Assistant Commissioner of Income-tax, V. M/s. Samarth Sahakari Sakhar Karkhana Ltd., Jalna

ITA 2099/PUN/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5292 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 10 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 1989-1990
• Appeal Filed On: 09-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MUKESH JHA
• Keywords: Diversion of income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUNE . , , , BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO . 2099 /P U N/201 6 / ASSESSMENT YEAR : 1989 - 90 THE ASSTT. COMMISSIONER OF INCOME TAX, JALNA CIRCLE, JALNA ....... / APPELLANT / V/S. M/S. SAMARTH SAHAKARI SAKHAR KARKHANA LTD., TQ. - AMBAD, DISTT. - JALNA / RESPONDENT ASSESSEE BY : S HRI PRASANNA JOSHI REVENUE BY : SHRI MUKESH JHA / DATE OF HEARING : 2 3 - 07 - 201 8 / DATE OF PRONOUNCEMENT : 30 - 0 7 - 201 8 / ORDER PER VIKAS AWASTHY, JM : TH IS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF COMMI SSIONER OF INCOME TAX (APPEALS) - 1 , AURANGABAD DATED 27 - 06 - 2016 FOR THE ASSESSMENT YEAR 1989 - 90. THE SOLITARY ISSUE RAISED IN THE APPEAL BY THE DEPARTMENT IS AGAINST DELETING THE ADDITION OF RS. 1,67,34,960/ - MADE ON ACCOUNT OF FREE DISTRIBUTION OF BAGASSE TO THE MEMBERS. 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RECORD S ARE : THE ASSESSEE IS A SOCIETY ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE OF 2 ITA NO . 2099/PUN/2016, A.Y. 1989 - 90 SUGAR. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER INTER ALIA MADE ADDITION OF RS.1,67,34,960/ - ON ACCOUNT OF NOTIONAL VALUE OF BAGASSE ALLEGEDLY DISTRIBUTED FREE OF COST TO ITS MEMBERS. THE MATTER TRAVELLED UP TO THE TRIBU NAL. THE TRIBUNAL IN APPEAL FILED BY THE ASSESSEE IN ITA NO. 619/PN/2006 FOR ASSESSMENT YEAR 1989 - 90 DECIDED ON 30 - 06 - 2008 RESTORED THE ISSUE BACK TO THE FILE OF COMMISSIONER OF INCOME TAX (APPEALS) FOR FRESH ADJUDICATION. THE COMMISSIONER OF INCOME TAX (APPEALS) IN SECOND ROUND AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEE AND AFTER ANALYZING VARIOUS FACTS DELETED THE ADDITION MADE BY ASSESSING OFFICER ON ACCOUNT OF FREE DISTRIBUTION OF BAGASSE TO THE MEMBERS. AGGRIEVED BY THE ORDER OF FIRST APPELLATE AUTHORITY, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 3. SHRI MUKESH JHA REPRESENTING THE DEPARTMENT SUBMITTED THAT THE ASSESSEE IN THE TAX AUDIT REPORT HAS MENTIONED THAT IT HAS DISTRIBUTED 69,729 MT OF BAGASSE FREE OF COST TO THE MEMBERS. THE ASSES SING OFFICER APPLIED THE MARKET RATE OF BAGASSE I.E. RS.240/ - PER MT AND WORKED OUT THE TOTAL VALUE OF BAGASSE DISTRIBUTED FREE OF COST TO THE MEMBERS AT RS.1,67,34,960/ - . THE LD. DR SUBMITTED THAT BAGASSE IS A VALUABLE COMMODITY, FREE DISTRIBUTION BAGASS E TO THE MEMBERS IS DIVERSION OF INCOME BY THE ASSESSEE. THE LD. DR SUBMITTED THAT IN FORM 3CD IT HAS BEEN UNAMBIGUOUSLY MENTIONED TH AT BAGASSE HAS BEEN DISTRIBUTED FREE OF COST TO THE MEMBERS . THE SAID FORM IS DULY SIGNED AND STAMPED BY THE TAX AUDITORS . THE LD. DR PRAYED FOR SETTING ASIDE THE IMPUGNED ORDER AND RESTORING THE FINDINGS OF ASSESSING OFFICER. 