The Kolkata Bench of Income Tax Appellate Tribunal (ITAT) has held that the disallowance of Employment Provident Fund (EPF) shall be added while taxing 40% of income from tea plantation business as business income.
The assessee Hanuman Plantations Limited is engaged in the business of growing and manufacturing tea and thus the income of the assessee comprised of agricultural component as well as business component. Mita Ritzvi, on behalf of the assessee submitted that referred to Rule 8(1) which provided the manner of computation of income of the assessee engaged in growing and manufacturing of tea.
He also submitted that the income as computed under the Act had to be apportioned in the ratio of 60:40 between two components 60% as agricultural income and 40% as business income and then the business income was to be brought tax under the Act.
He further submitted that first the income of the assessee had to be computed after making disallowance of Rs. 19,28,127/- on account of EPF and then whatever is resultant figure of income is worked out would be subjected to split in the ratio of 60:40 and income should be assessed accordingly and to tax only 40% of the total income arrived as such.
The Single Bench of Rajesh Kumar (Accountant Member) allowed the appeal and set aside the impugned order and observed that,
“We have also examined the above computation of income and find that the income of Rs. 6,92,424/- is be treated as business income being 40% of income of manufacturing of tea as per Rule 8 of Rules, 1962 instead of Rs. 23,43,506/- assessed as per intimation u/s 143(1) of the Act. We have perused the Rule 8(1) of Rules, 1962 vis-a-vis decision of Hon’ble Calcutta High Court and also the decisions of Tribunal and find that the case of the assessee is squarely covered by these decisions.”
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