The Malegaon Sahakari Sakhar Karkhana Ltd, Pune V. Deputy Commissioner of Income-tax, Circle - 14, Pune

ITA 1790/PUN/2018

• Counselvise Citation: [2022] 107 COUNSELVISE.COM (IT) 0270 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-07-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: A
• Assessment Year: 2015-2016
• Appeal Filed On: 21-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S P WALIMBE
• Keywords: Question of law; Set aside
• Section: 143(3)

Judgement Text

आयकर अपीलीय अिधकरण “ए” Ɋायपीठ पुणे मŐ। IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, PUNE BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER आयकरअपीलसं. / ITA No.1790/PUN/2018 िनधाᭅरणवषᭅ /Assessment Year: 2015-16 The Malegaon SahakariSakharKarkhana Ltd., Dyaneshwar Nagar, Post: Bhade, Sakhar Karkhana, Newasa – 414605. PAN: AAAAS 4092 H Vs The ACIT, Ahmednagar Circle-14, Pune. Appellant/ Assessee Respondent/ Revenue Assessee by Shri Hanmant D Dhavle – AR Revenue by Shri S P Walimbe - DR Date of hearing 29/06/2022 Date of pronouncement 04/07/2022 आदेश/ ORDER PER DR.DIPAK P.RIPOTE, AM: This appeal filed by the Assessee is directed against the order of ld.Commissioner of Income-tax(Appeals)-7, Pune’s, order dated 20.09.2018 for the Assessment Year 2015-16, involving proceedings under section 143(3) of the Income Tax Act, 1961. The Assessee has raised the following grounds of appeal: “1. On the facts and in the circumstances of the case and in law of the learned Commissioner of Income Tax (Appeals)-7, Pune has erred in disallowing and adding back an amount of Rs.77,64,309/- on account of Sale of sugar at concessional rate. ITA No.1790/PUN/2018 for A.Y.2015-16 The Malegaon Sahakari Sakhar Karkhana Ltd., (A) 2 2. On the fact and in the circumstance of the case and in law of the learned Commissioner of Income Tax (Appeals) -7, Pune has erred in disallowing and adding back an amount of Rs.19,84,500/- on account of VSI Contribution. 3. The appellant craves for the leave, add, alter, amend, modify and delete any or all the above grounds of appeals before or at the time of hearing.” 2. The ld.Authorised Representative(ld.AR) of the assessee explained that the issue of sale of sugar at concessional rate to members is covered in his favour by ITAT Pune’s order dated 14.03.2019 in Majalgaon Sahakari Sakhar Karkhana Ltd., ITA No.308/PUN/2018 & Others. 3. The ld.Departmental Representative for the Revenue has not brought out any distinguishing factor. Ground No.1: 4. Heard both the parties. Perused the records. 4.1 It is observed from the assessment order that during the year, assessee has sold sugar at Rs.1127.52 per quintal to its members, whereas Sugar Commissioner has fixed the price at Rs.1969.91. Therefore, the Assessing Officer(AO) alleged that sugar has been sold to members at a concessional rate is nothing but transferring the profits and hence treated the difference as income of the assessee. ITA No.1790/PUN/2018 for A.Y.2015-16 The Malegaon Sahakari Sakhar Karkhana Ltd., (A) 3 4.2 It is observed that the said issue has been decided by the ITAT Pune in the case of Majalgaon Sahakari Sakhar Karkhana Ltd., ITA No.308/PUN/2018 & Others. The ITAT Pune has held as under: “In our considered opinion it would be just and fair if the impugned orders on this score are set aside and the matter is restored to the file of AOs, instead of to the CITs(A), for fresh consideration as to whether the difference between the average price of sugar sold in the market and that sold to members at concessional rate is appropriation of profit or not, in the light of the directions given by the Hon’ble Supreme Court in the case of Krishna Sahakari Sakhar Karkhana Limited (supra).” 5. Respectfully following the above decision, we set aside this issue to the file of Assessing Officer for re-adjudication in the light of the Hon’ble Supreme Court’s decision in the case of Krishna Sahakari Sakhar Karkhana Ltd., (2012) 27 taxmann.com 162 (SC), order dated 25.09.2012. Accordingly, the Ground No.1 is allowed for statistical purpose. 