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TMI Blog2011 (7) TMI 320X X X X Extracts X X X X X X X X Extracts X X X X ..... ation expenses - Capital expenditure or revenue expenditure - Shade trees cutting - Uprooting jungle plants - Irrigation - held that:- these expenses are revenue in nature and not on capital account. - ITA No. 1441/Kol/2010 - - - Dated:- 28-7-2011 - B.R. Mittal, S.V. Mehrotra, JJ. P.S. Dutta, ld. DR, for the Appellant R. Salarpuria, ld. AR, for the Respondent ORDER B.R. Mittal: The department has filed this appeal for the assessment year 2002-03 against order of learned Commissioner of Income-tax (Appeals) dated 30-10-2009 disputing the deletion of disallowances made by the Assessing Officer. 2. The assessee has filed cross objection [No.123/Kol/2010] on following effective ground:- "1. For that in view of the facts and circumstances the Assessing Officer was wholly unjustified in disallowing a sum of Rs.1,97,020/- and Rs.40/- u/s. 14A and the CIT(A) was wholly unjustified in setting aside the matter to the Assessing Officer to make the disallowance as per Rule 8D. The action of the Assessing Officer and the CIT(A) is wholly unjustified, bad and illegal. The disallowance made by the AO and CIT(A) was highly excessive and wholly unreasonable." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce. As far as the case of your Appellant is concerned as aforesaid payment is in revenue in nature not as capital nature as claimed by the ld.A.O." 7. The learned Commissioner of Income-tax (Appeals) considered the above submissions of the assessee and directed the Assessing Officer to delete the addition by observing as under:- "I had carefully considered the various Judgments upon which the Assessee relied and on the given facts and circumstances of the case. I don't find any justification in making the addition of Rs.706,500/- on account preparation of maps by the AO as Capital in nature. As the fees paid to approved Valuers laid out wholly and exclusively for the purpose of the business of the Assessee and does not form any Assets hence it is revenue in nature. The AO is accordingly directed to delete the addition/disallowance. The ground is allowed." 8. Hence, department is in appeal before the Tribunal. 9. On behalf of the department, the learned Departmental Representative submitted that there is an enduring benefit to the assessee in respect of survey and preparation of maps prepared for entire tea garden. Hence, the expenditure is capital in nature. He subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the claim of Rs.6,01,885/- and added the same to the total income of the assessee. 14. Being aggrieved, the assessee filed appeal before the 1st Appellate Authority. 15. Before the learned Commissioner of Income-tax (Appeals), on behalf of the assessee a copy of memorandum of settlement dated 22/08/2001 between all Member Tea Estates of TAIAB was filed. In this regard, Circular No.73 dated 22/08/2001 of Tea Association of India, Assam Branch Jorhat received by the assessee on 19/09/2001 for Revision of pay scales for Sub-staff effective from April, 2000 and on the basis of the same the assessee had made the payment. The assessee has also filed a copy of said memorandum of understanding before the learned Commissioner of Income-tax(Appeals). 16. The learned Commissioner of Income-tax(Appeals) after considering the above submissions of the assessee has deleted the said addition. Relevant part of the learned Commissioner of Income-tax (Appeals)'s order is as under:- "I have gone through the Circular No.73 dated 22/08/2001 of the Tea Association of India filed by the Assessee along with the written submission for the Revision of Pay scale for Sub-staff effective from Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs.2,99,795/- Irrigation Rs.7,37,525/- Rs.10,94,583/- 21.1 The Assessing Officer has further stated that the assessee has failed to file any evidence to substantiate that there has been no extension planting in the instant assessment year. The Assessing Officer relying on the decision of the Hon'ble Kolkata High Court in the case of Tasati Tea Co. Ltd. reported in 262 ITR 388 held that these expenses are added back to the composite income treating the same as Capital in nature. 22. Being aggrieved, the assessee filed appeal before the learned Commissioner of Income-tax (Appeals). 23. On behalf of the assessee, following submissions were made before the learned Commissioner of Income-tax (Appeals):- Shade trees cutting Rs.57,263: Your petitioner incurred the expenses towards cutting of shade tree wholly and exclusively for the business of the company as your petitioner is engaged in growing and manufacturing of tea and it necessary to cut the unnecessary trees grown in between the tea bushes. Detail sheet for the said expenses is annexed hereto and marked with letter "E". Uprooting jungle plants : Rs.299,795/- : A detail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee in the assessment year under consideration and the expenses were incurred mainly to replant of the tea garden. He submitted that basically the expenses were incurred on shade trees cutting, uprooting jungle plants and irrigation and referred to page no. 18-22 of the paper book, wherein details of expenses incurred on shade trees cutting, upgrading jungle plants and irrigation are given. 