3 ITA NO . 2099/PUN/2016, A.Y. 1989 - 90 4. ON THE OTHER HAND SHRI PRASANNA JOSHI APPEARING ON BEHALF OF THE ASSESSEE VEHEMENTLY DEFENDED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEA LS) IN DELETING THE ADDITION OF RS. 1,67,34,960/ - . THE LD. AR SUBMITTED THAT IN FORM 3CD ( AT PAGE 10 OF THE PAPER BOOK ) THE WORDS D ISTRIBUTED FREE OF COST TO MEMBERS AGAINST CONSUMPTION OF BAGASSE 69,729 MT HAS BEEN INADVERTENTLY MENTIONED. THE LD. AR H AS POINTED THAT BAGASSE IS A BY - PRODUCT OF SUGAR MANUFACTURED IN THE S UGAR M ILLS. BAGASSE IS USED AS FUEL IN THE BOILERS OF S UGAR M ILL S FOR GENERATION OF STEAM. THE ASSESSEE HAS TWO BOILERS WITH THE CAPACITY OF 20 TONS PER HOUR (TPH) , EACH. THE ASSESSEE PRODUCED 70,005 MT OF BAGASSE DURING THE PERIOD NOVEMBER 1987 TO MARCH 1989 AND USED 69,730 MT OF BAGASSE FOR GENERATION OF POWER AND STEAM. 240 MT OF BAGASSE WAS IN CLOSING STOCK AND APPROXIMATELY 80 MT OF BAGASSE WAS SOLD TO THIRD PARTIES. THE LD. AR SUBMITTED THAT IF CONTENTIONS OF THE REVENUE ARE TO BE BELIEVED, THE SUBSTANTIAL PART OF BAGASSE IS DISTRIBUTED FREE OF COST TO THE MEMBERS , THE ASSESSEE WOULD HAVE TO SPENT HUGE AMOUNT ON FUEL TO OPERATE THE BOILERS. THERE IS NOTHING ON RECORD TO SHOW TH AT THE ASSESSEE HAS INCURRED EXPENDITURE ON FUEL FOR RUNNING THE BOILERS. THE FINDINGS OF ASSESSING OFFICER ARE MERELY BASED ON SURMISES AND CONJECTURES. THE ASSESSING OFFICER FAILED TO TAKE NOTE OF THE FACT THAT THE SUGAR FACTORY OF THE ASSESSEE WORKED FOR 157 DAYS DURING CRUSHING SEASONS 1987 - 88 AND 155 DAYS IN CRUSHING SEASONS 1988 - 89. THE BAGASSE WAS SELF CONSUMED BY THE ASSESSEE FOR RUNNING THE SUGAR FACTORY DURING THE RELEVANT PERIOD. 5. W E HAVE HEARD THE SUBMISSIONS MADE BY REPRESENTATIVES OF R IVAL SIDES AND HAVE PERUSED THE ORDERS OF AUTHORITIES BELOW . THE SOLITARY ISSUE RAISED IN THE APPEAL BY THE DEPARTMENT IS AGAINST DELETING THE ADDITION OF RS.1,67,34,960/ - . THE ASSESSING OFFICER MADE ADDITION OF RS.1,67,34,960/ - ON THE BASIS OF REMARKS , DISTRIBUTED FREE OF COST TO MEMBERS MADE IN THE 4 ITA NO . 2099/PUN/2016, A.Y. 1989 - 90 FORM 3CD AGAINST CONSUMPTION OF BAGASSE DURING THE PERIOD 01 - 10 - 1987 TO 31 - 03 - 1989 (18 MONTHS). THE ASSESSEE CARRIED THE ISSUE IN APPEAL BEFORE THE TRIBUNAL IN ITA NO. 619/PN/2006 (SUPRA). IN FIRST ROUN D THE TRIBUNAL VIDE ORDER DATED 30 - 06 - 2008 REMITTED THE ISSUE BACK TO THE FILE OF COMMISSIONER OF INCOME TAX (APPEALS) FOR FRESH ADJUDICATION. THE COMMISSIONER OF INCOME TAX IN SECOND ROUND THOROUGHLY EXAMINED THE FACTS OF THE CASE AND APPRECIATED THE EVI DENCES AND CONTENTIONS OF THE ASSESSEE AND CONCLUDED AS UNDER : THE CENTRAL GOVERNMENT'S NORMS OF STEAM CONSUMPTION FOR THIS TYPE OF SUGAR PLANT WERE 55% STEAM ON CANE FOR DOWN TIME OF LESS THAN 10%. CONSIDERING THESE STANDARDS, FOR CRUSHING 2,32,907 PER MT OF SUGARCANE IN THE RELEVANT