Vithalrao Shinde SSK Ltd, Solapur V. Assistant Commissioner of Income tax, Solapur

ITA 1429/PUN/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 1111 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 05-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T VIJAYA BHASKAR REDDY
• Assessee Lawyers: SHUBDHA A KOPPA
• Keywords: Business expenditure; Set aside

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO.1429/PUN/2017 / ASSESSMENT YEAR : 2013-14 VITHALARAO SHINDE SSK LTD., P.O. GANGAMAI NAGAR, PIMPALNER, TAL: MADHA, DIST. SOLAPUR 413 210. PAN : AAAAM1644B. . / APPELLANT. V/S THE ASST.COMMISSIONER OF INCOME TAX, CIRCLE 1, SOLAPUR. . / RESPONDENT ASSESSEE BY : SHRI SHUBDHA A. KOPPA. REVENUE BY : T. VIJAYA BHASKAR REDDY / ORDER PER ANIL CHATURVEDI, AM : 1. THIS APPEAL FILED BY THE ASSESSEE IS EMANATING OUT OF THE ORDER OF COMMISSIONER OF INCOME TAX (A) 7, PUNE DT.31.01.2017 FOR THE ASSESSMENT YEAR 2013-14. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON R ECORD ARE AS UNDER :- ASSESSEE IS A CO-OPERATIVE SOCIETY ENGAGED IN THE BUSINE SS OF MANUFACTURING AND SALE OF SUGAR AND ITS BY-PRODUCTS. AS SESSEE ELECTRONICALLY FILED ITS RETURN OF INCOME FOR A.Y. 2013-14 ON 26.09.2013 / DATE OF HEARING : 05.08.2019 / DATE OF PRONOUNCEMENT: 11.09.2019 2 DECLARING TOTAL INCOME AT RS.5,09,80,335/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER ASSESSMENT WAS FRAMED U/S 143(3 ) OF THE ACT VIDE ORDER DT.01.03.2016 AND THE TOTAL INCOME WAS DETERM INED AT RS.1,36,08,84,618/-. AGGRIEVED BY THE ORDER OF AO, ASSESS EE CARRIED THE MATTER BEFORE LD.CIT(A), WHO VIDE ORDER DT. 31.01.2017 (IN APPEAL NO.PN/CIT(A)-7/CIR-1/363/2015-16) GRANTED PARTIAL RELIEF T O THE ASSESSEE. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW IN APPE AL BEFORE US AND HAS RAISED VARIOUS GROUNDS. 3. ALL THE GROUNDS BEING ARGUMENTATIVE IN NATURE ARE NOT REPRODUCED AND THE SOLE GRIEVANCE OF THE ASSESSEE IS WITH RESPECT T O THE ADDITIONS ON ACCOUNT OF ALLEGED EXCESS SUGAR CANE PURCHASE AND SALE OF SUGAR AT CONCESSIONAL RATE. 4. WITH RESPECT TO THE EXCESS PURCHASE PRICE OF SUGAR C ANE PURCHASED, AO NOTICED THAT ASSESSEE HAD PURCHASED SUG AR CANE FROM THE FARMERS AT PRICE MUCH HIGHER THAN THE FAIR REMUNE RATIVE PRICE (FRP) NOTIFIED BY THE GOVERNMENT. AO WAS OF THE VIEW THA T ANY PAYMENT IN EXCESS OF FRP WAS IN THE NATURE OF DISTRIBUTION OF PROFITS. HE WAS OF THE VIEW THAT ONLY STATUTORY LIABILITY I.E., FRP PRIC E CAN BE CONSIDERED AS BUSINESS EXPENDITURE. HE ACCORDINGLY WORK ED OUT THE PAYMENT OF EXCESS SUGAR CANE PRICE AS TABULATED BY HIM AT PARA 5 OF THE ASSESSMENT ORDER AND DETERMINED THE EXCESS PRICE OF RS.130,07,39,570/- AND DISALLOWED THE