Sharad Sahakari Sakhar Karkhana Ltd, Kolhapur V. Assistant Commissioner of Income-tax, Ichalkaranji Circle, Ichalkaranji

ITA 1576/PUN/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 7584 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-10-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 10-10-2019
• Assessment Year: 2015-2016
• Appeal Filed On: 01-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRAVIN CHAVAN
• Keywords: Gift; Set aside
• Section: 143(3); 37(1)

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC, PUNE BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER . / ITA NO.1576/PUN/2018 / ASSESSMENT YEAR : 2015-16 SHARAD SAHAKARI SAKHAR KARKHANA LIMITED, SHAMRAO PATIL YADRAVKAR NAGAR, NARANDE, TAL. HATKANANGALE, DIST. KOLHAPUR. PAN : AAFAS3961G. . / APPELLANT. V/S THE ASST.COMMISSIONER OF INCOME TAX, ICHALKARANJI CIRCLE, ICHALKARANJI, KOLHAPUR. . / RESPONDENT ASSESSEE BY : MS. DEEPA KHARE. REVENUE BY : PRAVIN CHAVAN. / ORDER PER ANIL CHATURVEDI, AM : 1. THIS APPEAL FILED BY THE ASSESSEE IS EMANATING OUT OF THE ORDER OF COMMISSIONER OF INCOME TAX (A) 2, KOLHAPUR DT.09.08.2018 FOR THE ASSESSMENT YEAR 2015-16. 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 BUSIN ESS OF MANUFACTURING AND SALE OF SUGAR AND ITS BY-PRODUCTS. ASS ESSEE FILED ITS RETURN OF INCOME FOR A.Y. 2015-16 ON 26.09.2015 DECLARING TOTAL TAXABLE INCOME AT RS.NIL. THE CASE WAS SELECTED FOR SCRUTINY AN D THEREAFTER ASSESSMENT WAS FRAMED U/S 143(3) OF THE ACT VIDE ORDER DT.26.12.20 17 AND / DATE OF HEARING : 10.10.2019 / DATE OF PRONOUNCEMENT: 18.10.2019 2 THE TOTAL INCOME BEFORE SET OFF OF LOSSES WAS DETERMINED AT RS.2,53,56,787/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE C ARRIED THE MATTER BEFORE LD.CIT(A), WHO VIDE ORDER DT. 09.08.2018 (IN A PPEAL NO.ICH/106/2017-18) GRANTED PARTIAL RELIEF TO THE ASSESSE E. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW IN APPEAL AND HAS RAISED THE FOLLOWING GROUNDS : 1. ON FACTS AND IN CIRCUMSTANCES OF THE CASE LEARNED C IT (APPEALS) HAS ERRED IN CONFIRMING THE ADDITIONS MADE BY THE A .O . ON ACCOUNT OF FINAL CANE PRICE PAID FOR THE PURCHASE OF SUGAR CANE. THE CIT (A) HAS FAILED TO APPRECIATE THE PRICE PAID WAS AS PER QUANTITY SUPPL IED AND HENCE CANNOT BE HELD AS 'DISTRIBUTION OF PROFITS' . 2. ON FACTS AND IN CIRCUMSTANCES OF THE CASE LEARNED C IT (APPEALS) HAS FAILED TO APPRECIATE THAT THE PRICE PAID BY THE ASS ESSEE FACTORY WAS PARI MATERIAL WITH THE PRICE PAID BY OTHER FACTORIES AND HENCE ALLOWABLE UNDER . SECOND 37(1) OF THE INCOME TAX ACT 1961. 3. ON FACTS AND IN CIRCUMSTANCES OF THE CASE THE LE ARNED CIT (A) APPEALS HAS APPRECIATE THAT THE ASSESSEE HAS NOT RECEIVED A NY INCOME FROM SALE OF SUGAR AT CONCESSIONAL RATE AS SUCH THERE ACCRUES NO INCOME TO THE ASSESSEE AND HENCE NO TAX CAN BE LEVIED ON ANY AMOUNT WHICH IS NOT ACTUAL INCOME OF THE ASSESSEE AS HELD BY THE HON ' BLE SUPREME COURT IN CASE OF CIT(A) V/S. A. RAMAN & CO., AS REPORTED IN 67 ITR 11. THUS THE HON 'BLE CIT (APPEALS) HAS ERRED IN COMING TO A CONCLUSION THAT THE DISCOUNT O R SUGARS SOLD AT CONCESSIONAL PRICE IS NOTHING BUT GIFT TO MEMBERS A ND NOT BASED ON COMMERCIAL BUSINESS EXPEDIENCY. 