The Telegraph
Monday , June 30 , 2014
CIMA Gallary

Tea plea to stick with tax relief

Calcutta, June 29: Tea planters want the government to continue with the provision in the income tax act that allows them to set aside a part of their pre-tax profits to invest in estate development and capital expenditure.

“Tea is a cyclical crop. If one is allowed to earmark a certain amount of profits made towards a development fund, this is directly related to the development of the garden,” said Arun N. Singh, chairman of the Indian Tea Association (ITA).

The industry has submitted a plea to the finance ministry this month to safeguard the provisions in Section 33 AB of the income tax act, apprehending that the government will do away with it once the I-T act is replaced with the direct tax code.

“Our concern and our plea is that while the government is looking at possible dates for the introduction of the direct tax code, we must not lose sight of the provisions of Section 33AB. It allows to sequester profits in good years to spend in relatively poor crop years,” a senior member of the ITA said.

Section 33 AB of the income tax act provides for a deduction of up to 40 per cent of the pre-tax profit. The amount is kept with the National Bank for Agriculture and Rural Development (Nabard) and can be withdrawn in whole or part at a nominal rate of interest for specific investments allowed under the Tea Development Accounts Scheme.

The scheme permits the use of these funds for investment in extension and replacement planting, uprooting and replanting of old tea bushes, rejuvenation and pruning.

It can also be used for the construction or extension of roads, culverts, bridges and fencing within the estate; construction or extension of factories and godowns; controlling soil erosion and water logging; and purchase of equipment and machinery.

“We also want a clarification whether services related to tea will be kept out of purview of the service tax as its cultivation is an agricultural activity. Tea broking services are deemed as services that are taxable. The central board of excise and customs needs to clarify on the service tax issue,” the ITA member said.

Crop woes

Weather fluctuations continue to plague the industry this season. According to Tea Board statistics, crop output fell around 11 million kg in North India alone up to April.

The industry expects exports to be challenging this year and will focus on orthodox markets such as Russia and Iran. Exports in crush, tear, curl (CTC) markets are likely to be impacted by the Keniyan variety, which is priced lower.