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TMI Blog2009 (5) TMI 124X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed in the assessee's own case for the AY's 2001-02 to 2003-04. HELD THAT:- It is true that the Tribunal has taken a view, in favour of the Revenue, in the assessee's own case for the earlier AY's, viz., 2001-02 to 2003-04. The hon'ble High Court of Kerala in the case of CIT v. South India Corporation Ltd.[ 1999 (10) TMI 44 - KERALA HIGH COURT] has held that wherever the payments were not made within the due dates specified under the respective Acts, the deduction could not be allowed. It is in the light of that judgment that the Tribunal has taken such a view. But the Gauhati High Court in the case of CIT v. George Williamson (Assam) Ltd.[ 2006 (6) TMI 71 - GAUHATI HIGH COURT] has held that payments made to the provident fund etc., after the close of the accounting period but before the due date for filing of the return is entitled for deduction. Therefore, we allow this ground of the assessee and direct AO to give deductions for delayed payments made by the assessee in respect of the employees' contribution to provident fund and labour welfare fund, etc. Computation of book profit u/s 115JB - AO added profit on sale of one of its rubber est ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e that the asset was not a capital asset and therefore no capital gain arose on the profit derived from the sale of the rubber estate. The meaning of the expression going concern has to be understood in the light of the peculiar nature of the property transferred in the present case. What is transferred in the present case is a rubber estate. The activities in a rubber plantation/estate is a continuous and uninterrupted one and that tapping operations have to be carried out on a regular basis and all other activities have to be carried out without any interruption. Therefore, by the nature of the activities of the rubber plantation itself, it is a going concern . Even if there is no such an expression in the agreement that the rubber estate is sold as a going concern, the nature of the asset has become a continuous asset . Even, in the absence of such a specific clause, by its nature, a rubber plantation is in the nature of a going concern . Unless and until the yielding rubber trees are usually slaughtered and once tapping is started, it always partakes of the character of a going concern . Therefore, it is to be seen that while adding an expression in the agree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee on sale of its Boyce Estate . The said direction is set aside. This issue is decided in favour of the assessee. Loss suffered on sale of shares - speculation loss - long-term capital loss - HELD THAT:- There is no evidence on record to show that the assessee was indulged in the business of buying and selling of shares. When the assessee-company held the shares as investments, there cannot be a case of applying the Explanation to Section 73. In the facts and circumstances of the case, the loss is very much in the nature of capital loss and therefore, there is no justification in treating the same as speculation loss. This enhancement order of CIT (A) is set aside. This issue is decided in favour of the assessee. Disallowance on set off - long-term capital gains on sale of land with the long-term capital loss on sale of shares - This ground is allowed in the light of our finding that the loss on sale of shares is not a speculation loss. The assessee is successful in its appeal filed before us. Disallowance u/s 37 - replanting expenditure - The application of Sections 37 and 14A made by AO in disallowing 10 per cent. of the replanting expenditure is an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company disclosing a total loss of Rs. 4,66,82,249. Initially, the return was processed under Section 143(1). Thereafter, the return was selected for scrutiny and assessment was completed under Section 143(3) of the Act. 3. In the course of assessment proceedings, the Assessing Officer has made certain disallowances/additions whereby the assessable income has been determined at Rs. 39,24,14,587, as book profit under Section 115JB. The first disallowance/addition made by the assessing authority was in respect of depreciation claimed by the assessee in its tea division which amounted to Rs. 95,52,231; The second addition/disallowance was again in respect of depreciation, but in the rubber division of the assessee, which amounted to Rs. 59,54,017; The third addition/disallowance made by the Assessing Officer was also in respect of depreciation vis-a-vis rubber division, amounting to Rs. 74,85,588; The fourth addition/disallowance made by the Assessing Officer was in respect of loss claimed by the assessee in the computation of capital gains relating to the sale proceeds of trees, amounting to Rs. 17,58,746; The fifth addition/disallowance made by the assessing author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -tax (Appeals) has erred in upholding the action of the Assessing Officer in disallowing the employees' contribution to provident fund and labour welfare fund under Sections 36(1)(va) and 2(24)(x) of the Income-tax Act, 1961. 