1997 (9) TMI 38 - HC - Income Tax

High Court overturns Commissioner's decision on agricultural income assessment, halts recovery proceedings

Tata Tea Ltd. Versus Commissioner Of Agricultural Income-Tax

The High Court set aside the Commissioner's decision to use notional transfer value instead of the value computed under rule 7 for assessing agricultural ... Agricultural Income Tax, Instant Tea, Tea Issues:1. Whether the Commissioner was justified in directing the assessing authority to adopt the notional transfer value credited in the accounts as the basis to arrive at the agricultural income of the assessee instead of the transfer value computed as per rule 7 of the Income-tax Rules.Analysis:The case involved a revision by the assessee against the Commissioner's order regarding the assessment year 1980-81. The petitioner owned tea estates and factories, with a portion of green tea leaves being transferred for instant tea manufacture. The dispute centered around the valuation of green tea leaves transferred to the instant tea unit for tax purposes. The petitioner maintained separate accounts for its tea estates and instant tea division. The assessing authority initially accepted the valuation based on rule 7 but later revised the assessment, leading to a series of appeals and revisions.The Tribunal accepted the petitioner's contention regarding the cost of cultivation claimed for green tea leaves. Subsequently, the respondent sought to cancel the assessment order, arguing that the original notional value in the accounts should be considered instead of the value computed under rule 7. The High Court found the respondent's decision erroneous, noting that the Income-tax Officer had accepted the rule 7 value for the green tea leaves. The court highlighted discrepancies in the respondent's reasoning and previous orders, ultimately setting aside the respondent's decision and the revised assessment order.The court emphasized that the respondent's order was flawed and failed to reconsider the matter as directed in a previous judgment. The court annulled both the respondent's order and the revised assessment order, allowing the assessing authority to issue a new assessment based on the Tribunal's directions. The court clarified that recovery proceedings were to be put on hold, granting relief to the assessee and concluding the revision in their favor.