COMMISSIONER OF INCOME TAX, KARNAL V. SHAHABAD CO-OP SUGAR MILLS LTD

ITA/246/2011

AI Insights

The case revolves around the eligibility of the Shahabad Cooperative Sugar Mills Ltd. for a deduction under Section 80P(2)(a)(iii) of the Income Tax Act, 1961, which pertains to the marketing of agricultural produce by a cooperative society. The revenue challenged the Tribunal's decision, which favored the assessee, arguing that the manufacturing process transformed sugarcane into a new commercial product, thus disqualifying the assessee from the deduction. However, the Tribunal and the High Court's decisions were influenced by the precedent set in a similar case, Bhudewal Cooperative Sugar Mills, which supported the assessee's position. The Supreme Court's pending decision on a related SLP did not alter the immediate outcome of this case.

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 679651 (HC-MISC)
• Appeal Type: Others
• Pronouncement Date: 01-08-2011
• Assessment Year: misc
• Other Referred Cases: Bhudewal Cooperative Sugar Mills v. Commissioner of Income Tax [2009] 315 ITR 351 (P&H)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Assessee Lawyers: YOGESH PUTNEY
• Keywords: Agricultural produce; Deduction under section 80P; Income Tax; Manufacturing of Sugar
• Section: 260A; 143(1)(a); 80P(2)(a)(iii)

Judgement Text

"ITA No. 246 of 2011 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 246 of 2011 Date of Decision: 1.8.2011 Commissioner of Income Tax ....Appellant. Versus The Shahabad Cooperative Sugar Mills Ltd. ...Respondent. CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL, ACTING CHIEF JUSTICE. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Yogesh Putney, Senior Standing Counsel, for the appellant. AJAY KUMAR MITTAL, J. 1. This appeal has been preferred by the revenue under Section 260A of the Income Tax Act, 1961 (in short “the Act”) against the order dated 19.11.2010 passed by the Income Tax Appellate Tribunal, Delhi Bench “G”, New Delhi (hereinafter referred to as “the Tribunal”) in ITA No. 2147/Del/2000, relating to the assessment year 1995-96, claiming the following substantial question of law:- “Whether on the facts and in the circumstances of the case, the Ld. Income Tax Appellate Tribunal was right in law in holding that manufacturing of Sugar from sugarcane is marketing of agricultural produce grown by the members of the assessee society and the assessee society is eligible for deduction u/s 80P ITA No. 246 of 2011 -2- (2)(a)(iii) of the Act, despite the fact that (a) manufacture of sugar from sugarcane resulted in the emergence of totally a new substance, which is a commercial produce; and (b) in the manufacturing process, in fact, the assessee incurred all the expenditure on its own and marketed the sugar in its own name and as such it cannot be said that the sugar which was sold by the assessee belonged to its members?” 2. Put shortly, the facts necessary for adjudication as narrated in the appeal are that the assessee is manufacturer of sugar from sugarcane. It filed return for the assessment year 1995-96 on 30.10.1995 declaring an income of Rs.1,02,28,177/-. The said return was proceeded under Section 143(1)(a) of the Act on 24.1.1996. The assessee claimed deduction under Section 80P(2)(a)(iii) of the Act amounting to Rs.7,44,02,612/-. The Assessing Officer vide order dated 2.2.1998 rejected the claim of the assessee. Feeling aggrieved, the assessee took the matter in appeal before the Commissioner of Income Tax (Appeals) [in short “the CIT(A)”] who vide order dated 17.2.2000 upheld the order of the Assessing Officer and dismissed the appeal. On further appeal by the assessee, the Tribunal vide order dated 23.11.2004 dismissed the appeal following the orders of the earlier years of the Tribunal in the case of the same assessee. Against the order of the Tribunal, the assessee filed an appeal before this Court (ITA No. 165 of 2005) and this Court vide order dated 12.10.2009 set ITA No. 246 of 2011 -3- aside the order of the Tribunal and remanded the matter for fresh decision in accordance with law. The department took the matter against order dated 12.10.2009 remanding the matter to the Tribunal before the Hon'ble Supreme Court by way of an SLP which is pending. Thereafter, the Tribunal vide order dated 19.11.2010 allowed the appeal of the assessee holding that the issue had already been decided in favour of the assessee by relying upon the Full Bench decision of this Court in Bhudewal Cooperative Sugar Mills v. Commissioner of Income Tax [2009] 315 ITR 351 (P&H). Hence, the present appeal by the revenue. 3. It was fairly conceded by the learned counsel for the revenue that the Full Bench judgment in Bhudewal Cooperative Sugar Mills' case (supra) was applicable to the facts of the present case. 4. In view of the above, we do not find any merit in the appeal. No substantial question of law arises in this appeal. The appeal stands dismissed. (AJAY KUMAR MITTAL) JUDGE August 1, 2011 (ADARSH KUMAR GOEL) gbs ACTING CHIEF JUSTICE "