The Hindu Business Line : CBDT income notification

A NOTIFICATION by the Central Board of Direct Taxes (CBDT) bringing 25 per cent of the income from the sale of coffee grown and cured by sellers under income derived from business has led to unrest among planters, especially small growers.

``Over lakh small growers will be affected by this notification as they will have to needlessly do cumbersome paper work," plantation industry sources told Business Line.

On June 19, CBDT issued a notification saying 25 per cent of the income from the sale of coffee grown and cured by sellers would be computed as derived from business. It also said 40 per cent of the income derived from the sale of coffee grown, cured, roasted and grounded by sellers, with or without mixing chicory or other flavouring ingredients, would be computed as income derived from business.

"Leaving aside the problem growers will face, CBDT itself will be flooded with papers without returns," the sources said.

When contacted, the Coffee Board Vice-Chairman, Mr Bose Mandanna, said the notification was a fall-out of a Supreme Court ruling.

A Kochi-based company Aspinwall & Co had filed a petition in the apex court claiming investment allowance for curing. While upholding the petition, the Supreme Court said Aspinwall was engaged in "manufacturing of coffee bean". This meant sale of coffee, whose husk has been removed.

"Due to this ruling, anyone selling hulled coffee will have to pay 40 per cent central income tax during the current fiscal," Mr Mandanna said.

Plantation sources said large growers were already filing their income tax returns under the one-in-six scheme.

"The Coffee Board is discussing this issue. There are plans to amend the Coffee Act, 1952 to leave small growers out of the purview of income tax. Already, the Coffee Act is scheduled for amendment," the sources said.

The growers should have been happy with the notification since that part of income treated as derived from business will be exempt from the high agricultural income tax (AIT) imposed by the State Governments. The AIT ranges between 50 per cent in Karnataka and 65 per cent in Tamil Nadu. But planters have a different angle to their unhappiness.

Mr Mandanna said: "The problem with the notification is that the small growers will have to engage accountants for this and then have it cleared by a chartered accountant. The small growers will face problems due to therese stipulations when they are already facing hardships due to poor prices and low returns.

"We took up the issue with CBDT but we were told that they were only following the Supreme Court's ruling."

"Any failure to address the problem could lead to unrest among the growers. Already, most of them are agitated," industry sources said.

A coffee industry delegation, already in New Delhi, along with the Karnataka Chief Minister, Mr S.M. Krishna, to apprise the Centre of various other issues confronting the sector, has taken up the issue with CBDT.

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