The DCIT, Bharuch Circle, Bharuch V. Shri Ganesh Khand Udyog Sahakari Mandli Ltd., Bharuch

ITA 3030/AHD/2013

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 2063 (ITAT-SURAT)
• Duration Of Justice: 4 year(s) 10 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 20-07-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 18-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SMITHA V NAIR
• Section: 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ./ ITA NO.3030/AHD/2013 [ [ / ASSTT. YEAR:2009-2010 D.C.I.T, BHARUCH CIRCLE, BHARUCH. VS. GANESH KHAND UDYOG SAHAKARI MANDALI LTD. AT & PO- VATARIA, TALUKA VALIA, DIST BHARUCH-393135 PAN: AAAAS2139R (APPLICANT) (RESPONENT) REVENUE BY : SMT. SMITHA V. NAIR, SR. DR ASSESSEE BY : NONE / DATE OF HEARING : 12/11/2018 / DATE OF PRONOUNCEMENT: 13/11/2018 / O R D E R PER AMARJIT SINGH, ACCOUNTANT MEMBER: THIS REVENUES APPEAL FOR A.Y. 2009-10, ARISES FROM ORDER OF THE LD.CIT(A)-VI, BARODA, DATED 02/09/2013, IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. 2. BOTH THE GROUNDS OF REVENUE ARE INTERCONNECTED TO THE SOLITARY ISSUE OF DISALLOWANCE OF RS.5,92,19,981/- U/S.40A(2)(B) OF THE ACT. ITA NO.3030/AHD/2013 A.Y.2009-2010 2 3. THE BRIEF FACT OF THE CASE IS THAT ASSESEE HAS FILED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 25/09/2009, DECLARING TOTAL INCOME OF RS.NIL AND SHOWING CURRENT YEAR LOSS OF RS.4,10,59,457/-. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY BY ISSUING NOTICE U/S.143(2) OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER, HAS NOTICED THAT STATUTORY MINIMUM PRICE OF SUGAR CANE HAS BEEN FIXED AT RS.94.64 PER QUINTAL BY NATIONAL FEDERATION OF CO-OPERATIVE SUGAR FACTORIES LTD. WHEREAS THE ASSESSEE SOCIETY HAS PAID PRICE OF SUGARCANE AT THE RATE OF 1793.6 PER QUINTAL TO THE FARMERS. 4. AFTER TAKING INTO CONSIDERATION THE ABOVE FACT, THE ASSESSING OFFICER HAS OBSERVED THAT ALL THE FARMERS WERE MEMBERS OF THE SOCIETY AND ANY BENEFIT IN EXCESS OF REASONABLENESS WAS DISALLOWABLE AS PER THE PROVISIONS OF SECTION 40A(2)(B) OF THE ACT. THEREAFTER, THE ASSESSING OFFICER HAS ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE TO EXPLAIN WHY NOT EXCESS PRICE OF SUGARCANE GIVEN TO THE FARMERS SHOULD NOT BE DISALLOWED AS PER THE PROVISION OF SECTION 40A(2)(B) OF THE ACT. IN THIS REGARD THE ASSESSEE RESPONDED THAT THE SECTION 40A(2)(B) IS NOT APPLICABLE TO THE CO-OPERATIVE SOCIETY, THEREAFTER ANY AMOUNT PAID TO THE MEMBERS OF THE SOCIETY OVER AND ABOVE THE STATUTORY MINIMUM PRICE OF SUGARCANE PAID TO THE FARMERS SHOULD NOT BE DISALLOWED AS PER THE PROVISIONS OF SECTION 40A(2)(B) OF THE ACT. THE ASSESSING OFFICER HAS NOT ACCEPTED THE EXPLANATION OF THE ASSESSEE STATING THAT STATUTORY MINIMUM PRICE OF SUGARCANE HAS BEEN FIXED AT RS.94.68 PER QUINTAL WHEREAS ASSESSEE SOCIETY HAS PAID PRICE OF SUGAR CANE AT THE RATE OF RS.1793.6 PER QUINTAL TO THE FARMERS. HE WAS OF THE VIEW THAT THERE SHOULD BE REASONABLENESS IN PAYMENT OF GIVEN PRICE TO THE FARMERS, THEREFORE, HE OBSERVED THAT RS.1700 WAS THE APPROPRIATE MARKET VALUE OF