Dr. Baburao Bapuji Tanpure Sahakari Sakhar Karkhana Ltd, Ahmednagar V. Assistant Commissioner of Income tax, Ahmednagar

ITA 1391/PUN/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 8271 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 3 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 01-06-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ABHIJIT HALDAR
• Assessee Lawyers: K SRINIVASAN
• Section: 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUNE BEFORE SHRI R.S.SYAL, VP AND SHRI PARTHA SARATHI CHAUDHURY , JM . / I TA NO. 1391 /PUN/20 17 / ASSESSMENT YEAR : 2013 - 14 DR. BABURAO BAPUJI TANPURE SAHAKARI SAKHAR KARKHANA LTD. ( FORMERLY RAHURI SA HAKARI SA KHAR KARKHANA LTD.) SHRISHIVAJINAGAR, POST. RAHURI FACTORY, TAL. RAHURI, DIST. AHMEDNAGAR, PIN - 413 706. PAN : AAAAD1287F ....... / APPELLANT / V/S. THE ASSISTANT COMMISSIONER OF INCOME TAX, AHMEDNAGAR CIRCLE, AHMEDNAGAR. / RESPONDENT A SSESSEE BY : SHRI K . SRINIVASAN REVENUE BY : SHRI ABHIJIT HALDAR / DATE OF HEARING : 26 .0 9 .2019 / DATE OF PRONOUNCEMENT : 27 .0 9 .2019 / ORDER PER PARTHA SARATHI CHAUDHU RY, JM : THIS APPEAL PREFERRED BY THE ASSE SSEE EMANATES FROM THE ORDER OF THE LD. CIT(APPEALS) - 2, PUNE DATED 29.12.2016 FOR THE ASSESSMENT YEAR 2013 - 14 AS PER THE GROUNDS OF APPEAL ON RECORD. 2 ITA NO. 1391 /PUN/20 17 A.Y. 2013 - 14 2. THE ASSESSEE HAS RAISED 15 GROUNDS IN APPEAL MEMO, OUT OF WHICH GROUNDS NO. 1 TO 14 PERTAINS TO EXCESS SUGAR CANE PRICE PAID TO MEMBERS & NON - MEMBERS . GROUND NO.15 PERTAINS TO DISALLOWANCE U/S.36(1)(VA) OF THE INCOME TAX ACT, 1961 (HEREI NAFTER REFERRED TO AS THE ACT ). 3. THE LD. AR OF THE ASSESSEE AND LD. DR REPRESENTING THE DEPARTMENT SUBMITTED AT THE OUTSET THAT THE ISSUE RAISED IN PRESENT APPEAL BY THE ASSESSEE HA S ALREADY BEEN CONSIDERED AND ADJUDICATED BY THE CO - ORDINATE BENCH OF TRIBUNAL IN BUNCH OF APPEALS . THE FACTS AND ISSUE RAISED IN PRESENT APPEAL IS SIMILAR. THE LD. DR FURNISHED COPY OF ORDER OF TRIBUNAL DATED 14 - 03 - 2019 VIDE WHICH BUNCH OF 162 APPEALS WERE DISPOSED OF BY THE CO - ORDINATE BEN CH , T HE LEAD CASE BEING MAJALGAON SAHAKARI SAKHAR KARKHANA LTD. VS. ACIT IN ITA NO. 308/PUN/2018 FO R THE ASSESSMENT YEAR 2013 - 14 AND ALSO BY THE ORDER OF TRIBUNAL DATED 13.06.2019, THE LEAD CASE BEING ACIT VS. SHRI SHANKAR SSK LTD. IN ITA NO.382/PUN/2014 F OR THE ASSESSMENT YEAR 2010 - 11, COPY OF WHICH HAS ALSO BEEN PLACED ON RECORDS. 4 . AFTER H EARING BOTH THE SIDES AND AFTER CONSIDERING THE ORDER OF CO - ORDINATE BENCH IN THE CASE OF MAJALGAON SAHAKARI SAKHAR KARKHANA LTD. VS. ACIT (SUPRA) AND ALSO IN THE CA SE OF ACIT VS. SHRI SHANKAR SSK LTD. (SUPRA.) ETC. , WE OBSERVE THAT THE ISSUE RAISED IN THE PRESENT APPEAL HAS ALREADY BEEN CONSIDERED AND DECIDED BY THE CO - ORDINATE BENCH OF THE TRIBUNAL PUNE. 3 ITA NO. 1391 /PUN/20 17 A.Y. 2013 - 14 EXCESS CANE PRICE PAID TO MEMBERS & NON - MEMBERS : 5 . THE CO - ORDINATE BENCH AFTER CONSIDERING 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 HAS DECIDED THIS ISSUE AS UNDER : 5. WE HAVE HEARD BOTH THE SIDES AND GONE THROUGH TH E 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 THE RECENT JUDGMENT OF HONBLE SUPREME COURT IN C IT 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 SUG ARCANE 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 THE PRODUCTION OF SUGAR IS COVERED BY THE ESSENTIA L 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, 1 966 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 BASIS 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 THE CONTROL ORDER, 1966. THEIR LORDSHIPS NOTED