COMMISSIONER OF INCOMETAX Vs. PARRY AGRO INDUSTRIES LTD

JUDGEMENT

(1.) THIS appeal is preferred by the Commissioner of income-tax under section 260a of the Income-tax Act. Following are the substantial questions of law formulated by the Commissioner for our consideration in ITA. No. 109 of 1999. 1. Whether, on the facts and in the circumstances of the case, the Tribunal is right in holding that the loss incurred on sale of Units of Unit Trust of India was not speculation business and is not the finding wrong and against law? 2 (a) Whether on the facts and in the circumstances of the case, the Tribunal is right in law and had materials to hold that it would not be correct to say that the machinery had not been put to use in the year ending 31-3-1991? 2 (b) Whether, on the facts and in the circumstances of the case, are there material and evidence for the Tribunal to find -"there is evidence to show that it was received in the estate on 31-1-91"; "it was on trial run for some time when the defect was noticed"; "after making the repair the machinery was brought back to the estate when the invoice was issued" and are not the findings wrong and unsupported by evidence? 2 (c) Whether, on the facts and in the circumstances of the case the assessee is entitled to depreciation on Fluid Bed Tea Drier for the assessment year 1991-92 in the light of the finding of the Assessing officer that the assessee had not put to use the assets during the previous year ending on 31-3-1991? 3. Whether, on the facts and in the circumstances of the case, the assessee is entitled to claim deduction u/s. 80hhc and under section 80i before applying Rule 8 of the Income-tax Rules for allocation in regard to income from tea? 4. Whether, on the facts and in the circumstances of the case and read with Rule 8 of the Income-tax Rules which brings only 40% of the income under the Central Income-tax, the assessee is entitled to claim deduction u/s. 80hhc and 80i on 60% of the agricultural income as well?

(2.) ASSESSEE is a public limited company deriving income mainly from the manufacture of tea from its own estates, seven in the State of Tamil Nadu and one in the State of Assam. ASSESSEE filed its return of income declaring a total income of Rs. 2,87,11,180/- for the assessment year 1991-92. In the return of income, the assessee claimed short term capital loss of Rs. 1,45,08,630/- which is set off against business income. The loss was incurred on the purchase of units of UTI and REC bonds. Assessing officer treated the loss as speculation loss, which is to be set off against speculation profit only. Appeal was preferred against the order of the assessing officer before CIT (Appeals ). CIT (Appeals) held that the loss on sale of units of UTI etc. is only a capital loss, which should be allowed to be set off against the business income of the relevant assessment year.

(3.) ASSESSING officer also computed the deduction under section 80hhc and 80i on the income worked out from the tea business after apportioning the same, after applying Rule 8. However, on appeal, following the decision of the Madras High Court in the case of Periyakaramalai Tea and Produce Co. Ltd. (84 ITR 643) the CIT (Appeals) directed the assessing officer to work out the deduction before applying Rule 8. Revenue aggrieved by the said order filed appeal before the Tribunal. Tribunal applying the ratio laid down by the Madras high Court in the above mentioned decision held that the deduction has to be worked out before applying Rule 8 i. e. on 100% of income computed in respect of the whole tea income.