3. BEFORE ME, AT THE OUTSET, LD.A.R. SUBMITTED THAT THE ISS UE INVOLVED IN THE PRESENT GROUNDS IS WITH RESPECT TO THE ADDITIONS ON ACCOUNT OF ALLEGED EXCESS SUGAR CANE PURCHASE PRICE PAID AND SALE OF SUGAR AT CONCESSIONAL RATE TO THE MEMBERS OF THE ASSESSEE. SHE SUBMITTED THAT IDENTICAL ISSUE AROSE BEFORE THE CO-ORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE IN A.YS. 2011-12 TO 2014-15 AND OT HER ASSESSEES AND THE CO-ORDINATE BENCH OF THE TRIBUNAL VIDE ORDER DATED 01.10.2019 HAS RESTORED THE ISSUE BACK TO THE FILE OF AO WITH NECESSARY DIRECTIONS. IN SUPPORT OF HER AFORESAID CONTENTIONS, SHE POINTED TO THE NAME OF THE ASSESSEE AS APPEARING IN THE ORDER AT SRL.NO.48 TO 51 AT PAGES 6 AND 7 OF THE ORDER. SHE FURTHER SUBMITTED THAT THERE ARE NO C HANGES IN THE FACTS OF THE CASE IN THE YEAR UNDER CONSIDERATION AND THAT OF AS SESSEES OWN CASE 3 IN A.YS. 2011-12 TO 2014-15 AND THEREFORE FOLLOWING THE ORD ER OF TRIBUNAL DT.01.10.2019 IN ASSESSEES OWN CASE FOR EARLIER YEARS AND OTHER ASSESSEES (SUPRA) THE ISSUE BE DECIDED ON SIMILAR LINES. LD. D.R. ON THE O THER HAND DID NOT OBJECT TO THE CONTENTIONS MADE BY LD.A.R. BUT HO WEVER SUPPORTED THE ORDER OF LOWER AUTHORITIES. 4. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE M ATERIAL ON RECORD. THE ISSUE IN THE PRESENT GROUND IS WITH RESPEC T TO THE PAYMENT OF EXCESS CANE PRICE PURCHASED BY THE ASSESSEE. I FIND TH AT THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE GROUP OF CASES (INCLUDING THE PRESENT ASSESSEE) ORDER DATED 01.10.2019 HAD REMITTED THE ISSUE BACK TO THE FILE OF AO IN VIEW OF JUDGMENT OF THE HONBLE APEX COURT IN TH E CASE OF CIT VS. TASGAON SSK LTD. (2019) 412 ITR 420 (SC). THE CO-ORDINA TE BENCH OF THE TRIBUNAL HAS FURTHER DIRECTED THE AO TO DECIDE THE ISSU E IN THE LINE OF THE AFORESAID DECISION OF THE HONBLE APEX COURT. THE RELEVAN T OBSERVATIONS OF THE TRIBUNAL READS AS UNDER : 6. BOTH THE SIDES ARE UNANIMOUSLY AGREEABLE THAT T HE EXTANT ISSUE OF DEDUCTION FOR PAYMENT OF EXCESSIVE PRICE FOR PURCHASE OF SUGARCAN E, RAISED IN MOST OF THE APPEALS UNDER CONSIDERATION, IS SQUARELY COVERED BY THE AFORESAID JUDGMENT OF THE HON BLE 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 THE ARTICULATION OF LAW BY THE HON BLE SUPREME COURT IN THE AFORENOTED JUDGMENT. THE AO WOULD ALLOW DEDUCTION FOR THE PRIC E PAID UNDER CLAUSE 3 OF THE SUGAR CANE (CONTROL) ORDER, 1966 AND THEN DETERMINE THE C OMPONENT OF DISTRIBUTION OF PROFIT EMBEDDED IN THE PRICE PAID UNDER CLAUSE 5A, BY CONS IDERING THE STATEMENT OF ACCOUNTS, BALANCE SHEET AND OTHER RELEVANT MATERIAL SUPPLIED TO THE STATE GOVERNMENT FOR THE PURPOSE OF DECIDING/FIXING THE FINAL PRICE/ADDITIONAL PURCH ASE 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 INCOM E, 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, IT IS MADE C LEAR 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 TH E AO BY APPLYING THE PROVISIONS 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 O PPORTUNITY OF HEARING BY THE AO IN SUCH FRESH DETERMINATION OF THE ISSUE. 5. VIDE GROUND NO.3, THE ISSUE RAISED IS WITH RESPECT TO SALE OF SUGAR BY THE ASSESSEE TO ITS MEMBERS AT CONCESSIONAL RATE. AO H ELD THE SALE OF 4 SUGAR AT CONCESSIONAL RATE BY THE ASSESSEE TO ITS MEMB ERS TO BE APPROPRIATION OF PROFIT AND NOT AN EXPENDITURE AND ACCORD INGLY DISALLOWED THE CLAIM OF EXPENDITURE MADE BY ASSESSEE. I FIND THAT ID ENTICAL ISSUE AROSE IN ASSESSEES OWN CASE AND THE GROUP CASES CITE D SUPRA BEFORE THE TRIBUNAL. THE TRIBUNAL VIDE ORDER DT.01.10.2019 (SUPRA) RESTOR ED THE ISSUE