T HAT 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 EXPENDITURE AND WHAT WILL BE THE PROFIT ETC. CONSIDER ING 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 SMP DETERMINED UNDER CLAUSE 3 AND SAP/ADDITIONAL P URCHASE PRICE DETERMINED UNDER CLAUSE 5A, HAS AN ELEMENT OF 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 4 ITA NO. 1391 /PUN/20 17 A.Y. 2013 - 14 SAP/ADDITIONAL P URCHASE 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 UN DER 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 SAID 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/ADDIT IONAL 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 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. MERELY BECAUSE THE HIGHER PRICE IS PAID TO BOTH, MEMBERS AND NON - MEMBERS, QUA THE MEMBERS, STILL THE QUESTIO N 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 RECO RD 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 MODALITIES 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/DISTRIBUTION OF PROFIT AND THE REST OF THE AMOUNT IS T O 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 COVER ED BY THE AFORESAID JUDGMENT OF THE HONBLE SUPREME 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 T HE ARTICULATION OF LAW BY THE HONBLE SUPREME COURT 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 THE STATEMENT OF ACCOUNTS, BALANCE SHEET AND OTHER RELEVANT MATERIAL SUPPLIED TO THE STATE GOVERNMENT FOR THE PURPOSE OF DECIDING/FIXING THE 5 ITA NO. 1391 /PUN/20 17 A.Y. 2013 - 14 FINAL PRICE/ADDITIONAL PURCHASE PRICE/SAP UNDER THIS CLAUSE. THE AMO UNT 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 CONSIDE RED AS DEDUCTIBLE EXPENDITURE. AT THIS STAGE, IT 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 PRO VISIONS OF SECTION 40A(2) OF THE ACT, AS HAS BEEN 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 SOM E OF THE APPEALS, THE ASSESSEES HAVE RAISED AN ALTERNATE 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 VIEW 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 SA ID ALTERNATE GROUND IN ALL SUCH CASES IS DISMISSED. 6 . THUS, IN VIEW OF THE STATEMENT MADE BY BOTH THE SIDES THAT THE FACTS IN THE PRESENT SET OF APPEALS 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 HEA RING TO THE RESPECTIVE ASSESSEE , IN ACCORDANCE WITH LAW. THUS, GROUNDS NO. 1 TO 14 RAISED IN APPEAL BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 7 . THE LD. AR OF THE ASSES SEE SUBMITTED THAT HE IS NOT PRESSING THE GROUND NO.15. IN VIEW OF THE SUBMISSIONS MADE BY THE LD. AR, GROUND NO.15 RAISED IN APPEAL BY THE AS SESSEE IS DISMISSED AS NOT PRESSED . 6 ITA NO. 1391 /PUN/20 17 A.Y. 2013 - 14 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRO NOUNCED ON 27 TH DAY OF SEPTEMBER , 201 9 . SD/ - SD/ - R.S.SYAL PARTHA SARATHI CHAUDHURY VICE PRESIDENT JUDICIAL MEMBER / PUNE; / DATED : 27 TH SEPTEMBER , 2019 . SB / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(APPEALS) - 2, PUNE. 4. THE PR. CIT - 1, PUNE. 5 . , , , / DR, ITAT, A BENCH, PUNE. 6 . / GUARD FILE. // TRUE COPY // / BY ORDER, / PRIVATE SECRETARY , / ITAT, PUNE . 7 ITA NO. 1391 /PUN/20 17 A.Y. 2013 - 14 DATE 1 DRAFT DICTATED ON 26 .0 9 .2019 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 2 7 .0 9 .201 9 SR.PS/PS 3 DRAFT PROPOSED AND PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/JM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 DATE OF UPLOADING OF ORDER SR.PS/PS 8 FILE SENT TO BENCH CLERK SR.PS/PS 9 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 10 DATE ON WHICH FILE GOES TO THE A.R 11 DATE OF DISPATCH OF ORDER