SAME. 5. AO HAS NOTICED THAT ASSESSEE HAD SUPPLIED RS.14,402 QUINTALS OF SUGAR TO ITS MEMBERS AS AN AVERAGE PRICE OF RS.2,102/- PER QUINTAL, WHEREAS THE AVERAGE PRICE OF FREE SUGAR REALIZED BY THE ASSESSEE WAS 3 RS.2,738.50 PER QUINTAL. ASSESSEE WAS ASKED AS TO WHY T HE DIFFERENCE BETWEEN AVERAGE FREE SALE PRICE AND THE CONCESSIONAL PRIC E SHOULD NOT BE DISALLOWED AND ADDED TO THE TOTAL INCOME AS IT WAS NOTHING BUT THE DISTRIBUTION OF PROFITS. ASSESSEE MADE THE SUBMISSIONS WHIC H WERE NOT FOUND ACCEPTABLE TO THE AO. HE THEREFORE DISALLOWED THE DIFFE RENCE OF THE AMOUNT PAID BETWEEN AVERAGE FREE SALE PRICE AND CONCESS IONAL PRICE AMOUNTING TO RS.91,64,713/- AND MADE ITS ADDITION. AGGRIE VED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A ), WHO GRANTED PARTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW IN AP PEAL BEFORE US. 6. BEFORE US, LD.A.R. AT THE OUTSET, SUBMITTED THAT THE ISSU E IN THE PRESENT GROUND IS COVERED BY THE DECISION OF GROUP OF CASES DECIDED BY PUNE TRIBUNAL, THE LEAD CASE BEING OF SIDDHESHWAR SAHAKA RI SAKHAR KARKHANA LTD., AND OTHERS (IN ITA NO.1210/PUN/1997 FOR A. Y. 1992-93 ORDER DATED 01.05.2019). SHE POINTED TO THE ORDER OF TRIB UNAL AND SUBMITTED THAT THE ISSUE IN THOSE CASES HAS BEEN REMIT TED TO THE FILE OF AO WITH NECESSARY DIRECTIONS. SHE SUBMITTED THAT SINCE THE FACTS OF THE PRESENT CASE ARE IDENTICAL TO THAT OF SIDDHESHWAR SAHA KARI SAKHAR KARKHANA LTD., AND OTHERS (SUPRA), THE ISSUE BE REMITTED BACK TO THE FILE OF AO WITH SIMILAR DIRECTIONS. LD. D.R. ON THE OTHER HAND DID NOT CONTROVERT THE SUBMISSIONS MADE BY THE LD.A.R. BUT HOWEV ER SUPPORTED THE ORDER OF LOWER AUTHORITIES. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE M ATERIAL ON RECORD. THE ISSUE IN THE PRESENT GROUNDS IS WITH RESPE CT TO THE 4 PAYMENT OF EXCESSIVE SUGAR CANE PRICE TO THE FARMERS ON PURCHASE OF SUGAR CANE BY THE ASSESSEE AND ADDITION OF DIFFERENTIAL PR ICE BETWEEN AVERAGE FREE SALE PRICE AND CONCESSIONAL PRICE CHARGED ON SALE OF SUGAR. WE FIND THAT CO-ORDINATE BENCH OF THE TRIBUNAL ON IDENTICA L ISSUE IN THE CASE OF SIDDHESHWAR SAHAKARI SAKHAR KARKHANA LTD., AND O THERS (SUPRA) AFTER CONSIDERING THE ORDER OF HONBLE APEX COURT IN THE CASE OF CIT VS. TASGAON TALUKA S.S.K. LTD., HAS RESTORED THE MATT ER TO AO AND DIRECTED THE AO BY OBSERVING AS UNDER : 22. HOWEVER, AFTER ASSESSMENT YEAR 2009-10, THE SC ENARIO OF PAYMENT OF CANE PRICE TO THE FARMERS HAS UNDERGONE CHANGE AND THE DISTRIBUTION IS ON THE BASIS OF FAIR AND REMUNERATIVE PRICE, WHICH WAS DIFFERENT FROM SMP. THE CONTROL ORDER, 1966 AND THE WORKING OF SAP UNDE R CLAUSE 5A OF THE SAID ORDER DOES NOT GOVERN THE PAYMENT OF CANE PRIC E TO THE FARMERS