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Madhya Pradesh High Court · body

2009 DIGILAW 657 (MP)

Commissioner of Income Tax v. Garg Trading Co.

2009-05-15

DIPAK MISRA, R.K.GUPTA

body2009
JUDGMENT Dipak Misra, J. 1. This is an appeal by the Revenue preferred under Section 260A of the Income Tax Act, 1961, (for brevity 'the Act'). Be it noted, the appeal was barred by limitation. Notices were issued to the assessee-respondent and after hearing the assessee, the delay was condoned. 2. We have heard Mr. Sanjay Lal, learned Counsel for the revenue and Mr. H.S. Shrivastava, learned Counsel for the assessee on the question of admission. 3. It is submitted by Mr. Lal that two substantial questions of law arise in the present appeal. He has referred to the memorandum of appeal for formation of said substantial questions of law which read as under: (i) Whether on facts and in the circumstances of the case, the Tribunal was justified in law in the holding that the case of the assessee clearly falls within the preview of Section 44-AC of the Income Tax Act, 1961? (ii) Whether the Tribunal was justified in not deciding the case in view of the Hon'ble Supreme Court decision in the case of Union of India v. Sanhasirao (Taxman) Vol. 85, page 321 of 1996? 4. To appreciate the stand whether any substantial question of law is involved, it is appropriate to adumbrate the facts in brief. 5. The respondent-assessee deals in 'Tendu patta' and carries on tobacco business. For the assessment year 1991, the assessee offered income in respect of tendu patta business on the basis of provisions of Section 44AC. For the relevant accounting year the assessee had purchased tendu patta from the Conservator of Forest, Shipuri for Rs. 50,88,900/- and returned the income therefrom at Rs. 20,80,205/- by applying profit rate of 35%. Keeping in view the provisions as contained in Section 44AC, the assessing officer did not accept the claim of the assessee and came to hold that the said provision was not applicable to the present case. 6. Being aggrieved by the order passed by the assessing officer, the assessee preferred an appeal before CIT(A) who, concurred with the view taken by the assessing officer and opined that there were various operations after plucking of tendu leaves which involve processing also and hence, provisions of Section were not applicable. 7. Being aggrieved by the aforesaid order, the assessee respondent preferred an appeal before the Income Tax Appellate Tribunal. 7. Being aggrieved by the aforesaid order, the assessee respondent preferred an appeal before the Income Tax Appellate Tribunal. The tribunal referred to its earlier orders and came to hold that the activity which is undertaken by the assessee in respect of tendu leaves, is neither a manufacturing activity nor a processing activity. Being of this view, the tribunal allowed the appeal of the assessee. 8. It is submitted by Mr. Sanjay Lal, learned Counsel that the tribunal has fallen into grave error by expressing the opinion that no change occurs in case of tendu patta. Learned Counsel laid emphasis that there is plucking and bundling of tendu leaves and then thereafter the bundles are opened and water is sprinkled on the leaves which are spread over on the ground for the purpose of drying and after the moisture contained in the leaves dries down then they are again put into bundles and only then they are ready for sale and hence, processing is involved. 9. Mr. H.S. Shrivastava, learned senior counsel appearing for the assessee submitted that tendu patta is sold as tendu patta and characteristic of the same does not changed. Learned Counsel has invited our attention to the decision rendered in the case of Natwarlal v. [1998]233ITR490(MP) . In the said case, the Division Bench has held as follows: Tendu leaves are natural forest produce. The general features of trade in tendu leaves consist of the purchase of tendu forest units from the State Governments and thereafter by processing the tendu leaves they are marketed. The business of processing of tendu leaves comprises obtaining the rights of collection and purchase of raw tendu leaves from the concerned forest department. There are other processes undertaken like collection of tendu leaves, pruning, prevention of diseases, plucking of green leaves, arrangements of pudas at collection centres, drying the same by solar energy, classification/gradation of bid leaves, putting them in the bags and thereafter their transportation. These acitivities do not amount to "processing" of tendu leaves within the meaning of Section of the Income-tax Act, 1961, for entitlement of certificate under Form No. 27C of the Income-tax Rules, 1962. 10. We are in respectful agreement with the said view. In the result, we find no substantial question of law being involved to be adverted to in the present appeal and accordingly it stands dismissed.