Itat/150/2014 v. Green Gold Tree Farmers (P) Ltd [2008] 299 Itr 262. That Apart

IN THE HIGH COURT AT CALCUTTASPECIAL JURISDICTION (INCOME TAX)ORIGINAL SIDE HEARD ON : 14.06.2022DELIVERED ON : 14.06.2022 THE HON’BLE MR. JUSTICE T.S. SIVAGNANAMANDTHE HON’BLE MR.JUSTICE HIRANMAY BHATTACHARYYA ITAT NO. 150 OF 2014IA NO:GA/2/2014[OLD NO:GA/2966/2014] COMMISSIONER OF INCOME TAX, KOLKATA IIIVs.M/s. ITC LIMITED Appearance:Mr. Om Narain Rai, Advocate ...for the appellant Mr. J.P. Khaitan, Sr. AdvocateMs. Nilanjana Banerjee Pal, Advocate ...for the respondent JUDGMENT (Judgment of the Court was delivered by T.S. SIVAGNANAM, J.) (T.S. SIVAGNANAM, J.) : - This appeal by the revenue filed under Section260A of the Income Tax Act, 1961 (the act for brevity) is directed against theorder dated 4[th] March, 2014 passed by the Income Tax Appellate Tribunal “C”Bench, Kolkata (Tribunal) in ITA/1054/Kol/2011 for the assessment year 2007- 08. The revenue has raised the following substantial questions of law forconsideration :- i)Whether on the facts and in the circumstances of the case the Ld.Tribunal has erred in law in allowing the claim of the assesseetowards expenditure under Section 10(1) of the I.T. Act, 1961,amounting to Rs.3,91,57,316/- by disregarding that the assesseefailed to prove the basis of agricultural operation being carried out inraising clonal plants, Sugarcane and coconuts in relation toassessment year 2007-08 ?Tribunal has erred in law in allowing the claim of the assesseetowards expenditure under Section 10(1) of the I.T. Act, 1961,amounting to Rs.3,91,57,316/- by disregarding that the assesseefailed to prove the basis of agricultural operation being carried out inraising clonal plants, Sugarcane and coconuts in relation toassessment year 2007-08 ? ii)Whether on the facts and in the circumstances of the case the Ld.Tribunal has correctly interpreted Explanation to Section 2(1A) of theI.T. Act, 1961, in holding the same as retrospective in nature bydisregarding that neither Finance Act, 2008 nor ExplanatoryCircular No. 1 of 2009 dated 27.3.2009 specifically expressretrospectivity of the same ?Tribunal has correctly interpreted Explanation to Section 2(1A) of theI.T. Act, 1961, in holding the same as retrospective in nature bydisregarding that neither Finance Act, 2008 nor ExplanatoryCircular No. 1 of 2009 dated 27.3.2009 specifically expressretrospectivity of the same ? iii)Whether on the facts and in the circumstances of the case the Ld.Tribunal has erred in law in allowing claim of the assessee fordeduction under Section 80IA of the I.T. Act, 1961, amounting toRs.57,83,000/- in respect of its two captive power under takings atBhadrachallam by disregarding that the assessee was not entitled tothe aforesaid deduction since it had supplied power only to the paperundertakings belonging to the assessee itself and not to anyoutsider?Tribunal has erred in law in allowing claim of the assessee fordeduction under Section 80IA of the I.T. Act, 1961, amounting toRs.57,83,000/- in respect of its two captive power under takings atBhadrachallam by disregarding that the assessee was not entitled tothe aforesaid deduction since it had supplied power only to the paperundertakings belonging to the assessee itself and not to anyoutsider? iv) iv) iv)Whether on the facts and in the circumstances of the case the Ld.Tribunal has erred in law in allowing the claim of the assessee fordeduction under Section 80IC of the I.T. Act, 1961, amounting toRs.72,21,948/- by disregarding that the captive undertaking is notentitled to deduction under the said provision for the notional profitsince the products have only been supplied to the Food BusinessDivision (FBD) of the assessee and not to outsider ?v)Whether on the facts and the circumstances of the case the Ld.Tribunal has erred in law in allowing the claim of the assessee fordeduction under Section 43B of the I.T. Act, 1961, being the amountof employees’ contribution towards PF/ESI paid after the expiry ofdue date prescribed under the respective PF/ESI act even though thesame was not claimed in the return of assessment year 2007-08? We have heard Mr. Om Narayan Rai, learned standing counsel forthe appellant/revenue and Mr. J.P. Khaitan, learned Senior Counsel, assisted byMs. Nilanjana Banerjee Pal, learned Advocate for the assessee. We need not labour much to answer the substantial question of lawframed for consideration on account of certain earlier decisions in the assessee’sown case. So far as substantial question of law Nos. 1 and 2 are concerned theissue stands squarely covered by the decision in Commissioner of Income Tax Vs.Soundarya