AFTER ASSESSMENT YEAR 2009-10. IN SUCH SCENARIO, THE ASS ESSING OFFICER IS DIRECTED TO RE-LOOK INTO THE CLAIM OF ASSESSEE AS P ER AMENDED GUIDELINES ISSUED IN THIS REGARD AND DECIDE THE ALLOWABILITY O F SAID EXPENDITURE IN THE HANDS OF S.S.K. GROUP. SINCE THE SMP FACTOR IS NOT THE BASIS FOR ALLOWING THE SAID EXPENDITURE, IT WOULD BE DIFFICUL T TO CALCULATE THE ADDITIONAL PURCHASE PRICE UNDER CLAUSE 5A OF CONTRO L ORDER, 1966. ACCORDINGLY, IN THE PRESENT BUNCH OF APPEALS, WE RE MIT THIS ISSUE OF DEDUCTIBILITY OF EXCESS CANE PRICE TO THE FILE OF A SSESSING OFFICER WITH NECESSARY DIRECTIONS TO APPLY THE RATIO LAID DOWN B Y THE HON'BLE SUPREME COURT IN THE YEARS TO WHICH IT IS SO APPLICABLE AND FOR THE BALANCE YEARS I.E. AFTER THE MODIFICATION OF THE RULES FROM ASSES SMENT YEAR 2009-10, TO CONSIDER THE CHANGED GUIDELINES AND DECIDE THE SAME AFTER ALLOWING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 23. IT IS CONTENDED BY THE LEARNED COUNSELS BEFORE US THAT IN ADDITION TO THE ISSUE BEFORE THE HON'BLE SUPREME COURT IN RESPE CT OF EXCESS CANE PRICE, THERE ARE IN SOME CASES, SUGARCANE WAS PURCH ASED ON CONTRACTED RATES / PRICE OUT OF AREA OF OPERATIONS. IT WAS PO INTED OUT BY THEM THAT THIS ISSUE WAS NOT CONSIDERED BY THE HON'BLE SUPREM E COURT BUT THE SAID DEDUCTION IS TO BE ALLOWED IN THE HANDS OF ASSESSEE , WHICH ADMITTEDLY, IS NOT COVERED BY SMP PRICE. SINCE THE MATTER HAS BEE N SET ASIDE TO THE FILE OF ASSESSING OFFICER, THEN IN THE HANDS OF RELEVANT ASSESSEE, THIS ISSUE MAY BE LOOKED INTO BY THE ASSESSING OFFICER. IT WA S POINTED OUT THAT IN SUCH CASES, SMP WOULD NOT HAVE ANY ROLE TO PAY. CO NSEQUENTLY, SUCH APPEALS ARE NOT GOVERNED BY THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN CIT VS. TASGAON TALUKA S.S.K. LTD. AND OTH ERS (SUPRA). THE ASSESSING OFFICER IS DIRECTED TO DECIDE THE ISSUE A FTER ALLOWING REASONABLE OPPORTUNITY OF HEARING TO ASSESSEE. WITH SIMILAR DI RECTIONS, WE SET ASIDE. 8. WITH RESPECT TO ADDITION ON SALE OF SUGAR AT CONCESS IONAL RATE, WE FIND THAT THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CAS E OF SIDDHESWAR SAHAKARI SAKHAR KARKHANA LTD., AND OTHERS HA D REMITTED THE ISSUE TO THE FILE OF AO TO APPLY THE RATIO OF THE DECIS ION OF HONBLE 5 APEX COURT LAID DOWN IN THE CASE OF KRISHNA SAHAKARI SAKH AR KHARKHANA REPORTED IN (2012) 211 TAXMANN. 