Ita/988/2009 Of The Commissioner Of Income Tax v. M/S. Oil Palm India Ltd

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON MONDAY ,THE 29TH DAY OF OCTOBER 2018 / 7TH KARTHIKA, 1940 ITA.No. 932 of 2009 AGAINST THE ORDER/JUDGMENT IN ITA 651/2005 of I.T.A.TRIBUNAL,COCHINBENCH DATED 30-11-2007 APPELLANT/S: THE COMMISSIONER OF INCOME TAXKOTTAYAM. BY ADVS.SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES)SRI.JOSE JOSEPH SC FOR INCOME TAX RESPONDENT/S: M/S. OIL PALM INDIA LTD.KOTTAYAM. BY ADV. SRI.E.K.NANDAKUMAR (SR.) SRI. RAJA KANNAN OTHER PRESENT: THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 29.10.2018, ALONGWITH ITA.384/2010, ITA.11/2011, ITA.401/2010, ITA.400/2010,ITA.1134/2009, ITA.988/2009, THE COURT ON THE SAME DAY DELIVERED THEFOLLOWING: IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON MONDAY ,THE 29TH DAY OF OCTOBER 2018 / 7TH KARTHIKA, 1940 ITA.No. 384 of 2010 AGAINST THE ORDER/JUDGMENT IN ITA 811/2007 of I.T.A.TRIBUNAL,COCHINBENCH DATED 16-06-2010 APPELLANT/S: THE COMMISSIONER OF INCOME TAXKOTTAYAM. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES)SRI.JOSE JOSEPH SC FOR INCOME TAX RESPONDENT/S: M/S. OIL PALM INDIA LIMITEDXIII/354, OLD STAR THEATRE ROAD, P.B.NO.1715, KOTTAYAM. BY ADVS.SRI.P.BENNY THOMASSRI.JOSON MANAVALANSRI.K.JOHN MATHAISRI.KURYAN THOMASSRI.M.GOPIKRISHNAN NAMBIARSRI.P.GOPINATH THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 29.10.2018, ALONG WITH ITA.11/2011, ITA.401/2010, ITA.400/2010, ITA.1134/2009,ITA.988/2009, ITA.932/2009, THE COURT ON THE SAME DAY DELIVERED THEFOLLOWING: IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON MONDAY ,THE 29TH DAY OF OCTOBER 2018 / 7TH KARTHIKA, 1940 ITA.No. 11 of 2011 AGAINST THE ORDER/JUDGMENT IN ITA 466/2009 of I.T.A.TRIBUNAL,COCHINBENCH DATED 16-06-2010 APPELLANT/S: THE COMMISISONER OF INCOME TAXKOTTAYAM. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES)SRI.JOSE JOSEPH SC FOR INCOME TAX RESPONDENT/S: M/S. OIL PALM INDIA LIMITED XIII/354, OLD STAR THEATRE ROAD, P.B.NO.1715, KOTTAYAM-686 039. BY ADVS.SRI.P.BENNY THOMASSRI.JOSON MANAVALANSRI.K.JOHN MATHAISRI.KURYAN THOMASSRI.M.GOPIKRISHNAN NAMBIARSRI.P.GOPINATH THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 29.10.2018, ALONG WITH ITA.384/2010, ITA.401/2010, ITA.400/2010, ITA.1134/2009,ITA.988/2009, ITA.932/2009, THE COURT ON THE SAME DAY DELIVERED THEFOLLOWING: IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON MONDAY ,THE 29TH DAY OF OCTOBER 2018 / 7TH KARTHIKA, 1940 ITA.No. 401 of 2010 AGAINST THE ORDER/JUDGMENT IN ITA 1124/2007 of I.T.A.TRIBUNAL,COCHINBENCH DATED 16-06-2010 APPELLANT/S: THE COMMISSIONER OF INCOME TAX,KOTTAYAM. RESPONDENT/S: BY ADVS.SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES)SRI.JOSE JOSEPH SC FOR INCOME TAX M/S. OIL PALM INDIA LIMITED,XIII/354, OLD STAR THEATRE ROAD, P.B. NO.1715, KOTTAYAM SOUTH P.O., KOTTAYAM-686039.BY ADVS.SRI.P.BENNY THOMASSRI.JOSON MANAVALANSRI.K.JOHN MATHAISRI.KURYAN THOMASSRI.M.GOPIKRISHNAN NAMBIARSRI.P.GOPINATH THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 29.10.2018, ALONGWITH ITA.11/2011, ITA.384/2010, ITA.400/2010, ITA.1134/2009,ITA.988/2009, ITA.932/2009, THE COURT ON THE SAME DAY DELIVERED THEFOLLOWING: IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON MONDAY ,THE 29TH DAY OF OCTOBER 2018 / 7TH KARTHIKA, 1940 ITA.No. 400 of 2010 AGAINST THE ORDER/JUDGMENT IN ITA 22/2009 of I.T.A.TRIBUNAL,COCHINBENCH DATED 16-06-2010 APPELLANT/S: THE COMMISSIONER OF INCOME TAXKOTTAYAM . BY