Shree Siddheswar SSK Ltd, Solapur V. Deputy Commissioner of Income-tax, Circle - 1, Solapur

ITA 143/PUN/2022

AI Insights

The case involves Shree Siddheshwar Sahakari Sakhar Karkhana Ltd., a sugar cooperative, appealing against the order of the CIT(A), National Faceless Appeal Centre, which upheld disallowances made by the Assessing Officer under Section 143(3) of the Income Tax Act, 1961. The primary issues in the appeal were the disallowance of excess sugarcane purchase prices paid to cane growers and the disallowance of concessional sugar sales to members. The Tribunal considered the amendments to Section 36(1)(xvii) effective from April 1, 2016, and relevant CBDT circulars, directing a re-assessment of the prices paid for sugarcane in accordance with these provisions. The Tribunal also noted the consistency in judicial decisions regarding the disallowance of concessional sales, leading to the restoration of this issue to the Assessing Officer for re-evaluation.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 137338 (ITAT-PUNE)
• Duration Of Justice: 11 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 01-02-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 20-02-2022
• Other Referred Cases: Majalgaon SSK, (2019) 105 taxmann.com 100, Krishna SSK (2012) 27 taxmann.com 162, Sahyadri Sahakari Sakhar Kharkhana Ltd. vs. DCIT, Circle, Satara, Shrigonda Sahakari Sakhar Kharkhana Ltd. vs. DCIT, The Malegaon Sahakari Sakhar Karkhana Limited vs. ITO
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Commercial expediency
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “B” : PUNE BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER ITA.No.143/PUN./2022 Assessment Year 2017-18 Shree Siddheshwar Sahakari Sakhar Karkhana Ltd., Kumathe, Tal : North Solapur, Dist. Solapur. Maharashtra - 413 224 PAN AAAAS3729F vs. The Asst. Commissioner of Income Tax, Circle-1, Aaykar Bhavan, Hotgi Road, Solapur. Maharashtra. PIN 413 103 (Appellant) (Respondent) For Assessee : Shri Prasanna Joshi For Revenue : Shri Sardar Singh Meena Date of Hearing : 02.02.2023 Date of Pronouncement : 15.02.2023 ORDER PER SATBEER SINGH GODARA, J.M. This assessee’s appeal for assessment year 2017-18, arises against the CIT(A), National Faceless Appeal Centre [in short “NFAC”] Delhi’s order dated 22.12.2021, passed in Din & Order No. ITBA/NFAC/S/250/2021-22/1038004815(1), involving proceedings under Section 143(3) of the Income Tax Act, 1961 (in short “the Act”). Heard both the parties. Case file perused. 2. The assessee has pleaded the following substantive grounds in the instant appeal : 2 ITA.No.143/PUN./2022 Shree Siddheshwar Sahakari Sakhar Karkhana Ltd., Kumathe, Tal North Solapur. 1 “Disallowance out of Sugarcane Purchases 1.1. Ld. CIT(A) failed to realise that the law on the subject had changed w.e.f 1/4/2016 after insertion of clause (xvii) in section 36(1) whereby the price approved by the Government ought to have been allowed. 1.2. Ld. CIT(A) failed to appreciate that CBDT by its Circular No.18 issued on 25/10/2021 had clarified that "Government" mentioned in 36(l)(xvii) included a State Govt, which fixed price of cane under any State regulations. 1.3. Ld. CIT(A) wrongly followed the judgement of the this Hon'ble Tribunal in the case of Majalgaon SSK, (2019) 105 taxmann.com 100 which related to years prior to 1/4/2016 when section 36(l)(xvii) was not in statute. 1.4. On the facts and in the circumstances of the case, it may be held that the cane price paid by the appellant of Rs.2598/Mt was purely out of commercial expediency in order to try and procure adequate quantity of cane in the face of competition of adjacent private sugar mills were buying cane at Rs.2800/Mt and Rs.2725/Mt and who did not face any disallowance of the cane price paid by them. 3 ITA.No.143/PUN./2022 Shree Siddheshwar Sahakari Sakhar Karkhana Ltd., Kumathe, Tal North Solapur. 2. Concession in Sugar Sales to Members 2.1. Ld. CIT(A) has remitted the issue back to the AO to decide in accordance with the law laid down by Hon'ble Supreme Court in Krishna SSK (2012)27 taxmann.com 162 and in the event Ld. AO fails to do so, appellant be permitted to raise this ground in appeal.” 3. We advert to the first and foremost issue of disallowance of the alleged excess sugar cane purchase price made by the assessee to the cane growers. There is hardly any dispute that this assessee is a sugar cooperative society who purchases sugarcane from cane growers during the crushing season. And that the dispute herein pertains to disallowance of Rs.15,51,58,480/- @ 50% of Rs.31,03,16,960/- [difference between FRP and additional price paid]. Relevant details of the assessee’s sugarcane purchases have been incorporated by the Assessing Officer in para-10 page-6 of his assessment order dated 30.12.2019. It is in this factual backdrop that both the parties vehemently argued in light of their respective stands qua the assessee’s alleged excess sugarcane price paid to the sugarcane growers in issue. 