27. We have heard the rival submissions of both the parties and considered the orders of the authorities below. We have also perused the details given at page nos.18-22 of the assessee's paper book. We agree with the learned Authorised Representative that the said expenses have been incurred mainly on wages. There is no evidence on record that the said expenses have been incurred to plant new plants/trees. We agree with the learned Authorised Representative that the assessee has incurred the expenses to remove the dead plants/trees, which died in the normal course. These are normal activities in day to day business of tea gardens. We also observe the decision of the Hon'ble Calcutta High Court as relied on by the Assessing Officer in the case of Tasati Tea Co. Ltd. (supra) supports the stand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive letters addressed to the Executive Engineers, Pollution Control Board, counter foils of the form towards purchase of the D/Drafts, postal receipts and acknowledgement cards were also filed before the learned Commissioner of Income-tax (Appeals). 34. Learned Commissioner of Income-tax (Appeals) after considering the above facts has deleted the said disallowance aggregating to Rs.37,090/by observing as under:- "Upon perusing the documents and supporting filed by the Assessee I don't agree with the AO that the such fees are payable for a period of three years and treating the same as capital in nature. Hence, don't find any merit as the same were incurred by the Assessee for water and air pollution for the year 2001-02 as such allowable as expenses treating the same as revenue in nature. In the circumstances, I direct the A.O to delete addition/disallowance a sum of Rs.37,090/-. This ground is also allowed." 35. Hence department is in appeal before the Tribunal. 36. During the course of hearing before us, the learned Departmental Representative has relied on the order of the Assessing Officer. On the other hand, learned Authorised Representative for the assessee h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company visited U.K for finding business opportunities for export of tea. 41. Learned Commissioner of Income-tax (Appeals) considered the above submissions of the assessee and has deleted the said disallowance by observing as under:- "I don't agree with the AO for disallowing a sum of Rs.377,176/- on account of foreign travel stating reason that assessee has not exported any tea in the instant year where as upon perusing the supporting documents filed by the assessee. I find that in the instant year has been able to export Black Tea to various countries through recognized export House. Therefore, addition made by the A.O on account of foreign travel expenses is deleted." 42. The department is in appeal before the Tribunal. 43. During the course of hearing before us, the learned Departmental Representative supported the order of the Assessing Officer and submitted that the assessee did not make any export to European countries. Therefore, the foreign visit of Sri C.K.Pasari, whole time director of the assessee company was not for the purpose of business, but was for his personal purposes. He submitted that the action of the Assessing Officer be confirmed. 44. On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der consideration. He submitted that in view of above, the order of learned Commissioner of Income-tax (Appeals) be reversed and the issue be restored to him to decide the same on the basis of evidence as may be filed by the assessee before him. 48. The learned Departmental Representative submitted that he has no objection to above submissions of the learned Authorised representative. 49. In view of above submissions of learned representatives of both the parties and considering the decision of the Hon'ble Bombay High Court in the case of M/s. Godrej Boyce Mfg. Co. Ltd. (supra), we agree with the submissions of the learned Authorised Representative for the assessee that Rule 8D is applicable from AY 2008-09 and the decision of the Hon'ble Special Bench [ITAT, Mumbai] in the case of Daga Capital Management Pvt. Ltd. (supra) has been overruled. Hence, we allow cross objection filed by the assessee by setting aside the issue to the file of the learned Commissioner of Income-tax(Appeals) to decide the same afresh on the basis of the evidence as may be filed before him after giving adequate opportunity of being heard to the assessee, as per law. Accordingly, C.O of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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