ADVS.SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES)SRI.JOSE JOSEPH SC FOR INCOME TAX RESPONDENT/S: THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 29.10.2018, ALONGWITH ITA.11/2011, ITA.384/2010, ITA.400/2010, ITA.1134/2009,ITA.988/2009, ITA.932/2009, THE COURT ON THE SAME DAY DELIVERED THEFOLLOWING: IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON MONDAY ,THE 29TH DAY OF OCTOBER 2018 / 7TH KARTHIKA, 1940 ITA.No. 400 of 2010 AGAINST THE ORDER/JUDGMENT IN ITA 22/2009 of I.T.A.TRIBUNAL,COCHINBENCH DATED 16-06-2010 APPELLANT/S: THE COMMISSIONER OF INCOME TAXKOTTAYAM . BY ADVS.SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES)SRI.JOSE JOSEPH SC FOR INCOME TAX RESPONDENT/S: M/S. OIL PALM INDIA LIMITED,XIII/354, OLD STAR THEATRE ROAD, PB NO.1715, KOTTAYAM.BY ADVS.SRI.P.BENNY THOMASSRI.JOSON MANAVALANSRI.K.JOHN MATHAISRI.KURYAN THOMASSRI.M.GOPIKRISHNAN NAMBIARSRI.P.GOPINATH XIII/354, OLD STAR THEATRE ROAD, THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 29.10.2018, ALONGWITH ITA.384/2010, ITA.11/2011, ITA.401/2010, ITA.1134/2009,ITA.988/2009, ITA.932/2009, THE COURT ON THE SAME DAY DELIVERED THEFOLLOWING: IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON MONDAY ,THE 29TH DAY OF OCTOBER 2018 / 7TH KARTHIKA, 1940 ITA.No. 1134 of 2009 AGAINST THE ORDER/JUDGMENT IN ITA 650/2005 of I.T.A.TRIBUNAL,COCHINBENCH DATED 30-11-2007 APPELLANT/S: COMMISSIONER OF INCOME TAXKOTTAYAM BY ADVS.SRI.P.K.R.MENON,SENIOR COUNSEL, GOI(TAXES)SRI.JOSE JOSEPH SC FOR INCOME TAX RESPONDENT/S: M/S. OIL PALM INDIA LTD, KOTTAYAM. BY ADV. SRI.E.K.NANDAKUMAR (SR.) SRI. RAJA KANNAN. THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 29.10.2018, ALONGWITH ITA.384/2010, ITA.11/2011, ITA.401/2010, ITA.400/2010,ITA.988/2009, ITA.932/2009, THE COURT ON THE SAME DAY DELIVERED THEFOLLOWING: IN THE HIGH COURT OF KERALA AT ERNAKULAMPRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON MONDAY ,THE 29TH DAY OF OCTOBER 2018 / 7TH KARTHIKA, 1940 ITA.No. 988 of 2009 AGAINST THE ORDER/JUDGMENT IN ITA 649/2005 of I.T.A.TRIBUNAL,COCHINBENCH DATED 30-11-2007 APPELLANT/S: THE COMMISSIONER OF INCOME TAX,KOTTAYAM. BY ADVS.SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES)SRI.JOSE JOSEPH SC FOR INCOME TAX RESPONDENT/S: M/S. OIL PALM INDIA LTD.,KOTTAYAM. BY ADV. SRI.E.K.NANDAKUMAR (SR.) SRI. RAJA KANNAN THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 29.10.2018, ALONGWITH ITA.384/2010, ITA.11/2011, ITA.401/2010, ITA.400/2010,ITA.1134/2009, ITA.932/2009, THE COURT ON THE SAME DAY DELIVERED THEFOLLOWING: JUDGMENT [ITA 932/2009, ITA.988/2009, ITA.1134/2009, ITA.384/2010,ITA.400/2010, ITA.401/2010, ITA.11/2011] Vinod Chandran, J. The issue raised in the appeal is academic by reason ofthe judgment of a Division Bench in W.P.(C) No.36862/2004.The assessment years in I.T.As. Nos.932/2009, 988/2009,1134/2009, 384/2010 & 401/2010 are 1999-2000, 1997-98,1998-99, 2004-05 and 2002-03 respectively, all prior toassessment year 2004-05. The issue raised before theTribunal was whether Rule 7 of the Income Tax Rules, 1962could be applied in the case of the assessee. The assesseeis a public limited company engaged in the cultivation ofoil palms and production and sale of crude palm oil. Thepalm oil is also produced by the assessee from the palmfruit obtained from its plantations as also from localpurchase. The assessee was offering the entire income asagricultural income before the State Tax Authorities andwas assessed under the Agricultural Income Tax Act. Fromthe year 2004-05, the Income Tax Authorities applied Rule 7 and made an apportionment of the agricultural income andtreated the balance as business income assessable under theIncome Tax Act, 1961. While doing so, the Income TaxDepartment also revisited the assessments from the year1997-98 onwards. Certain assessments from years after2005-06 were also pending in appeal before this Court. 