Vithal Rao Shinde SSK Ltd, Solapur V. ACIT, Solapur

ITA 1159/PUN/2012

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9552 (ITAT-PUNE)
• Duration Of Justice: 7 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 01-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S B PRASAD
• Keywords: Additional evidence; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUNE , , , BEFORE SHRI ANIL CHATURVEDI, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO . 1159 /P U N/201 2 / ASSESSMENT YEAR : 20 07 - 08 VITHALRAO SHINDE SSK LTD., PIMPALNER, TAL. - MADHA, DISTT. SOLAPUR PAN : AAAAM1644B ....... / APPELLANT / V/S. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1, SOLAPUR / RESPONDENT ASSESSEE BY : SHRI PRASANNA JOSHI REVENUE BY : SHRI S.B. PRASAD / DATE OF HEARING : 21 - 06 - 2019 / DATE OF PRONOUNCEMENT : 01 - 0 7 - 2019 / ORDER PER VIKAS AWASTHY, JM : TH IS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - III, PUNE DATED 2 9 - 07 - 2011 FOR THE ASSESSMENT YEAR 20 07 - 08. 2. SHRI PRASANNA JOSHI APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS ENGAGED IN MANUFACTURING OF WHITE SUGAR. THE LD. AR 2 ITA NO . 1159/PUN/2012, A.Y. 2007 - 08 SUBMITTED THAT THE GROUND NOS. 1 TO 20 OF THE APPEAL ARE IN RESPECT OF EXCESS CANE PRICE PAID BY THE ASSESSEE TO SUGARCANE SUPPLIERS, I.E. THE PRICE OVER AND ABOVE THE S TATUTORY M INIMUM P RICE (SMP) FIXED BY STATE GOVERNMENT FOR PURCHASE OF CANE . THE LD. AR SUBMITTED THAT THE ISSUE RAISED IN PRESENT APPEAL BY THE ASSESSEE IS COVERED BY THE JUDGMENT OF HONBLE SUPREME COURT OF INDIA IN THE CASE OF CIT VS. TASGAON TALUKA S.S.K. LTD. REPORTED AS 103 TAXMANN.COM 57 . 2.1 THE LD. AR SUBMITTED THAT GROUND NO. 21 OF THE APPEAL IS AGAINST DISALLOWANCE OF BANK GUARANTEE COMMISSION. THE LD. AR SUBMITTED THAT IN PROCEEDINGS BEFORE LOWER AUTHORITIES THE ASSESSEE COULD NOT FILE THE DEED OF G UARANTEE. THE ASSESSEE IS FILING THE SAME BEFORE THE TRIBUNAL AS ADDITIONAL EVIDENCE. THE ASSESSEE HAS PAID GUARANTEE CHARGES TO MAHARASHTRA STATE CO - OP. BANK FOR FURNISHING GUARANTEE ON ITS BEHALF TO NATIONAL CO - OP. DEVELOPMENT CORPORATION FOR REPAYMENT OF LOAN OF R S .775 LAKHS ALONG WITH INTEREST THEREON OF RS.345.83 LAKHS DURING THE TENURE PERIOD OF SAID LOAN. THE LD. AR SUBMITTED THAT THE BANK PROVIDES WORKING CAPITAL, IN LIEU OF GUARANTEE CHARGES PAID TO MAHARASHTRA STATE CO - OP. BANK. 3. SHRI S.B. PRASAD REP RESENTING THE DEPARTMENT FAIRLY ADMITTED THAT THE ISSUE OF EXCESS CANE PRICE PAID BY THE ASSESSEE TO SUGARCANE SUPPLIERS, I.E. THE PRICE OVER AND ABOVE THE S TATUTORY M INIMUM P RICE (SMP) FIXED BY STATE GOVERNMENT FOR PURCHASE OF CANE HAS ALREADY BEEN CONSID ERED BY THE CO - ORDINATE BENCH OF TRIBUNAL IN THE CASE OF SIMILAR SITUATED ASSESSEE S ENGAGED IN MANUFACTURING OF WHITE SUGAR FROM SUGARCANE. 