Decided on March 18,1994



M.K. Chaturvedi, Judicial Member - (1.) THIS appeal by the assessee is directed against the order of CIT(A), Bhopal and pertains to the assessment year 1990-91.
(2.) Briefly the facts : The assessee is a specified HUF for the relevant assessment year, accounting year ended on 31st March, 1990. Assessee is doing business in TENDU LEAVE and also enjoying share income from S. Kanhaiyalal Bidi Co., Bhopal. It was stated before the Assessing Officer that TENDU LEAVE is a "forest produce", therefore, in regard to the income from this forest produce, prescription of Section 44AC of the Income-tax Act, 1961 (hereinafter called the Act), should be followed and accordingly tax on the said income should be charged @ 35% on presumptive basis as contemplated in the section. It was further stated that Section 44AC begins with, non obstante clause, therefore, it has got overriding effect. Admittedly as per account books, the income is higher than the one computed in accordance with Section 44AC. The rates of tax as contemplated under Section 44AC were not applied in determining the tax liability of the assessee by the Assessing Officer on the ground that assessee is engaged in the business of processing. The provision of Section 44AC is applicable in relation to the trading business only. The core of the dispute, therefore, rotates round the question whether the assessee is engaged in trading activity or in processing activity. Shri R.N. Gupta, ld. counsel for the assessee, appeared before us. Relevant documents and papers were filed at the time of hearing. It was submitted that assessee is a trader in TENDU LEAVE. Explaining the, modus operandi, of the business, ld. counsel for the assessee submitted that Tendu Leaves are first plucked from the trees and thereafter they are made into bundles. The said bundles are then left open on the ground for drying up. Before storing, water is sprayed so that leaves may be preserved in the raw state. The assessee performed the operations of TODAI (plucking), ULTAI (turning up), PALTAI (turning down) and BHARPAI (putting the leaves in gunny bags). This, according to the ld. counsel, cannot be construed as, processing activity. It was stated only to be a trading activity. The case of the assessee, according to ld counsel, clearly falls within the ken of Section 44AC. Further reliance was placed on the decisions of Hon'ble Madhya Pradesh High Court rendered in the case of CST, MP v. Jugalkishore Badriprasad [1979] 43 STC 501 and of Apex Court rendered in the case of Delhi Cold Storage (P.) Ltd. v. CIT [1991] 191 ITR 656 (SC).
(3.) SHRI K.L. Sanghi, ld. D.R., appeared before us. It was vehemently argued that the ratio laid down by the jurisdictional High Court in the case of Jugalkishore Badriprasad cannot be applied in the facts of the present case. According to the ld. D.R., High Court in the said case was concerned with the interpretation of word 'manufacture' under M.P. General Sales Tax Rules, 1959. Their Lordships held that processing of drying of Tendu Leaves and packing them in bundles does not involve any manufacturing process so as to come within the definition of "manufacture" in Section 2(i) of the M.P. General Sales Tax Rules, 1958. Their Lordships held that in view of Rule 2(a) of M.P. General Sales Tax Rules, 1959, inserted in the rules w.e.f. 15-4-1968 clarifying the word "manufacture" in Section 2(i) of the Act does not include "plucking, drying, curing and bundling of tendu leaves", what was implicit in the definition of word "manufacture" in Section 2(i) has been made explicit. The Income-tax Act, 1961 used the word "manufacture" and "processing" in two different connotations and they are not the same. Therefore, the ratio of the decision rendered in the case of Jugalkishore Badriprasad is not of much help to the assessee. Ld. D.R. further relied on the orders of the Revenue authorities. It was also submitted that as per account books, the income is higher than the one computed in accordance with Section 44AC.;

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