CANE PER TON FOR THE ASSESSEE AND THE BALANCE PRICE AMOUNT OF RS. 93.6 TON PAID TO THE FARMERS WAS TREATED AS EXCESSIVE PAYMENT U/S.40A(2)(B) OF THE ACT. ACCORDINGLY, THE ASSESSING OFFICER HAS MADE ADDITION OF RS.5,92,19,981/- U/S.40A(2)(B) OF THE ACT. ITA NO.3030/AHD/2013 A.Y.2009-2010 3 5. AGGRIEVED ASSESSEE HAS FILED AN APPEAL BEFORE THE LD.CIT(A. THE LD.CIT(A) HAS ALLOWED THE APPEAL OF THE ASSESSEE BY PLACING RELIANCE ON THE DECISION OF ITAT, PUNE BENCH IN THE CASE OF SHIVAMRUT DUDH UTPADAK SAH. SANGH MARYADIT VS DCIT, (1999) 63 TTJ (PUNE) 405 AND ALSO DECISION OF HONBLE HIGH COURT OF BOMBAY, IN THE CASE OF CIT VS MANJARA SHETKARI SAHAKARI SAKHAR KARKHANA LTD. & ORS.(2008) 214 CTR BOM) 662. 6. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US THE LD.DR, HAS SUPPORTED THE ORDER OF THE LD.AO. ON THE OTHER HAND, NOBODY HAS ATTENDED FROM THE SIDE OF THE ASSESSEE. 7. AFTER HEARING THE LD.DR, AND PERUSAL OF THE MATERIAL AVAILABLE ON RECORD, IT IS NOTICED THAT ON SIMILAR FACTS AND IDENTICAL ISSUE THE CO-ORDINATE BENCH OF THE ITAT, PUNE, IN THE CASE OF SHIVAMRUT DUDH UTPADAK SAH. SANGH MARYADIT VS DCIT(SUPRA) HAS HELD THAT CO-OPERATIVE SOCIETY ENJOYS SPECIAL STATUS THAT IT HAS OWN INDIVIDUALITY AND DISTINCTNESS IN THE SCHEME OF THE IT ACT. A CO- OPERATIVE SOCIETY IS A VOLUNTARY AOP, IT IS ECONOMIC INSTITUTION FORMED FOR SOCIAL PURPOSE AND NOT MOTIVATED BY ENTREPRENEURIAL PROFITS BY DISTINGUISHES FROM THE ASSOCIATION OF BUSINESS . THE CO-ORDINATE BENCH OF ITAT HAS HELD THAT THE PROVISIONS OF SECTION 40A(2)(B) OF THE ACT, DOES NOT APPLY TO CO-OPERATIVE SOCIETY. HENCE, NO DISALLOWANCE UNDER THAT SECTION CAN BE MADE IN THE ASSESSMENT OF CO-OPERATIVE SOCIETY. THE HONBLE BOMBAY HIGH COURT ALSO IN THE CASE OF CIT VS MANJARA SHETKARI SAHAKARI SAKHAR KARKHANA LTD.(SUPRA) HAS HELD THAT THE SECTION 40A(2) DOES NOT APPLY TO THE CO-OPERATIVE SOCIETY, H ENCE NO DISALLOWANCE UNDER THAT SECTION CAN BE MADE IN THE ASSESSMENT OF THE CO- OPERATIVE SOCIETY . FURTHER IT IS ALSO NOTICED THAT ASSESSEE HAS EXPLAINED THAT AN INDIVIDUAL SHAREHOLDER CANNOT HAVE BENEFICIAL INTEREST OF MORE THAN 0.05% IN THE SHARES OF THE CO-OPERATIVE SOCIETY. IT IS ALSO NOTICED THAT AUTHORIZED CAPITAL IN THE CASE OF ASSESSEE WAS RS.5 CR. AND AN INDIVIDUAL MEMBER CANNOT SUBSCRIBE MORE THAN 25,000/- WORTH OF SHARES, WITHOUT APPROVAL FROM THE GOVERNMENT. THESE FACTS WERE NOT DISPUTED/DISPROVED BY THE ASSESSING OFFICER ITA NO.3030/AHD/2013 A.Y.2009-2010 4 8. IN THE LIGHT OF ABOVE FACTS AND LEGAL FINDINGS, WE ARE OF THE VIEW THAT THE PROVISIONS OF SECTION 40(A)2(B) OF THE ACT, ARE NOT APPLICABLE TO CO-OPERATIVE SOCIETY. THEREFORE, WE ARE INCLINED WITH THE DECISION OF LD.CIT(A), THAT THE PROVISION OF SECTION 40(A)2(B) OF THE ACT, WERE NOT APPLICABLE TO THE CASE OF THE ASSESSEE, THEREFORE WE DO NOT FIND ANY MERITS IN THE APPEAL OF THE REVENUE AND THE SAME IS DISMISSED. 9. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 13/11/2018 AT SURAT. -SD- -SD- ( RAJPAL YADAV ) JUDICIAL MEMBER ( AMARJIT SINGH ) ACCOUNTANT MEMBER TRUE COPY SURAT; DATED 13/11/2018