3 ITA NO . 1159/PUN/2012, A.Y. 2007 - 08 4. BOTH SIDES HEARD. ORDERS OF THE AUTHORITIES BELOW PERUSED. THE SOLITARY ISSUE RAISED IN GROUND NOS. 1 TO 20 OF THE APPEAL IS AGAINST DISALLOWANCE OF EXCESS CANE PRICE PAID BY THE ASSESSEE TO SUGARCANE SUPPLIERS, I.E. THE PRICE OVER AND ABOVE THE S TATUTORY M INIMUM P RICE (SMP) FIXED BY STATE GOVERNMENT FOR PURCHASE OF CANE . WE FIND THAT THE CO - ORDINATE BENCH OF T RIBUNAL IN THE CASE OF MAJALGAON SSK LTD. VS. ACIT IN ITA NO. 308/PUN/2018 FOR ASSESSMENT YEAR 2013 - 14 DECIDED ON 14 - 03 - 2019 HAS ALREADY CONSIDERED THIS ISSUE AND HAS RESTORED THE SAME TO THE FILE OF ASSESSING OFFICER BY OBSERVING AS UNDER : 5. WE HAVE HEARD BOTH THE SIDES AND GONE THROUGH THE RELEVANT MATERIAL ON RECORD. THERE IS CONSENSUS AD IDEM BETWEEN THE RIVAL PARTIES THAT THE ISSUE OF PAYMENT OF EXCESSIVE PRICE ON PURCHASE OF SUGARCANE BY THE ASSESSES IS NO MORE RES INTEGRA IN VIEW OF T HE RECENT JUDGMENT OF HONBLE SUPREME COURT IN CIT VS. TASGAON TALUKA S.S.K. LTD. (2019) 103 TAXMANN.COM 57 (SC). THE HONBLE APEX COURT, VIDE ITS JUDGMENT DATED 05 - 03 - 2019, HAS ELABORATELY DEALT WITH THIS ISSUE. IT RECORDED THE FACTUAL MATRIX THAT THE ASSESSEE IN THAT CASE PURCHASED AND CRUSHED SUGARCANE AND PAID PRICE FOR THE PURCHASE DURING CRUSHING SEASONS 1996 - 97 AND 1997 - 98, FIRSTLY, AT THE TIME OF PURCHASE OF SUGARCANE AND THEN, LATER, AS PER THE MANTRI COMMITTEE ADVICE. IT FURTHER NOTED THAT TH E PRODUCTION OF SUGAR IS COVERED BY THE ESSENTIAL COMMODITIES ACT, 1955 AND THE GOVERNMENT ISSUED SUGAR CANE (CONTROL) ORDER, 1966, WHICH DEALS WITH ALL ASPECTS OF PRODUCTION OF SUGARCANE AND SALES THEREOF INCLUDING THE PRICE TO BE PAID TO THE CANE GROWERS . CLAUSE 3 OF THE SUGAR CANE (CONTROL) ORDER, 1966 AUTHORIZES THE GOVERNMENT TO FIX MINIMUM SUGARCANE PRICE. IN ADDITION, THE ADDITIONAL SUGARCANE PRICE IS ALSO PAYABLE AS PER CLAUSE 5A OF THE CONTROL ORDER, 1966. THE AO IN THAT CASE CONCLUDED THAT THE DIFFERENCE BETWEEN THE PRICE PAID AS PER CLAUSE 3 OF THE CONTROL ORDER, 1966 DETERMINED BY THE CENTRAL GOVERNMENT AND THE PRICE DETERMINED BY THE STATE GOVERNMENT UNDER CLAUSE 5A OF THE CONTROL ORDER, 1966, WAS IN THE NATURE OF `DISTRIBUTION OF PROFITS AND HENCE NOT DEDUCTIBLE AS EXPENDITURE. HE, THEREFORE, MADE AN ADDITION FOR SUCH SUM PAID TO MEMBERS AS WELL AS NON - MEMBERS. WHEN THE MATTER FINALLY CAME UP BEFORE THE HONBLE APEX COURT, IT NOTED THAT CLAUSE 5A