Nursery [241 ITR 530] as well as the decision in Commissioner ofIncome Tax Vs. Green Gold Tree Farmers (P) Ltd [2008] 299 ITR 262. That apart we note that in assessee’s own case for the assessment years 2005-06 and 2006-07 these questions were answered in favour of the assessee. Aggrieved by the same, the revenue had preferred appeal before thisCourt in ITA No. 173 of 2011 which was dismissed by judgment dated22.12.2015. On reading of the said judgment it is not clear as to whether thesaid appeal relates to the assessment year 2005-06 or 2006-07 yet the legalissues having been settled, the order passed by the Tribunal cannot be faulted.That apart in CBDT Circular No. 1 of 2009 dated 27[th] March, 2009 the scope ofthe expression “agriculture income” was widened to hold that if the nursery ismaintained independently without resorting to basis operations of law then theincome from such nursery would not be agriculture income and would be liableto be included in total income. This circular will not have any effect on theassessee’s case as on facts, the Commissioner Appeals has noted the submissionof the assessee that in order to cultivate the seeds the assessee engages in theactivities of preparing of land, levelling, preparation of beds, sowing of seeds,planting etc. and after a certain stage the best responsive plant is earmarked asthe mother seed. Therefore, de hors the circular issued by CBDT, the conclusionarrived at by the Tribunal, affirming the view taken by the Commissioner ofIncome Tax (Appeal), cannot be faulted. Accordingly, substantial questions of law 1 and 2 are answered againstthe revenue. So far as the substantial question no. 3 is concerned, it is not in disputethat the said question is covered in favour of the assessee and against the revenue in assessee’s own case for the assessment year 2002-03 in the case ofCIT Kolkata III V. ITC [2015] 64 taxmann.com 214 (Calcutta). The Hon’bleDivision Bench held in favour of the assessee in the following terms:- “4. The aforesaid provision contemplates or does not militate againstsupply of electricity by the eligible unit to any other business of the assessee.Therefore the contention that the unit is not eligible because “the assesseehas not sold power genrated by the power undertaking to any outsider buthas consumed 100% generated by its unit” does not appear to be logical. Thepremise for claiming the benefit according to Clause IV of Sub-section 4 ofSection 80-IA is a setting up of an undertaking for the generation of powerduring the specified period. The fact that the unit was set up within thespecified period is not in dispute. “4. The aforesaid provision contemplates or does not militate againstsupply of electricity by the eligible unit to any other business of the assessee.Therefore the contention that the unit is not eligible because “the assesseehas not sold power genrated by the power undertaking to any outsider buthas consumed 100% generated by its unit” does not appear to be logical. Thepremise for claiming the benefit according to Clause IV of Sub-section 4 ofSection 80-IA is a setting up of an undertaking for the generation of powerduring the specified period. The fact that the unit was set up within thespecified period is not in dispute. 5. the mere fact that the power generated by the undertaking was I itsentirety consumed for power to that extent was reduced and the surplus tothat extent could be supplied by the existing distribution undertaking to thepublic at large. The object of the legislature was to promote infrastructurefor generating power, it the instant undertaking had not been set up theother business of the assessee would naturally have depended for its demandin its entirety upon the supply by the Andhra Pradesh State ElectricityBoard. Shortage of power throughout the country is a well-knownphenomenon. The overall shortage of power to the extent of the powergenerated by the undertaking has, therefore, been reduced. 