5.1 In the result, Ground No.1 of the assessee is allowed for statistical purpose. Ground No.2: 6. The Ground No.2 is related to amount of Rs.19,84,500/- contributed to VSI i.e. Vasandada Sugar Institute. The said amount was not actually paid, but there was only provision. The ld.AO held that under section 35(1) of the Act, the amount has to be actually ITA No.1790/PUN/2018 for A.Y.2015-16 The Malegaon Sahakari Sakhar Karkhana Ltd., (A) 4 paid. The ld.AR submitted that the said issue is also covered by the ITAT Pune Bench’s decision referred earlier. 7. The fact in case is that the amount was not actually paid, but there was only provision. The relevant section 35(1)(ii) is reproduced here asunder: “35. (1) In respect of expenditure on scientific research, the following deductions shall be allowed— (ii) an amount equal to one and three-fourth times of any sum paid to a research association which has as its object the undertaking of scientific research or to a university, college or other institution to be used for scientific research : Provided that such association, university, college or other institution for the purposes of this clause— (A) is for the time being approved, in accordance with the guidelines, in the manner and subject to such conditions as may be prescribed; and (B) such association, university, college or other institution is specified as such, by notification in the Official Gazette, by the Central Government;” 7.1 It is observed that as per the above section, amount has to be actually paid. However, in the present case, it is an admitted fact that there was only provision. 8. The Hon’ble Bombay High Court in the decision of CIT Vs. Jai Ambika Sahakari Sakhar Karkhana Ltd., Tax Appeal No.17 of 2008 whereas the question of law on which the admission of the appeal is sought, held as under: “Question: Whether the amount paid/provided in the books of account by the Assessee for contribution to Vasant dada Sugar Institute, a recognized research institute, can be allowed as deduction under ITA No.1790/PUN/2018 for A.Y.2015-16 The Malegaon Sahakari Sakhar Karkhana Ltd., (A) 5 section 35(1) of the Income Tax Act, 1961 as the amount has only been provided in the accounts but has not actually been paid in the relevant Assessment Year? 8. The definition of the word "Paid" contained in section 43(2) of the Act takes into account not only the amount which is actually paid by the assessee to a research institute but also takes into account the liability incurred and provided in the books of account in case mercantile system of accounting is followed. Consequently, the amount which has been provided for as a liability to be paid to a scientific research institute by the assessee is to be allowed as a deduction under section 35 of i.t.act in a case where the assessee maintains its accounts on mercantile basis. 9. In the present case, it is not in dispute that the assessee maintains the accounts on a mercantile basis. Hence, even a book entry made by the assessee in its books of accounts as a liability for making contribution to VSI, a Research Institute, would be covered by section 35(1)(ii) of the I.T. Act. In our view, the Tribunal committed no error in holding that the assessee was entitled to deduction under section 35(1)(ii) of the I.T.Act.” 10. There is no merit in the appeal, which is hereby dismissed.” 9. Respectfully following the above decision of the Hon’ble Bombay High Court, the expenditure is allowed to the assessee, therefore, the Ground No.2 raised by the assessee is allowed. 10. In the result, Ground No.2 raised by the assessee is allowed. 11. To sum up, appeal of the assessee is partly allowed. Order pronounced in the open Court on 4 th July, 2022. Sd/- Sd/- (S.S.GODARA) (DR. DIPAK P. RIPOTE) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 4 th July, 2022/ SGR* ITA No.1790/PUN/2018 for A.Y.2015-16 The Malegaon Sahakari Sakhar Karkhana Ltd., (A) 6 आदेशकᳱᮧितिलिपअᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The CIT(A), concerned. 4. The Pr. CIT, concerned. 5. िवभागीयᮧितिनिध, आयकर अपीलीय अिधकरण, “ए” बᱶच, पुणे / DR, ITAT, “A” Bench, Pune. 6. गाडᭅफ़ाइल / Guard File. आदेशानुसार / BY ORDER, // TRUE COPY // Senior Private Secretary आयकरअपीलीयअिधकरण, पुणे/ITAT, Pune.