BACK TO THE FILE OF AO TO DECIDE AS PER THE DIRECTIONS CON TAINED THEREIN BY OBSERVING AS UNDER : 25. THE LD. CIT(A) IN THE INSTANT BATCH OF APPEALS HAS CONFIRMED THE ADDITION TOWARDS THE DIFFERENCE BETWEEN THE LEVY PRICE AND T HE CONCESSIONAL PRICE (UPTO 5 KG. PER MEMBER PER MONTH) AND TO THE EXTENT OF DIFFERENCE BETWEEN THE MARKET PRICE OF SUGAR AND CONCESSIONAL PRICE (O VER AND ABOVE 5KG. PER MEMBER PER MONTH). IN THIS PROCESS, THE ASSESSEES G OT TAXED EVEN FOR THE POTENTIAL PROFIT TO THE EXTENT OF DIFFERENCE BETWEE N THE COST PRICE AND MARKET/LEVY PRICE, AS THE CASE MAY BE. ERGO, WE HOL D THAT SUCH A STRAIGHTWAY DIFFERENCE BETWEEN THE MARKET/LEVY PRIC E AND THE CONCESSIONAL PRICE OF SUGAR CANNOT BE CONSTRUED AS APPROPRIATION OF PROFIT LEADING TO ADDITION AS HAS BEEN EXTANTLY DONE. THE IMPUGNED OR DERS TO THIS EXTENT ARE SET ASIDE AND THE MATTERS ARE RESTORED TO THE FILE OF THE RESPECTIVE AOS FOR FIRST ASCERTAINING THE COST PRICE OF SUGAR TO EACH ASSESSEE AND THEN MAKE ADDITION ON THIS ISSUE BY TREATING IT IS AS A CASE OF APPROPRIATION OF PROFIT ONLY TO THE EXTENT OF THE CONCESSIONAL SALE PRICE W HICH IS BELOW THE COST PRICE. HOWEVER, IT IS CLARIFIED THAT IN DETERMINING COST P RICE OF SUGAR TO THE FACTORY, NOT ONLY ALL THE DIRECT COSTS BUT ALL THE INDIRECT COSTS SHOULD ALSO BE TAKEN INTO CONSIDERATION. IN OTHER WORDS, ALL ITEMS OF DE BIT TO THE TRADING AND PROFIT AND LOSS ACCOUNT WOULD CONSTITUTE COST BASE. NEEDLE SS TO SAY, THE ASSESSEE WILL BE ALLOWED REASONABLE OPPORTUNITY OF HEARING I N SUCH FRESH PROCEEDINGS ON THIS ISSUE. 6. BEFORE ME, NO CONTRARY DECISION IN SUPPORT OF REVENUE H AS BEEN CITED BY LD.D.R NOR HAS HE POINTED TO ANY DISTINGUISHING FAC TS IN THE YEAR UNDER CONSIDERATION AND THAT OF ASSESSEES OWN CASE IN EARLIER YEARS I.E., A.YS. 2011-12 TO 2014-15 AND OTHER ASSESSEES WHICH HAS BEEN DECIDED BY THE CO-ORDINATE BENCH OF THE TRIBUNAL VIDE ORDER DT.01.10 .2019 (SUPRA). FURTHER LD.D.R. HAS ALSO NOT PLACED ANY MATERIAL TO DEMON STRATE THAT THE DECISION OF THE TRIBUNAL IN THE CASE OF ASSESSEES OWN CA SE IN EARLIER YEARS AND OTHER ASSESSEES (SUPRA) HAS BEEN SET ASIDE OR OVER RULED BY HIGHER JUDICIAL FORUM. IN VIEW OF THE AFORESAID FACTS, I, FOLLOWING TH E DECISION OF CO-ORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CAS E IN EARLIER YEARS 5 AND OTHER ASSESSEES (SUPRA) AND FOR SIMILAR REASONS, RE STORE THE ISSUE TO THE FILE OF AO TO DECIDE THE ISSUE AS PER THE DIRECTIONS GIV EN IN ASSESSEES OWN CASE IN EARLIER YEARS (SUPRA). NEEDLESS TO STATE THA T AO SHALL GRANT ADEQUATE OPPORTUNITY OF HEARING TO THE ASSESSEE. ASSE SSEE IS ALSO DIRECTED TO PROMPTLY FURNISH ALL THE DETAILS CALLED FOR BY THE AUTHOR ITIES. IN VIEW OF MY DECISION TO RESTORE THE ISSUE TO THE FILE OF AO, I AM NOT ADJUDICATING O N MERITS THE GROUNDS OF THE APPEAL RAISED BY THE ASSESSEE . THUS, THE GROUNDS OF ASSESSEE ARE ALLOWED FOR STATISTICAL PUR POSES. 7. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED FO R STATISTICAL PURPOSES. ORDER PRONOUNCED ON 18 TH DAY OF OCTOBER, 2019. SD/- ( ANIL CHATURVEDI ) ' / ACCOUNTANT MEMBER PUNE; DATED : 18 TH OCTOBER, 2019. YAMINI #$%&'(' % / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5 6. CIT(A)-2, KOLHAPUR. PR. CIT-2, KOLHAPUR. '#$ %%&',) &', *+ / DR, ITAT, SMC PUNE; $-.// GUARD FILE. / BY ORDER // TRUE COPY // 012%3&4 / SR. PRIVATE SECRETARY ) &', / ITAT, PUNE.