G.C. Gupta, J. - (1.) The assessee has come up in appeal under Sec. 260A of the Income Tax Act, 1961 (hereinafter referred to as the 'Act') against an order of the Income Tax Appellate Tribunal, A - Bench, Kolkata dated 28th June, 2005 in ITA 1626/KOL/2004 for the assessment year 2000 -01.
(2.) By the order dated 17th November, 2005 a Division Bench of this Court admitted this appeal on the following substantial question of law: - - "I) Whether on a true and proper interpretation of Sec. 33AB of the Act and Rule 8 of the Income Tax Rules the deduction under Sec. 33AB of the Act is to be allowed while computing the income derived from sale of tea grown and manufactured by the seller which forms the composite income from sale of tea grown and manufactured by the seller and the apportionment in terms of Rule 8 of the Income Tax Rules between agricultural income and non -agricultural income should be made after the said deduction is allowed in the computation of composite income -
(3.) Briefly stated the facts and circumstances of the case are as follows: - - "The assessee is a company engaged inter alia, in the business of growing, manufacturing and selling of tea in India and abroad. The assessee claimed a deduction at the rate of 20% on the composite income of Rs. 25,54,855/ -. But the assessing officer by his order dated 27th March, 2003 passed under Sec. 143 (3) of the Act held that any deduction under Sec. 33AB has to be allowed only from the non -agricultural component of the composite income determined under Rule 8 of the Income Tax Rules, 1962. To be precise the assessing officer held as follows: - -"The assessee has claimed deduction u/s. 33AB on the basis of composite income before apportionment under Rule 8. The apportionment of agricultural income and non - agricultural income for taxation purposes is provided in Rule 8. Therefore, any deduction in computation of income under the head "Profits and gains of business or profession" has to be allowed from the non -agricultural component as computed under Rule 8 the deduction being allowed from agricultural income, which is not subjected to 1. Tax as provided u/s. 10(1). Hence, computation of deduction u/s. 33AB is made with respect to twenty percent of the profit from non -agricultural component as ascertained from Rule 8. So the deduction of Rs. 5,10,971/ -is added back to the composite income of Rs. 20,43,884/ - and is to be considered for allowance on determination of the non agricultural component of composite income.";