2.A Division Bench of this Court considered in theapplicability of Rule 7 in the I.T.As. filed for variousassessment years against application of Rule 7. Thechallenge in the Writ Petition was on the ground ofhardship of double taxation in so far as the assesseehaving been subjected to the agricultural tax regime andconceded 100% of its income for the purpose of levy ofagricultural income tax. The Income Tax Department, overthe years had not applied Rule 7 and had after a longperiod attempted to tax the income of the assessee asbusiness income, applying the rule, despite the rule beingavailable from the inception of the Income Tax Rules. 3.The statutory appeals filed were decided by theDivision Bench in Oil Palm India Ltd. v. Assistant Commissioner of Income Tax by judgment dated 01.12.2011 inI.T.A.No.402/2010 and connected matters. The Division Benchfound that the reopening of assessments were proper, and theapplication of Rule 7 of the Income Tax Act is perfectly inorder. The Division Bench referred to sub-rule (2) of Rule7 and held that the market value of the agriculturalproduce, which in this case is the fruit grown in theassessee's plantations, with the pulp and kernel therein;has to be excluded and business income has to be computedonly for the value addition made by way of the industrialprocess of extraction of crude palm oil. The question withrespect to whether double taxation could be permitted or notwas left to be considered in the Writ Petition.4.The Writ Petition was considered and decisionrendered on 31.01.2012 in Oil Palm India Ltd. v. Assistant Commissioner of Income Tax, (WP(C) No.36862/2004). Therein, the Division Bench noticed the introduction of Rules 7A and7B relating to rubber and coffee in the year 2000.However, the Central Board of Direct Taxes (CBDT) took noteof the difficulties faced by the several assessees, who had paid 100% tax treating the entire income as agriculturalincome and issued Circular No.5/2003 dated 22.05.2003prohibiting assessment under Section 147 or Section 263 forany years prior to 2002-03. The Division Bench found thatthe position is more or less same for income from crudepalm oil, which is the product in the case of the assesseebefore it, for reason of the total income having beendisclosed for assessment under the Agricultural Income TaxAct with prompt payment of tax. The Central Income TaxAuthorities, though was aware of Rule 7 as stood under therules from its inception, took proceedings for assessmentunder the Income Tax Act only in the year 2004. Hence, theDivision Bench directed all agricultural income assessmentscompleted from assessment year 2005-06 to stand set asidewith a direction to the State Taxing Authority to modifythe assessments in line with the assessments completed bythe 1[st] respondent under the Central Income Tax. It wasalso directed that the agricultural income tax assessed forthe assessment year 2004-05 and prior years would betreated as confirmed. The Income Tax Authorities were directed not to assess the income under Rule 7 of the Rulesfor the said years. In I.T.A.Nos.932/2009, 988/2009,1134/2009, 384/2010 & 401/2010 the assessments are priorto 2005-06 and hence the appeals will stand rejected. 