6. We are, as such, unable to hold that the benefit under Section 80IA isnot available to the assessee because the power generated was consumed athome or by other business of the assessee. It is now well-settled that astatute granting incentives for promoting growth and development should beconstrued liberally so as to advance the objective of the provision and not tofrustrate it.” Thus following the aforementioned decision substantial question of law no. 3is answered against the revenue. In so far as the substantial question of law No. 4 is concerned CITA reversed the order passed by the assessing officer having found that the assessee was aneligible undertaking and entitled to the benefit of Section 80IC which is a specialprovision in respect of certain undertakings or industries in certain specialcategory states. It is not in dispute that the said eligible undertaking was not manufacturing any of the goods as listed in 13[th] schedule to the Act. Theprinciple which was laid down in the assessee’s own case in the issue relating toSection 80IA as reported in [2015] 64 taxmann.com 214 (Calcutta) will equallyapply to the claim of deduction under Section 80AC of the Act. The CITA rightlytook note of the fact that Section 80AC (7) specifically provides that theprovisions of sub-Section 5 and sub-Section 7 to 12 of Section 80IA will equallyapply to Section 80IC, and therefore, the eligibility for claiming deduction underSection 80IA in respect of captive undertaking will, therefore, also apply toSection 80IC. That apart we should take note of the fact that the provision is a specialprovision conferring certain benefits on undertakings in certain special categorystates. In the assessee’s case as reported in [2015] 64 taxmann.com214(Calcutta) the Hon’ble Division Bench while considering the scope of Section80IA pointed out that Statute grating incentives for promoting growth anddevelopment should be considered liberally so as to advance the objective of theprovision and not to frustrate it. Further we note the decision of the Hon’bleSupreme Court in Bajaj Tempo Ltd. V. CIT [1992] 196 ITR 188/62 Taxman 480(SC) wherein the Hon’ble Supreme while considering the claim for exemptionunder Section 15C of the Act pointed out that the section, read as a whole, was aprovision directing towards encouraging industrialisation by promoting anassessee setting up a new undertaking to claim of not paying tax to the extent of6% in a year on the capital employed. Further it was pointed out that aprovision intended for promoting economic growth has to be interpreted liberally, the restriction on it, too, has to be construed so as to advance the objective of theSection and not to frustrate it. Therefore, the decision arrived at by the CITA waswholly justified. The Tribunal decided the correctness of the said finding and inparagraph 5.1 of the impugned order took note of the Section 80IA (8) and heldthat the said provision is applicable to Section 80IC and accordingly approvedthe finding recorded by the CITA. In the light of the above, we find there is no error in the approach of the CITAor the Tribunal for us to interfere. Accordingly substantial question of law No. 4is answered against the revenue. This leaves us with only substantial question of law No. 5 which pertains toclaim made by the assessee for deduction under Section 43B of the Act beingamount of employees’ contribution towards provident fund/employees’ Stateinsurance paid after the expiry of due date prescribed under the relevant statuteeven though the same was not claimed in the return for the assessment year2007-08. We are conscious of the fact that certain appeals have been admittedby this Court on the very same issue. But, however, we note that the taximplication on the said issue is far lesser than the threshold limit fixed by CBDTfor filing of the appeal. Since all four substantial question of law have beenanswered against the revenue the solitary question which remains is with regardto the claim for deduction under Section 43B. We have perused the assessmentyear and we find that the disallowance on the said head is Rs.4,06,052/-. Thisbeing below the threshold limit fixed by the CBDT for pursuing the appeal, the appeal fixed by the revenue on this ground has to be dismissed on the ground oflow tax effect. Consequently, the substantial question of law has to be left open.In the result, the substantial questions of law No. 1 and 2 are answeredagainst the revenue by following the decision in Soundarya Nursery and GreenGold Tree Farmers Pvt. Ltd. as well as the decision in ITA/173/2011 dated22.15.2015 in assessee’s own case. Substantial question of law No. 3 is anweredagainst the revenue by following the decision in assessee’s own case as reportedin [2015] 64 taxmann.com 214(Calcutta). Substantial question of law No. 4 is answered against the revenue for reasonsassigned by us in preceding paragraph. The substantial question of law No. 5 is left open as the quantum ofdisallowance under the said head is below the threshold limit fixed by the CBDTand, therefore, the revenue cannot pursue the said question on the ground of lowtax effect. The appeal and the applications are dismissed/disposed of accordingly. There will be no order as to costs. (T.S. SIVAGNANAM, J.) I agree. (HIRANMAY BHATTACHARYYA, J.)