11. The case of the appellant is that the payments were made before the due date for filing the return and therefore deductions should be allowed as prayed for. The Assessing Officer found that the contributions being employees' contribution, it cannot be allowed as a deduction and the Commissioner of Income-tax (Appeals) upheld the disallowance in the light of the order of the Tribunal passed in the assessee's own case for the assessment years 2001-02 to 2003-04. In that order, the Tribunal has held that Section 43B(B) was applicable only in respect of employer's contribution and not to employees' contribution. The learned chartered accountant appearing for the assessee invited our attention to the judgment of the hon'ble Supreme Court in the case of CIT v. Vinay Cement ltd. [2007] 213 CTR 268 : [2009] 313 ITR (St.) 1 where it has upheld the judgment of the Gauhati High Court in the case of CIT v. George Williamson (Assam) Ltd. [200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amboo and Timber Suppliers [1996] 219 ITR 212 are to be followed and accordingly decided the case of George Williamson (Assam) Ltd. [2006] 284 ITR 619 (Gauhati), in assessee's favour. The above decision of the Gauhati High Court has now been upheld by the Supreme Court in the case of Vinay Cement Ltd. [2007] 213 CTR 268; [2009] 313 ITR (AT) 1. It means, the court has also taken note of the judgment of the Kerala High Court in the case of CIT v. South India Corporation Ltd. [2000] 242 ITR 114 and thereafter upheld the judgment of the Gauhati High Court in the case of George Williamson (Assam) Ltd. [2006] 284 ITR 619. It means that the issue has now been decided by the Supreme Court, in the case of Vinay Cement Ltd. [2007] 213 CTR 268; [2009] 313 ITR (AT) 1 that the payments made to provident fund and employees' state insurance scheme etc. are to be allowed as deductions, if the payments were made before the due date for filing of the return. This judgment is applicable to both the employees' and employer's contribution, as no distinction has been made by the Gauhati High Court in the case of George Williamson (Assam) Ltd. [2006] 284 ITR 619. Therefore, in the facts a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used for agricultural purposes constituted revenue derived from agricultural land and therefore agricultural income under Section 2(1A) of the Act and therefore not chargeable to Central income-tax. 17. The hon'ble High Court of Kerala has also held the same view as reflected in the judgment of their Lordships in the case of CIT v. Alanickal Co. Ltd. [1986] 158 ITR 630. The hon'ble jurisdictional High Court held that where the rubber estate sold by an assessee was in a rural area, transaction of sale of a rubber estate with rubber trees standing on it did not involve transfer of any capital asset and as such the sale of rubber estate along with rubber trees amounts to sale of agricultural land alone and the transaction cannot be split up as sale of agricultural land and sale of trees and any gains arising from that sale of trees are not liable to tax on capital gains. 18. Obviously, the profit on sale of agricultural land is agricultural income and the court further held that standing trees also form part of the immovable property and therefore contributed to agricultural income alone. 19. The hon'ble Supreme Court in the case of CIT v. All India Tea and Tradin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate from computing book profit for the purposes of Section 115JB. This issue is decided in favour of the assessee and ground Nos. 2 and 3 are accordingly allowed. 24. The ground Nos. 4 to 6 raised by the assessee involve the issue relating to the assessment of profits made on sale of Boyce Estate , as capital gains under Section 50B of the Act. 25. As already stated in this order, the assessee has accounted for the profit on sale of its Boyce Estate at Rs. 32,65,94,751 but claimed exemption from levy of tax on the ground that the property was not a capital asset within the meaning of Section 2(14) and the profit arising on sale of that rubber estate would not form part of long-term capital gains tax. The basis of this argument is that the rubber estate is an agricultural land and therefore profits arising on sale of agricultural land partakes of the character of agricultural income itself and would not come within the purview of computation of total income under the provisions of the Income-tax Act. 26. The above position was accepted by the Assessing Officer, as there was no dispute on the factual aspects of the issue. The asset sold by the assessee was a rubber estat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company was transferred to the employment of the new owners of Boyce Estate without any break of service and the sale was a sale of lock-stock-barrel basis. The Commissioner of Income-tax (Appeals) observed that Boyce Estate sold by the assessee contained not only the standing rubber trees but also plant/factory, accommodation, other facilities and other movable properties and all those properties both movable and immovable have been sold by the assessee and as such the entire rubber estate as a working unit was transferred as such, which in fact, satisfies all the attributes of a slump sale. 31. The Commissioner of Income-tax (Appeals) held that the assessee is having a number of rubber estates and it is one of the rubber estates, viz., Boyce Estate which is in the nature of an undertaking as provided in Explanation 2 to Section 2(19AA). He held that Boyce Estate itself is a functional unit in the nature of an independent undertaking and therefore in the light of the terms and conditions stipulated in the transfer deed, the sale was that of a slump sale. The Commissioner of Income-tax (Appeals) further held that as the property was sold as a going concern with all the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in detail. The assessee-company is engaged in different types of business like running of plantations, executing turnkey projects, clearing and forwarding agency and shipping business, etc. In its agricultural division, the assessee-company is having a number of estates growing tea, rubber, cocoa, cardamom, etc. In the case of rubber itself, the assessee is having about 12 different estates. During the previous year relevant to the assessment year under appeal, the assessee-company has sold one of its rubber estates known as Boyce Estate . The estate has been sold on the basis of a detailed agreement executed between the vendor and vendee. The total consideration stipulated for the transfer of the estate has been spilt over different assets both movable and immovable enumerated in different schedules and annexure. 