Gauhati H.C : Whether, on the facts and in the circumstances of the case and in view of the provisions of rule 8 of the IT Rules, 1962, the Tribunal was justified in law in sustaining the CIT(A)’s decision that 40 per cent of the income on sale of assets, excess liability written off and miscellaneous receipts be taken to be liable to tax instead of 100 per cent taken by the AO ?

High Court Of Gauhati

CIT vs. Bansidhar Sewbhagovan & Co.

Section Rule 8

Asst. Year 1982-83, 1983-84, 1984-85

V.D. Gyani, Actg. C.J. & H.K.K. Singh, J.

IT Ref. No. 10 of 1996

29th July, 1998

Counsel Appeared

G.K. Joshi & U. Bhuyan, for the Revenue

JUDGMENT

BY THE COURT :

By this Court’s order dt. 17th Jan., 1994, passed in Civil Rule No. 32(M) of 1992 statement of case has been submitted with the following question of law for this Court’s opinion under s. 256(2) of the IT Act, 1961 :

“Whether, on the facts and in the circumstances of the case and in view of the provisions of rule 8 of the IT Rules, 1962, the Tribunal was justified in law in sustaining the CIT(A)’s decision that 40 per cent of the income on sale of assets, excess liability written off and miscellaneous receipts be taken to be liable to tax instead of 100 per cent taken by the AO ?”

The assessee is a registered firm engaged in the business of growing and manufacturing of tea. The AO for the asst. yrs. 1982-83, 1983-84 and 1984-85 taxed the entire income on the sale of assets, miscellaneous receipts and excess liability written back in the account. The assessee filed appeals before the CIT(A). It was his contention that items which were brought to tax were intimately connected with the tea business of the assessee which was subject to tax only at 40 per cent and is not at 100 per cent as was erroneously done by the AO in bringing to tax these items to full 100 per cent. The CIT(A) accepted the assessee’s contention and directed the AO to tax only 40 per cent of those items. It was the case of the Revenue coming to appeal before the Tribunal contending that items that were brought to tax in full by the AO had no connection with the assessee’s tea business. It was also contended that there was no evidence to show that the assets sold were pertaining to tea business. As for excess liability written back as well as miscellaneous receipt, similar contentions were advanced. The assessee, on the other hand, pointed out that the assets which were sold were allowed depreciation under s. 32 of the Act which showed that they were business assets and were used for the assessee’s tea business. So far as excess liability written back was concerned, the assessee submitted that the liability towards expense incurred in the earlier orders in connection with tea business, miscellaneous receipts were relating to Gelakey Tea Estate belonging to the assessee and it was also argued that this miscellaneous receipt represented compensation received as well as receipts for empty gunny bags sold. Relying on rule 8(1) of the IT Rules, 1962, it was contended that only 40 per cent of the tea business was subjected to tax and accordingly the aforesaid three items received could only be taxed at 40 per cent The Tribunal agreeing with the CIT(A) that only 40 per cent of the receipts was liable to tax, dismissed the appeal filed by the Revenue.

Learned standing counsel for the Revenue referring to the order submitted, and to our mind rightly so, that the CIT(A) without looking to the iota of contentions advanced by the assessee and without assigning any reasons whatsoever readily agreed to the submissions made as regards the profit on sale of assets, excess liability written off and miscellaneous receipts.

Having gone through the assessment orders for the assessment years under reference, the submissions made by learned standing counsel for the Revenue cannot be lightly brushed aside. Rule 8 of the IT Rules , was the subject- matter of contention before this Court in Sookerating Tea Co. (P.) Ltd. vs. CIT 1977 CTR (Gau) 315 : (1978) 111

ITR 457 (Gau) : TC 31R.563. This was a case where the assessee contended that the loan transactions were made in the course of the tea business and the interest earned was only assessable at 40 per cent of the total income and on a reference this Court dealing with rule 8 held as follows : “In order to solve the problem we have to carefully examine the language of rule 8. This rule of 40 per cent—60 per cent is applicable to income derived from the sale of tea grown and manufactured by the seller in India.”

It is a settled principle of law that the Tribunal is the last forum so far as the findings of facts are concerned. This Court on a reference under s. 256(2) of the IT Act, cannot go beyond the facts as established and going through the orders passed by the AO, the contentions advanced as regards the miscellaneous receipts and assets sold, had anything to do with the tea business, is not even remotely established. There is no evidence to connect them with the tea business.

In view of the foregoing discussion, and following Sookerating Tea Co. (P.) Ltd. vs. CIT (supra), our answer to the question as referred, is in the negative, that is to say, in favour of the Revenue and against the assessee.

[Citation :233 ITR 651]

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