4. We have given our thoughtful consideration to the instant former issue of disallowance of sugarcane purchases. 4 ITA.No.143/PUN./2022 Shree Siddheshwar Sahakari Sakhar Karkhana Ltd., Kumathe, Tal North Solapur. It transpires during the course of hearing that there is hardly any need for us to delve deeper in the relevant factual matrix once the legislature has itself inserted clause (xvii) to sec.36(1) by the Finance Act, 2015 w.e.f. 01.04.2016 making it clear that such a deduction of sugar cane price shall be equal to or less than the price fixed or approved by the Government. The said amendment is admittedly applicable w.e.f. 01.06.2016. And that we are in assessment year 2017-18 only. This follows the CBDT’s circular no.18/2021 dated 25.10.2021 making it clear that the statutory expression “price fixed or approved by the Government” in sec.36(1) (xvii) includes such price fixed by the state government’s through state level acts/orders as well as the designated authorities, which may also be higher than the price fixed by the central government. Faced with the situation, we direct the learned Assessing Officer to adjudicate the instant issue afresh and to verify the assessee’s sugar cane purchase prices fixed as to whether they are as per the state government or the prescribed authority(ies) or the central government, whichever is found to be higher, in light of sec.36(1)(xvii) of the Act. We also direct the assessee to file all the relevant details before the learned Assessing Officer in consequential proceedings within three effective opportunities of hearing. It’s instant first and 5 ITA.No.143/PUN./2022 Shree Siddheshwar Sahakari Sakhar Karkhana Ltd., Kumathe, Tal North Solapur. foremost substantive ground is allowed for statistical purposes in above terms. 5. Next comes the second issue involving disallowance of the assessee’s sugar sales to its members at concessional rates which is hardly res integra in light of this tribunal’s recent coordinate bench’s directions in ITA.Nos. 732 to 741/PUN/2022 2004-05, 2007-08 to 2011-12 & 2015-16 to 2018-19 Sahyadri Sahakari Sakhar Kharkhana Ltd., Yashwantnagar, Tal. Karad, Dist. Satara vs. DCIT, Circle, Satara order dated 20.01.2023 reading as under : “4. This leaves us with the assessee’s former substantive ground challenging correctness of both the learned lower authorities action disallowing its sale of sugar at concessional rate to members involving Rs.2,91,53,216/-. It is noted that the same is no more res integra as this tribunal’s coordinate bench’s recent order in ITA No.1785/PUN/2018 in Shrigonda Sahakari Sakhar Kharkhana Ltd. vs. DCIT, order dated 29.07.2022 has directed the assessing authority concerned to decide it afresh as follows: “3. Mr. Jasnani vehemently supported the learned lower authorities action on assessee’s sale of sugar at concessional rate (both to members) disallowed in 6 ITA.No.143/PUN./2022 Shree Siddheshwar Sahakari Sakhar Karkhana Ltd., Kumathe, Tal North Solapur. both the lower proceedings. He fails to dispute that the sugar at concessional rate is no more res integra as the tribunal’s various co-ordinate benches, and more particularly ITA No.68/PUN/2018 in The Malegaon Sahakari Sakhar Karkhana Limited vs. ITO’s order dated 21.40.2021 has set aside the concerned assessee’s substantive ground back to the assessing authority for its afresh appropriate adjudication as per law. Ordered accordingly.” 5. Both the parties are at ad idem during the course of hearing that the instant sole surviving issue involves identical factual as well as legal backdrop in the entire state of Maharashtra so far as sale of sugar by sugar co- operatives to their growers / members at concessional rate(s) is concerned. Faced with the situation, we also deem it appropriate to restore this issue back to the file of Assessing Officer in very terms. Ordered accordingly. This first and foremost appeal ITA No.732/PUN/2022 treated as the ‘lead’ case is partly accepted for statistical purposes. 5.1. Faced with the situation, we adopt judicial consistency and restore the instant latter issue as well back to 7 ITA.No.143/PUN./2022 Shree Siddheshwar Sahakari Sakhar Karkhana Ltd., Kumathe, Tal North Solapur. Assessing Officer for his afresh appropriate adjudication in very terms. Ordered accordingly. 6. This assessee’s appeal is allowed for statistical purposes in above terms. Order pronounced in the open Court on 15.02.2023. Sd/- Sd/- [DR. DIPAK P. RIPOTE] [SATBEER SINGH GODARA] ACCOUNTANT MEMBER JUDICIAL MEMBER Pune, Dated 15 th February, 2023 VBP/- Copy to 1. The appellant 2. The respondent 3. The Ld. CIT(A) concerned. 4. The CIT concerned 5. D.R. ITAT, Pune “B” Bench, Pune 6. Guard File. //By Order// Assistant Registrar, ITAT, Pune Benches Pune.