2017 (5) TMI 483

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.... has claimed cess expenses on the production of green leaf made in the gardens as per the provision of Assam Government. The assessee claimed deduction of such cess expenses before apportioning the composite income as per rule 8 of Income Tax Rules. The assessee also relied on the judgment of Hon'ble jurisdictional High Court in the case of Commissioner of Income Tax vs. A.F.T Industries Ltd. (2004) , 270 ITR 167 (Cal). However, the AO disallowed the claim of the assessee by observing that against the order of Hon'ble jurisdictional High Court in the case of A.F.T Industries Ltd. (supra), the Revenue has filed an SLP before the Hon'ble Supreme Court which has been admitted. Since the matter is pending before the Hon'ble Supreme Court, therefore, the AO treated the cess as nondeductible expenditure from the composite income and disallowed the same and added to the total income of the assessee. 4. Aggrieved, assessee preferred an appeal before ld. CIT(A), who has deleted the addition made by the AO by observing as under :- "3.2 I have examined this issue. This mater has been duly considered by the ITAT, Kolkata, in the case of M/s Apeejay Tea Ltd. ITA No. 901/Kol/2011 pro....

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....ct of the order is reproduced below:- ORDER The respondent-assessee had paid cess on green leaf to the Government of Assam which was levied under Assam Taxation (On Specified Land) Act, 1990. In its income tax return, it had claimed the same as deduction which has been allowed by the High court. The relevant discussion in this behalf is as under: - "However, the learned Tribunal had held that the deduction is eligible after computing the income under Rule 8 and the apportionment is to be made only after the income is so computed. Such apportionment cannot be made be fare the deduction. Rule 8 of the Income Tax Rules, 1962 requires that the computation is to be made as if by fiction the entire income out of the tea grown and manufactured as income assessable under the Income Tax Act, 1961. In view of Rule 8 the income so. computed is to be apportioned 60:40 of which 40 is assessable to tax under the Act. It does not provide that after apportionment of the 60% of the income so computed shall again be required to be computed under the Agricultural Income Tax Act. On the other hand, this 60% is exposed and becomes eligible to tax under the Agricultural Income....

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....tor Rs. 12,500/- (vi) Ceiling fans Rs. 5,406/-   Rs.1,21,206/-   The Ld. CIT(A) after considering the submissions of assessee deleted the addition made by AO in part by observing as under:- "4.3 In the assessment order the AO has not given any reasoning for disallowance of Rs. 1,21,206/- except that the addition is being made on agreed basis. I am of the view that assessment has to be made as per law and not as per an agreement between the AO and the assessee. Hence, I will approach the issue and examine it as per law. Firstly, under the Tea Development Account Scheme, 1990 of NABARD it is perfectly legal to make withdrawal under the said scheme for purchase of computer and ancillary or related equipments [Para-9, clause (k)]. Hence, the action of the appellant to make withdrawals for this purpose is as per law. The AR of the appellant has given a break up of expenses totaling Rs. 1,21,206/- which includes items like stabilizer, computer chair, refrigerator and ceiling fan. After perusing these details given by the AR of the appellant, I am in agreement with the views of the AR of the appellant that except for purchase of refrigerator all the....

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....f business of construction, manufacture or production of any article or thing specified in the listed in the Eleventh Schedule. the whole of such amount so utilized shall be deemed to be the profits and gains of business of that previous year and shall accordingly be chargeable to income tax as the income of that previous year.]" According to the Assessing Officer, the instant withdrawal of money from the account maintained with NABARD does not fall under the circumstances provided u/s 33AB(4) of the Act, thus, the disallowance was made by AO. However, the Ld. CIT(A) deleted the addition made by AO by observing that the amount was withdrawn in accordance within the meaning of approved scheme under the Act. Therefore, in such disallowance was not warranted. In the light of above discussion, the issue before us arises for our adjudication so as to whether the impugned withdrawal was within the meaning of the provision of Section 33AB of the Act. As per the provisions of Section 33AB of the Act a deduction is allowable from the income if assessee deposits the amount with the National Bank in accordance with the Scheme approved by the Tea Board or Coffee Board or Rubber Boa....

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....ction of expenditure incurred out of amount withdrawn from the NABARD account is not allowable. But, there is no denial for the deduction of depreciation as the same is an allowance and it is not expenditure. The Ld. CIT(A) after considering the submission of assessee deleted the addition made by the AO by observing as under:- "5.2 I have considered the written submission of the AR of the appellant. I find that the AO has held that the claim of depreciation will not be allowable u/s. 33AB(6) whereas the AR of the appellant has argued that depreciation is not an expenditure and it is only a notional allowance which is not based on actual expenditure. The AR of the appellant has placed reliance on the Supreme Court decision in the case of Garden Silk Weaving Factory vs. CIT (1993) 189 ITR 512 which pertains to claim of depreciation u/s 32 of the IT Act, 1961. The said judgment holds depreciation to be of the nature of notional allowance and not an item of actual expenditure. However, section 33AB(6) states that if certain amount is standing to the credit of the assessee in a special deposit account and withdrawals from this account is made by the assessee for any expenditure....