WAS INSERTED IN THE YEAR 1974 ON THE BA SIS OF THE RECOMMENDATIONS MADE BY THE BHARGAVA COMMISSION, WHICH RECOMMENDED PAYMENT OF ADDITIONAL PRICE AT THE END OF THE SEASON ON 50:50 PROFIT SHARING BASIS BETWEEN THE GROWERS AND FACTORIES, TO BE WORKED OUT IN ACCORDANCE WITH THE SECOND SCHEDULE TO T HE CONTROL ORDER, 1966. THEIR LORDSHIPS NOTED THAT AT THE TIME WHEN ADDITIONAL PURCHASE PRICE IS DETERMINED/FIXED UNDER CLAUSE 5A, THE ACCOUNTS ARE SETTLED AND THE PARTICULARS ARE PROVIDED BY THE CONCERNED CO - OPERATIVE SOCIETY AS TO WHAT WILL BE THE EXPEN DITURE AND WHAT WILL BE THE PROFIT ETC. CONSIDERING THE FACT THAT STATUTORY MINIMUM PRICE (SMP), DETERMINED UNDER CLAUSE 3 OF THE CONTROL ORDER, 1966, WHICH IS PAID AT THE BEGINNING OF THE SEASON, IS DEDUCTIBLE IN THE ENTIRETY AND THE DIFFERENCE BETWEEN SM P DETERMINED UNDER CLAUSE 3 AND SAP/ADDITIONAL PURCHASE PRICE DETERMINED UNDER CLAUSE 5A, HAS AN ELEMENT OF 4 ITA NO . 1159/PUN/2012, A.Y. 2007 - 08 DISTRIBUTION OF PROFIT WHICH CANNOT BE ALLOWED AS DEDUCTION, THE HONBLE SUPREME COURT REMITTED THE MATTER TO THE FILE OF THE AO FOR CONSIDERING THE MODALITIES AND MANNER IN WHICH SAP/ADDITIONAL PURCHASE PRICE/FINAL PRICE IS DECIDED. HE HAS BEEN DIRECTED TO CARRY OUT AN EXERCISE OF CONSIDERING ACCOUNTS/BALANCE SHEET AND THE MATERIAL SUPPLIED TO THE STATE GOVERNMENT FOR THE PURPOSE OF DECIDING/FIXING THE FINAL PRICE/ADDITIONAL PURCHASE PRICE/SAP UNDER CLAUSE 5A OF THE CONTROL ORDER, 1966 AND THEREAFTER DETERMINE AS TO WHAT AMOUNT WOULD FORM PART OF THE DISTRIBUTION OF PROFIT AND THE OTHER AS DEDUCTIBLE EXPENDITURE. THE RELEVANT FINDINGS OF THE HONBLE APEX COURT ARE REPRODUCED AS UNDER: - 9.4. ..... THEREFORE, TO THE EXTENT OF THE COMPONENT OF PROFIT WHICH WILL BE A PART OF THE FINAL DETERMINATION OF SAP AND/OR THE FINAL PRICE/ADDITIONAL PURCHASE PRICE FIXED UNDER CLAUSE 5A WOULD CERTAINLY BE AND/OR S AID TO BE AN APPROPRIATION OF PROFIT. HOWEVER, AT THE SAME TIME, THE ENTIRE/WHOLE AMOUNT OF DIFFERENCE BETWEEN THE SMP AND THE SAP PER SE CANNOT BE SAID TO BE AN APPROPRIATION OF PROFIT. AS OBSERVED HEREINABOVE, ONLY THAT PART/COMPONENT OF PROFIT, WHILE DETERMINING THE FINAL PRICE WORKED OUT/SAP/ADDITIONAL PURCHASE PRICE WOULD BE AND/OR CAN BE SAID TO BE AN APPROPRIATION OF PROFIT AND FOR THAT AN EXERCISE IS TO BE DONE BY THE ASSESSING OFFICER BY CALLING UPON THE ASSESSEE TO PRODUCE THE STATEMENT OF ACCOU NTS, BALANCE SHEET AND THE MATERIAL SUPPLIED TO THE STATE GOVERNMENT FOR THE PURPOSE OF DECIDING/FIXING THE FINAL PRICE/ADDITIONAL PURCHASE PRICE/SAP UNDER CLAUSE 5A OF THE CONTROL ORDER, 1966. MERELY BECAUSE THE HIGHER