109 (SC) BY OBS ERVING AS UNDER : 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT ON IDENTICAL ISSUE, IN THE C ASE OF SIDDHESHWAR SAHAKARI SAKHAR KARKHANA LTD. AND OTHERS (SUPRA) T HE CO-ORDINATE BENCH OF THE TRIBUNAL HAS REMITTED THE ISSUE TO THE FILE OF AO TO APPLY THE RATIO OF THE DECISION OF HONBLE APEX COURTS LAID DOWN IN THE CASE OF CIT VS. KRISHNA SAHAKARI SAKHAR KARKHANA LTD. REPORTED IN (2012) 211 TAXMANN 109 (SC), BY OBSERVING AS UNDER : 24. NOW, COMING TO THE NEXT ISSUE I.E. SALE OF SUG AR AT CONCESSIONAL RATE TO MEMBERS. IN THIS BUNCH OF APP EALS, THIS IS THE SECOND ISSUE WHICH IS MOSTLY RAISED AND DIFFERENT C OUNSELS APPEARING BEFORE US HAVE POINTED OUT THAT THE SAID ISSUE HAS BEEN DECIDED BY THE HON'BLE SUPREME COURT IN CIT VS. KRI SHNA SAHAKARI SAKHAR KARKHANA LTD. (SUPRA), BUT THE APPEALS IN TH E PRESENT BUNCH HAVE BEEN DECIDED WITHOUT TAKING INTO CONSIDE RATION THE SAID DECISION, AS THE ORDERS WERE PASSED BY CIT(A) BEFORE THE SAID DECISION. 25. WE FIND THAT THE TRIBUNAL IN MAJALGAON SAHAKARI SAKHAR KARKHANA LTD. VS. ACIT (SUPRA) HAVE REMITTED THE IS SUE BACK TO THE FILE OF ASSESSING OFFICER VIDE ITS DELIBERATIONS IN PARA 11 AT PAGES 22 TO 24 OF ORDER TO APPLY THE RATIO LAID DOWN IN C IT VS. KRISHNA SAHAKARI SAKHAR KARKHANA LTD. (SUPRA) AND DETERMINE WHETHER DIFFERENCE BETWEEN AVERAGE PRICE OF SUGAR SOLD IN T HE MARKET AND THAT SOLD TO THE MEMBERS AT CONCESSIONAL RATE WAS T HE APPROPRIATION OF PROFITS OR NOT. FOLLOWING THE SAM E PARITY OF REASONING, THIS ISSUE IS ALSO REMITTED BACK TO THE ASSESSING OFFICER TO DECIDE IN LINE WITH SAME DIRECTIONS. 9. BEFORE US, REVENUE HAS NEITHER POINTED OUT ANY DISTINGU ISHING FEATURE IN THE FACTS OF THE PRESENT CASE AND THAT SIDDHE SHWAR SAHAKARI SAKHAR KARKHANA LTD., AND OTHERS (SUPRA) NOR HAS PLACED ANY MATERIAL ON RECORD TO DEMONSTRATE THAT THE ORDER OF THE TRIBUN AL IN THE CASE OF SIDDHESHWAR SAHAKARI SAKHAR KARKHANA LTD., AND OTHERS (S UPRA) HAS BEEN SET ASIDE / STAYED / OVER-RULED BY THE HIGHER JUD ICIAL FORUM. WE, THEREFORE FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF SIDDHESHWAR SAHAKARI SAKHAR KARKHANA LT D., AND OTHERS (SUPRA) AND FOR SIMILAR REASONS, RESTORE THE ISSUE TO THE FILE OF AO TO DECIDE THE ISSUE ON MERITS. NEEDLESS TO STATE THAT AO SH ALL GRANT ADEQUATE OPPORTUNITY OF HEARING TO THE ASSESSEE. ASSES SEE IS ALSO 6 DIRECTED TO PROMPTLY FURNISH ALL THE DETAILS CALLED FOR BY TH E AUTHORITIES. THUS, THE GROUNDS OF ASSESSEE ARE ALLOWED FOR STATI STICAL PURPOSES. 10. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED FO R STATISTICAL PURPOSES. ORDER PRONOUNCED ON 11 TH DAY OF SEPTEMBER, 2019. SD/- SD/- ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) ! / JUDICIAL MEMBER '! / ACCOUNTANT MEMBER PUNE; DATED : 11 TH SEPTEMBER, 2019. YAMINI #$%&'('% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5 6. CIT(A)-7, PUNE. PR. CIT-6, PUNE. '#$ %%&',) &', / DR, ITAT, B PUNE; $*+,/ GUARD FILE. / BY ORDER // TRUE COPY // -./%0&1 / SR. PRIVATE SECRETARY ) &', / ITAT, PUNE.