Relief to Doloo Tea Company: ITAT deletes Income Tax Addition made by Taxing Sale of Tea bushes and Shade Trees [Read Order]

The Kolkata Bench of the Income Tax Appellate Tribunal (ITAT), deletes addition made by taxing sale of tea bushes and shade trees, thereby granting relief Doloo Tea Company (India) Ltd, the assessee.

The assessee company during the year received a total compensation of Rs.4 crores from National Highways Authority of India (NHAI) on account of compulsory acquisition of agricultural land along withstanding crops of tea bushes, shade trees and labour quarters constructed on land.

Though the land of the assessee has been accepted by the Department as agricultural land which was not a capital asset as per section 2(14) of the Income Tax Act and hence the compensation received by the assessee on acquisition of the land has not been taxed. However, the Assessing Officer treated the amount received from sale of tea bushes and sale of shade trees and sale of labour quarters as taxable business income of the assessee.

The land has already been treated as agricultural land not capital in nature and the tea bushes have been cultivated by the assessee to obtain tea leaves and the shade trees are grown by the assessee for the protection of its tea crops.

Not only the tea leaves but the entire plant i.e. tea bushes is the agricultural produce and the shade trees has also been grown and cultivated by the assessee which is a part of its activity to grow and protect tea crops.

So far as the amount received on account of sale of tea bushes and shade trees is concerned, the Bench agreed with the submission of the Counsel for the assessee that since the land, in question, has already been treated as agricultural land, therefore, the produce thereupon i.e. the tea bushes and even the shade trees grown for the protection of the tea bushes would also fall in the definition of income from sale of agricultural produce which is exempt u/s 10 of the Act.

A Coram comprising Sanjay Garg, Judicial Member and Dr. Manish Borad, Accountant Member observed that “The action of the lower authorities in taxing compensation received on account of sale of tea bushes and shade trees cannot be held to be justified. The addition made by the lower authorities by taxing the sale of tea bushes and shade trees is ordered to be deleted.”

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to TaxscanAdFree. Follow us on Telegram for quick updates.