PRICE IS PAID TO BOTH, MEMBERS AND NON - MEMBERS, QUA THE MEMBERS, STILL THE QUESTION WOULD REMAIN WITH RESPECT TO THE DISTRIBUTION OF PROFIT/SHARING OF THE PROFIT. SO FAR AS THE NON - MEMBERS ARE CONCERNED, THE SAME CAN BE DEALT WITH AND/OR CONSIDERED APPLYING SECTION 40A (2) OF THE ACT, I.E ., THE ASSESSING OFFICER ON THE MATERIAL ON RECORD HAS TO DETERMINE WHETHER THE AMOUNT PAID IS EXCESSIVE OR UNREASONABLE OR NOT........ 9.5 THEREFORE, THE ASSESSING OFFICER WILL HAVE TO TAKE INTO ACCOUNT THE MANNER IN WHICH THE BUSINESS WORKS, THE MODALIT IES AND MANNER IN WHICH SAP/ADDITIONAL PURCHASE PRICE/FINAL PRICE ARE DECIDED AND TO DETERMINE WHAT AMOUNT WOULD FORM PART OF THE PROFIT AND AFTER UNDERTAKING SUCH AN EXERCISE WHATEVER IS THE PROFIT COMPONENT IS TO BE CONSIDERED AS SHARING OF PROFIT/DISTRI BUTION OF PROFIT AND THE REST OF THE AMOUNT IS TO BE CONSIDERED AS DEDUCTIBLE AS EXPENDITURE. 6. BOTH THE SIDES ARE UNANIMOUSLY AGREEABLE THAT THE EXTANT ISSUE OF DEDUCTION FOR PAYMENT OF EXCESSIVE PRICE FOR PURCHASE OF SUGARCANE, RAISED IN MOST OF THE APPEALS UNDER CONSIDERATION, IS SQUARELY COVERED BY THE AFORESAID JUDGMENT OF THE HONBLE SUPR EME COURT. RESPECTFULLY FOLLOWING THE PRECEDENT, WE SET - ASIDE THE IMPUGNED ORDERS ON THIS SCORE AND REMIT THE MATTER TO THE FILE OF THE RESPECTIVE A.OS. FOR DECIDING IT AFRESH AS PER LAW IN CONSONANCE WITH THE ARTICULATION OF LAW BY THE HONBLE SUPREME CO URT IN THE AFORENOTED JUDGMENT. THE AO WOULD ALLOW DEDUCTION FOR THE PRICE PAID UNDER CLAUSE 3 OF THE SUGAR CANE (CONTROL) ORDER, 1966 AND THEN DETERMINE THE COMPONENT OF DISTRIBUTION OF PROFIT EMBEDDED IN THE PRICE PAID UNDER CLAUSE 5A, BY CONSIDERING T HE STATEMENT OF ACCOUNTS, BALANCE SHEET AND OTHER RELEVANT MATERIAL SUPPLIED TO THE STATE GOVERNMENT FOR THE PURPOSE OF 5 ITA NO . 1159/PUN/2012, A.Y. 2007 - 08 DECIDING/FIXING THE FINAL PRICE/ADDITIONAL PURCHASE PRICE/SAP UNDER THIS CLAUSE. THE AMOUNT RELATABLE TO THE PROFIT COMPONENT OR SHARING OF PROFIT/DISTRIBUTION OF PROFIT PAID BY THE ASSESSEE, WHICH WOULD BE APPROPRIATION OF INCOME, WILL NOT BE ALLOWED AS DEDUCTION, WHILE THE REMAINING AMOUNT, BEING A CHARGE AGAINST THE INCOME, WILL BE CONSIDERED AS DEDUCTIBLE EXPENDITURE. AT THIS STAGE, I T IS MADE CLEAR THAT THE DISTRIBUTION OF PROFITS CAN ONLY BE QUA THE PAYMENTS MADE TO THE MEMBERS. IN SO FAR AS THE NON - MEMBERS ARE CONCERNED, THE CASE WILL BE CONSIDERED AFRESH BY THE AO BY APPLYING THE PROVISIONS OF SECTION 40A(2) OF THE ACT, AS HAS BEE N HELD BY THE HONBLE SUPREME COURT SUPRA. NEEDLESS TO SAY, THE ASSESSEE WILL BE ALLOWED A REASONABLE OPPORTUNITY OF HEARING BY THE AO IN SUCH FRESH DETERMINATION OF THE ISSUE. 