FINANCIAL YEAR, THE NORMAL STEAM REQUIRED WOULD BE AROUND 1,28,098 MT. THUS BASED ON THE STANDARD YIELD, BAGASSE CONSUMPTION OUGHT TO BE AROUND 58,227 MT WHEREAS THE ACTUAL CONSUMPTION AS SHOWN IN THE QUANTITY ACCOUNT OF BA GASSE WAS 69,730 MT. THE INCREASED STEAM CONSUMPTION (INCREASED BAGASSE CONSUMPTION) WAS DUE TO LOWER CRUSHING RATE (THE STEAM CONSUMPTION INCREASED DRASTICALLY WHEN CAPACITY UTILIZATION WAS LOW), INTERRUPTIONS IN CRUSHING (DOWN TIME I.E. HOURS LOST % HOUR S AVAILABLE, WAS ABNORMALLY HIGH AT 46% & 26% AS AGAINST STANDARD OF 10%). DUE TO THE ABOVE FACTS, THE ACTUAL BAGASSE CONSUMPTION OF 69,739 MT WAS REALISTIC AND DID NOT GIVE ANY SCOPE FOR MAKING SURMISES. I AGREE WITH THE ARGUMENTS/CONTENTIONS OF THE COUNSEL OF THE APPELLANT THAT IF THE BAGASSE, HAD BEEN DISTRIBUTED FREE OF COST TO THE MEMBERS AS ALLEGED BY THE A O, THEN WHAT THE APPELLANT HAD USED AS A FUEL TO OPERATE ITS SUGAR FACTORY. ON APPRECIATION OF THE EVIDENCES SUBMITTED BY THE APPELLANT, IT IS OBVIOUS THAT THE IMPUGNED ADDITION WAS MADE BY THE AO ON THE BASIS OF INADVERTENT REMARK IN THE TAX AUDIT REPORT AND SAME COULD NOT BE SUSTAINED. FURTHER THE ACTION OF THE AO TANTAMOUNTED TO TAXING NOTIONAL INCOME WHICH HAD NEITHER ACCRUED TO NOR RECEIVED BY THE APPELLANT. THERE IS NO EVIDENCE ON RECORD THAT THE APPELLANT SOCIETY HAD EARNED INCOME TO THE EXTENT OF RS .1,67,34,960/ - BY FREE DISTRIBUTION OF BAGASSE TO ITS MEMBE RS. 6. THE REVENUE HAS FAILED TO POINT OUT FROM RECORDS ANY EXPENDITURE INCURRED BY THE ASSESSEE ON FUEL FOR THE RUNNING OF SUGAR MILLS. IT IS AN UNDISPUTED FACT THAT BAGASSE IS USED AS FUEL TO RUN THE BOILERS IN SUGAR MILLS. THE ASSESSEE HAS DEMONSTRATED USE OF 69730 MT OF BAGASSE AS FUEL DURING THE PERIOD 01 - 10 - 1987 TO 31 - 03 - 1989. THE DEPARTMENT HAS NOT CONTROVERTED THE FACT THAT THE SUGAR MILLS OF THE ASSESSEE WAS IN OPERATION FOR 157 DAYS IN CRUSHING SEASON 1987 - 88 AND 155 DAYS IN CRUSHING SEASON 5 ITA NO . 2099/PUN/2016, A.Y. 1989 - 90 1988 - 89. EXCEPT FOR THE PROBABILITY BAGASSE BEING USED AS FUEL , NO EXPENDITURE ON FUEL HAS BEEN BROUGHT TO OUR NOTICE. WE FIND MERIT IN THE SUBMISSIONS OF THE LD. AR. THE WORD S, DISTRIBUTED FREE OF COST TO MEMBERS AGAINST CONSUMPTION OF BAGASSE IN FORM 3CD APPEARS TO BE OUT OF PLACE. 7. WE DO NOT FIND ANY INFIRMITY IN THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) IN DELETING THE ADDITION AND HENCE, CONCUR WITH THE SAME. THE APPEAL OF REVENUE IS DEVOID OF ANY MERIT AND IS DISMISSED. 8. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED ON MONDAY, THE 30 TH DAY OF JU LY , 201 8 . SD/ - SD/ - ( . /D. KARUNAKARA RAO ) ( / VIKAS AWASTHY) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE; / DATED : 30 TH JU LY , 2018 RK / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 1, AURANGABAD 4. THE PR. COMMISSIONER OF INCOME TAX - 1, AURANGABAD 5. , , , / DR, ITAT, B BENCH, PUNE. 6. / GUARD FILE. / / // TRUE COPY// / BY ORDER, / PRIVATE SECRETARY, , / ITAT, PUNE