5.In I.T.A.Nos.400/2010 and 11/2011, the assessmentyears are 2005-06 and 2006-07. There the assessments underRule 7 of the Income Tax Rules would have to be sustained.In fact, the assessments were sustained by both the FirstAppellate Authority and the Tribunal. The appeal is on thequestion of the direction of the First Appellate Authorityto determine the income based on a formula, which theSenior Counsel for Government of India (Taxes) would submitis not a statutory formula. We find force in thecontention raised by the Revenue. Since the formulaevolved by the First Appellate Authority is not a statutoryone, it is only appropriate that the Assessing Officerconsider the issue untrammeled by such directions issued bythe First Appellate Authority to apply the formula soevolved. Rule 7 in fact gives sufficient guidelines on howto apportion the income and hence there is no requirement for a formula. The Tribunal refused to interfere in theorder of the First Appellate Authority finding that it isan open remand. We clarify that it is in fact an openremand and the Assessing Officer will not employ theformula as evolved by the First Appellate Authority.Hence, I.T.A.Nos.400/2010 and 11/2011 are allowed to thelimited extent and remanded for fresh consideration on theissue of apportionment alone. No order as to costs. Sd/- K.VINOD CHANDRANJUDGE dkr Sd/-ASHOK MENONJUDGE APPENDIX OF ITA 932/2009 PETITIONER'S/S EXHIBITS: ANNEXURE A COPY OF THE ORDER U/S 143(3) R.W.S 147 OF THE INCOME TAX ACT 1961 DATEE 31.8.2004. ANNEXURE BCOPY OF CIT(A) ORDER IN ITA 50/K/CIT-IV/04-05 DATED 29.1.2005. ANNEXURE C COPY OF THE ORDER OF ITAT IN ITA NO.651/COCH/2005 DATED 30.11.2007. APPENDIX OF ITA 384/2010 PETITIONER'S/S EXHIBITS: ANNEXURE AASSESSMENT ORDER U/S.143(3) DATED 11.12.2006. ANNEXURE BCOPY OF CIT(A)'S ORDER IN APPEAL NO.ITA37/K/CIT(A)-IV/06-07, DATED 20.6.2007. ANNEXURE C COPY OF ITAT'S ORDER IN APPEAL NO.ITANO.811/COCH/2007 DATED 16.6.2010. APPENDIX OF ITA 11/2011 PETITIONER'S/S EXHIBITS: ANNEXURE ATRUE COPY OF THE ASSESSMENT ORDER DATED31.12.2008. ANNEXURE BTRUE COPY OF THE ORDER OF COMMISSIONER OFINCOME TAX (APPEALS) DATED 25.5.2009.ANNEXURE CTRUE COPY OF THE ORDER OF THE TRIBUNAL DATED16.6.2010. APPENDIX OF ITA 401/2010 PETITIONER'S/S EXHIBITS: ANNEXURE-A ASSESSMENT ORDER U/S. 143(3) DATED 25/02/2005. ANNEXURE-BCIT(A)'S ORDER IN APPEAL NO. ITA 70/K/CIT(A)-IV/04-05 DATED 22/08/2005. ANNEXURE-C ITAT'S ORDER IN APPEAL NO. ITA NO.1124/COCH/2007 DATED 16/06/2010. APPENDIX OF ITA 400/2010 PETITIONER'S/S EXHIBITS: ANNEXURE-A ANNEXURE -B ANNEXURE-C COPY OF ASSESSMENT ORDER U/S. 143(3) DATED 24/12/2007. COPY OF CIT((A)'S ORDER IN APPEAL NO.ITA 36/ KTM/CIT(A)-IV/07-08, DATED 07/10/2008. COPY OF ITAT'S ORDER IN APPEAL NO.ITA NO.22/COCH/2009 DATED 16/06/2010. APPENDIX OF ITA 1134/2009 PETITIONER'S/S EXHIBITS: ANNEXURE A ANNEXURE B ANNEXURE C COPY OF THE ORDER U/S. 143(3) R.W.S. 147 OFTHE INCOME TAX ACT 1961 DATED 31/08/2004. COPY OF CIT(A) ORDER IN ITA NO.49/K/CIT-IV/04-05 DATED 29/01/2005. COPY OF THE ORDER OF ITAT IN ITA NO.650/COCH/2005 DATED 30/11/2007. APPENDIX OF ITA 988/2009 PETITIONER'S/S EXHIBITS: ANNEXURE A ANNEXURE B ANNEXURE C COPY OF THE ORDER U/S. 143(3) R.W.S. 147 OFTHE INCOME TAX ACT 1961 DATED 31/08/2004. COPY OF CIT(A) ORDER IN ITA NO.48/K/CIT-IV/04-05 DATED 29/01/2005. COPY OF THE ORDER OF ITAT IN ITA NO.649/COCH/2005 DATED 30/11/2007.