35. The assessee-company has assigned specific consideration/value for the rubber plantation as such along with the standing trees. The consideration for the extent of land has been specifically mentioned. Thereafter, the assessee has listed out every item of movable property transferred to the buyer and value has been assigned to those movable assets. Vehicles and o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, in the absence of such a specific clause, by its nature, a rubber plantation is in the nature of a going concern . Unless and until the yielding rubber trees are usually slaughtered and once tapping is started, it always partakes of the character of a going concern . 38. Therefore, it is to be seen that while adding an expression in the agreement that the rubber estate was transferred as a going concern, the purpose was only to refer to the state of affairs and refer to an existing fact and not to create any legal proposition in the context of the sale deed. 39. Therefore, in the facts and circumstances of the case, we are of the considered view that the Commissioner of Income-tax (Appeals) has been highly carried away by the commercial expression reflected in the agreement like going concern . At the cost of repetition, we have to state that a rubber plantation is always a going concern . Even if the parties to the contract do not say so, still the estate in the nature of a rubber plantation is a going concern. Therefore, the said expression is not a test to be relied on to decide the exact nature of the transaction for the purpose of income-tax law. 40. The Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtaking and no liability was transferred to the buyer, the transfer of undertaking would not constitute a slump sale. 44. The Income-tax Appellate Tribunal, Kolkata Bench D , in the case of Deputy CIT v. ICI (India) Ltd. [2008] 23 SOT 58 has held the same view that there cannot be a case of slump sale, if all the assets and liabilities of an undertaking have not been transferred to the vendee. 45. As rightly relied on by the learned chartered accountant appearing for the assessee, the same view was taken by the Income-tax Appellate Tribunal, Ahmedabad Bench, in the case of Camphor and Allied Products Ltd. v. Deputy CIT [2001] 79 ITD 489. 46. In the present case, the rubber estate has been sold by the assessee excluding cash in hand, stock in hand, receivables, finance, assets and liabilities. It was not a case of sale by lock, stock and barrel. The assessee-company has made conscious exclusions. The assets sold by the assessee have been listed out in different schedules and annexure. The consideration has been specifically assigned to the sale of immovable property by way of rubber estate. Separate consideration has been assigned to the sale of movable properties includin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rison Universal Flowers Ltd. (HUFL). These shares were acquired by the assessee-company by way of direct subscription during the accounting periods from 1995-96 to 1998-99. M/s. Harrison Universal Flowers Ltd. (HUFL) was a subsidiary of the assessee-company. In the previous year, the entire holding of the assessee in the subsidiary company was transferred to M/s. Surendra Jain and Family in terms of an agreement dated November 3, 2004, for a consideration of Rs. 17,54,400. The loss suffered on sale of these shares was returned by the assessee under the head Long-term capital gains . After considering the indexed cost, the long-term capital loss was worked out at Rs. 3,39,44,694 and the same was assessed by the Assessing Officer as capital gains . In the first appeal, the Commissioner of Income-tax (Appeals) directed the Assessing Officer to treat the loss as speculation loss and therefore held that the said loss would not be available for setting off against positive long-term capital gains. 50. It is to be seen that since 1995-96 onwards, the shares of M/s. Harrison Universal Flowers Ltd. (HUFL) were disclosed by the assessee-company in its balance-sheet as Long-term investm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Rs. 17,58,746 as capital gain and reducing the long-term capital loss brought forward from earlier years. 55. We heard both sides in detail. Regarding the disallowance of Rs. 6,93,096, the Assessing Officer disallowed 10 per cent. of replanting expenditure. The disallowance was made under Section 37 of the Act. It is the view of the Assessing Officer that the expenditure was disallowable under Section 14A of the Act. The Appellate Tribunal deleted similar disallowances made by the Assessing Officer for the assessment years 2002-03 and 2003-04. Following the order of the Tribunal, the Commissioner of Income-tax (Appeals) deleted the said disallowance. The application of Sections 37 and 14A made by the Assessing Officer in disallowing 10 per cent. of the replanting expenditure is an exaggerated interpretation of the statutory provisions. The replanting expenditure by itself is a separate block of expenses incurred for the business of the assessee, which is partly agricultural in nature. There is no provision to straight away disallow any part of the business expenditure only for the reason that it is attributable to agricultural operations and the assessee is equally deriving ag ..... X X X X Extracts X X X X X X X X Extracts X X X X
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