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I-T - Tea manufacturer entitled to deduction for cess paid on green leaves in computing composite income from tea business: ITAT

By TIOL News Service

KOLKATA, JULY 14, 2017: THE ISSUE BEFORE THE TRIBUNAL IS - Whether a tea manufacturer is entitled to deduction of 'payment of cess on green leaves' while computing the composite income from its tea business. YES is the answer.

Facts of the case:

The assessee is a company engaged in the business of growing and manufacturing of Tea. According to the AO, Cess on green leaf was an expenditure which was attributable to the activity of growing of tea and would therefore be not allowable as deduction while computing income from manufacture and sale of tea. The plea of the Assessee was that the entire green leaf cess had to be allowed as deduction first and only on the loss or profit arrived at after such deduction, Rule 8(1) of the Rules have to be applied and 40% of such sum had to be considered as income or loss from the business of manufacture and sale of tea.

On appeal, the ITAT held that,

++ after hearing the rival submissions and on careful perusal of the materials available on record, keeping in view of the fact that the issue is concluded by the decision of the Jurisdictional High Court in the case of CIT vs AFT Industries Ltd., where the amount paid as cess was held as eligible for deduction in computing the composite income under Rule 8 of I.T. Rules. This issue is, therefore, decided in favour of the assessee and against the Revenue by upholding the order of the C.I.T.(A) who has allowed the deduction of payment of cess on green leaves in computing the composite income from tea business of the assessee under rule 8 of the I.T. Rules. The fact that the SLP is pending before the Supreme Court against the decision of the Calcutta High Court in respect of AFT Industries Ltd. vs CIT will not have any effect since the Apex Court has neither set aside the orders of the Calcutta High Court nor granted any stay.

(See 2017-TIOL-1028-ITAT-KOL)


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