M/S Namdhar Seeds , Bangalore vs Department Of Income Tax

Asst. Commissioner of Income-tax, Circle 2(1), Bangalore. ... Appellant

Vs.

M/s.Namdhari Seeds, 'Sri Sai Arcade', 12th Cross, 1st Phase, Ideal Homes Township, Rajarajeshwarinagar, Bangalore-98. ... Respondent PAN: AABFN 0971 G

Appellant by: Dr.K.Shankar Prasad, JCIT(DR). Respondent by: Shri H.N.Khincha, CA.

Date of hearing : 10/02/2015. Date of pronouncement: 20/02/2015.

Per Smt. P.MADHAVI DEVI, JM:

This is an appeal filed by the Revenue against the order of

the CIT(A)-I, Bangalore, dated 23/2/2013 directing the Assessing

Officer (AO) to examine if the assessee is engaged in exporting

of agricultural products and if so to allow deduction u/s 80HHC of

the Income-tax Act, 1961 [hereinafter referred to as 'the Act' for

short] for such income. It is the grievance of the Revenue that ITA No.9/Bang/2014 M/s.Namdhari Seeds.

Page 2 of 5 the CIT(A) has given such a direction without appreciating the

fact that neither the issue of agricultural income nor the issue of

deduction u/s 80- HHC was restored to the AO for fresh

consideration by the ITAT and further that the assessee has not

made any such claim in its return of income.

2. Brief facts of the case are that the assessee, a partnership

firm, which is engaged in the activity of cultivation of vegetable

and fruit seeds and sale thereof, had filed its return of income on

29/8/2003 declaring total income of Rs.7,92,073/- after claiming

exemption of agricultural income of Rs.2,61,66,179/- u/s 10(1)

of the Income-tax Act, 1961 [hereinafter referred to as 'the Act'

for short]. The claim of exemption u/s 10(1) was disallowed by

the Assessing Officer (AO) against which the assessee preferred

an appeal before the CIT(A) who held that only 10% of the

agricultural income should be treated as business income and

granted relief to the extent of 90%. The assessee preferred

further appeal before the Tribunal regarding treatment of 10% of

agricultural income as business income as well as disallowance of

advertisement expenses made u/s 40(a)(ia) of the Act. The

Revenue had also preferred an appeal before the Tribunal against

the relief given to the extent of 90% by treating the income as

agricultural income. The Tribunal had confirmed the stand taken

by the CIT(A) by dismissing both the assessee's as well as the

revenue's appeals on this issue.

ITA No.9/Bang/2014

M/s.Namdhari Seeds.

Page 3 of 5

3. The AO has given effect to the order of the Tribunal by

his order dated 19/2/2013. The assessee preferred an appeal

before the CIT(A) stating that the AO ought to have granted

deduction u/s 80HHC of the Act in respect of agricultural income

treated as business income and that the AO has to reconsider the

same since no claim u/s 80-HHC of the Act in respect of 10% of

agricultural income treated as business income had been made.

The CIT(A) remanded the issue to the file of the AO with a

direction to examine the claim of the assessee u/s 80-HHC.

Aggrieved, the revenue is in appeal before us.

4. The learned Departmental Representative reiterated his

objection by supporting the stand of the AO that since the

assessee has not made any claim of deduction u/s 80-HHC before

the AO, in respect of agricultural income which is treated as

business income, the CIT(A) ought not to have remitted the

matter to the AO.

The learned counsel for the assessee submitted that the

assessee had claimed the entire income as agricultural income

exempt from taxation and since part of the same has been

treated as business income, the AO ought to have considered the

assessee's eligibility for deduction u/s 80-HHC, since the

assessee was also in the business of export of agricultural

products.

ITA No.9/Bang/2014

M/s.Namdhari Seeds.

Page 4 of 5

5. Having regard to the rival contentions and the material on

record, we find that in its return of income, the assessee had

made a claim of exemption of agricultural income from taxation.

It is only as a result of the order of the Tribunal that 10% of the

agricultural income is being treated as business income. It is in

these circumstances that the assessee is now claiming deduction

u/s 80-HHC of the Act which, in our opinion, is a legal claim. The

assessee may not have made a claim u/s 80-HHC in its return of

income but a claim, as has been made, for exemption of the said

income u/s 10(1) of the Act and in view of the rejection of part of

the claim, the assessee is now claiming deduction u/s 80-80-

HHC as an alternate ground. It is for the AO to examine the

allowability of the same. Though AO is precluded from

considering such claim unless it was made in assessee's return of

income, there is no such prohibition in the case of appellate

authorities. The provision of law under which the assessee is

entitled to exemption is a legal issue which can be raised by an

assessee at any stage of the proceedings as held by the Hon'ble

Supreme Court in the case of NTPC reported in 229 ITR 383(SC).

In view of the same, we do not find any reason to interfere with

the order of the CIT(A) on this issue. It is further observed that

the appeal against the order of the Tribunal directing to treat

10% of the income as business income is pending adjudication

before the Hon'ble High Court and therefore, consideration of the

assessee's claim of deduction u/s 80-HHC of the Act shall be ITA No.9/Bang/2014 M/s.Namdhari Seeds.

Page 5 of 5 subject to the result of the proceedings before the Hon'ble High

Court.

6. In the result, the revenue's appeal is dismissed.

Pronounced in the open court on 20th of February, 2015.

sd/- sd/- (Abraham P George) (Smt. P.Madhavi Devi) ACCOUNTANT MEMBER JUDICIAL MEMBER eksrinivasulu

Copy to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. 6. Guard file By order

Assistant Registrar Income-tax Appellate Tribunal Bangalore