7. IT IS NOTED THAT IN SOME OF THE APPEALS, THE ASSESSEES HAVE RAISED AN A LTERNATE GROUND FOR ALLOWING DEDUCTION U/S.80P IN RESPECT OF THE ADDITION. 8. THE LD. ARS, IN SOME OF THE CASES, WHICH WERE REPRESENTED BY THEM, WERE FAIR ENOUGH NOT TO PRESS SUCH GROUND AS IT IS ONLY AN ALTERNATE GROUND AND HAVING BECOME INFRUCTUOUS IN V IEW OF THE RESTORATION OF THE MATTER TO THE AO. NO ARGUMENT WAS ADVANCED IN SUPPORT OF SUCH GROUND IN OTHER CASES, EVEN WHERE THE LD. ARS PARTICIPATED IN PROCEEDINGS BEFORE THE TRIBUNAL. THEREFORE, THE SAID ALTERNATE GROUND IN ALL SUCH CASES IS DISMISSED. THUS, IN VIEW OF THE STATEMENT MADE BY BOTH THE SIDES THAT THE FACTS IN THE PRESENT APPEAL ARE IDENTICAL , THE ISSUE RELATING TO EXCESS SUGAR CANE PRICE PAID BY THE ASSESSEE IS RESTORED TO THE FILE OF ASSESSING OFFICER WITH SIMILAR DIRECTIONS AS ABOVE IN THE CASE OF MAJALGAON SAHAKARI SAKHAR KARKHANA LTD. VS. ACIT (SUPRA) . THE ASSESSING OFFICER SHALL DECIDE THE ISSUE AFTER AFFORDING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE, IN ACCORDANCE WITH LAW. THE GROUND NOS. 1 TO 20 OF THE APPEAL ARE ALLOWED FOR STATISTICAL PURPOSE , ACCORDINGLY . 5 . IN GROUND NO. 21 OF THE APPEAL , THE ASSESSEE HAS ASSAILED DISALLOWANCE OF BANK GUARANTEE COMMISSION. THE CONTENTION OF THE ASSESSEE IS THAT BEFORE THE LOWER AUTHORITIES, TH E ASSESSEE COULD NOT PRODUCE DEE OF GUARANTEE BETWEEN MAHARASHTRA STATE CO - OP. BANK AND NATIONAL CO - OP. DEVELOPMENT CORPORATION. THE ASSESSEE HAS TAKEN LOAN FROM BANK FOR THE PURPOSE OF BUSINESS. THE D EED OF G UARANTEE HAS BEEN 6 ITA NO . 1159/PUN/2012, A.Y. 2007 - 08 FILED AS ADDITIONAL EVIDENC E BEFORE US. THE SAME IS TAKEN ON RECORD . WI THOUT COMMENTING ON MERITS OF THE ADDITION , WE DEEM IT APPROPRIATE TO RESTORE THIS ISSUE TO THE FILE OF ASSESSING OFFICER FOR RE - CONSIDERATION IN THE LIGHT OF ADDITIONAL EVIDENCE FILED. THE ASSESSING OFFICER SHALL DECIDE THIS ISSUE DE - NOVO AFTER CONSIDERING THE FRESH EVIDENCE AND AFFORDING REASONA BLE OPPORTUNITY OF HEARING TO THE ASSESSEE, IN ACCORDANCE WITH LAW. 6 . IN THE RESULT, THE IMPUGNED ORDER IS SET ASIDE AND THE APPEAL OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON MONDAY, THE 01 ST DAY OF JU LY , 2019. SD/ - SD/ - ( / ANIL CHATURVEDI ) ( / VIKAS AWASTHY) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE; / DATED : 01 ST JU LY , 2019 . RK / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - III, PUNE 4. / THE CIT - IV, PUNE 5 . , , , / DR, ITAT, A BENCH, PUNE. 6 . / GUARD FILE. / / // TRUE COPY// / BY ORDER, / PRIVATE SECRETARY, , / ITAT, PUNE