tea manufacturing processes. Therefore, the said opening valuation of said machineries should not be considered for the purpose of claiming deduction u/s 80IE of the Act. - Decided against revenue

Summary

Issues:
1. Delay in filing appeal by Revenue.
2. Deletion of disallowance on account of levy of cess on green leaves.
3. Deletion of addition made on account of Section 80IE (2)(ii) of the Act.

Issue 1: Delay in filing appeal by Revenue
The appeal was filed by the Revenue against the order passed by the Ld. CIT(A)-2, Kolkata for assessment year 2010-11 with a delay of 17 days. The Ld. DR submitted that the delay was due to administrative constraints and not deliberate. After perusing the affidavit and hearing both parties, the Tribunal condoned the delay as reasonable and bonafide, allowing the appeal to be admitted.

Issue 2: Deletion of disallowance on account of levy of cess on green leaves
The AO disallowed a payment under green leaf cess as non-deductible expenditure, leading to an appeal by the assessee. The CIT(A) deleted the addition based on the decision of the Hon'ble High Court of Calcutta, which was further supported by the dismissal of the SLP by the Supreme Court. The Tribunal upheld the decision, stating that the cess levied on green leaf production falls under composite income, dismissing the Revenue's appeal.

Issue 3: Deletion of addition made on account of Section 80IE (2)(ii) of the Act
The assessee claimed deduction under Section 80IE(6) of the Act, which was denied by the AO due to non-compliance with certain conditions. The CIT(A) considered the relevant machineries for growing and manufacturing processes separately, allowing the deduction. The Tribunal upheld the CIT(A)'s decision, stating that the water supply and irrigation systems, not part of the manufacturing process, should not be considered for claiming the deduction under Section 80IE. The Revenue's appeal on this issue was dismissed.

In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the decisions made by the CIT(A) regarding the issues of delay in filing the appeal, deletion of disallowance on account of levy of cess on green leaves, and deletion of addition made on account of Section 80IE (2)(ii) of the Act.