DCIT, Cir.-1, Kolhapur V. Shri Udaysingrao Gaikwad Sah. Sakhar Karkhana Ltd., Kolhapur

ITA 393/PUN/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 56367 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 4 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 15-03-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K AMBASTHA
• Keywords: Business income; Opportunity of being heard
• Section: 260A; 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE SHRI I.C. SUDHIR (JM) AND SHRI G.S. PANNU (AM) ITA NO. 393/PN/2010 (ASSTT. YEAR: 200405) DY. COMMISSIONER OF INCOME TAX , ... APPELLANT CIRCLE -1, KOLHAPUR V. SHRI UDAYSINGRAO GAIKWAD SAHAKARI RESPONDENT SAKHAR KARKHANA LTD. AP SONAWADE BAMBAWADE. TAL- SHAHUWADI, DIST. KOLHAPUR PAN : AAAAU0353K APPELLANT BY : SHRI S.K. AMBASTHA RESPONDENT BY : NONE ORDER PER I.C. SUDHIR, JM THE REVENUE HAS QUESTIONED VALIDITY OF FIRST APPEL LATE ORDER WHEREBY THE LD CIT(A) HAS DELETED THE ADDITION MADE ON ACCOUNT OF (I) EXCESS CANE PRICE PAID TO ITS MEMBERS; AND (II) SALE OF SUGAR AT CONCESSIONAL RAT E. 2. AT THE OUTSET OF HEARING, THE LD. D.R. SUBMITTED THAT THE ISSUES RAISED IN THE GROUNDS OF THE APPEAL ARE FULLY COVERED BY THE DECI SION OF HONBLE SUPREME COURT IN THE CASE OF DCIT V/S. SREE SATPUDA TAPI PARISHAR SS K LTD., (2010), 326 ITR 42 (SC) AND OTHERS. GROUND NO.1 3. IT IS REGARDING EXCESS CANE PRICE PAID TO ITS M EMBERS. THE ASSESSEE HAD CLAIMED RS. 9,01,535/- ON ACCOUNT OF EXCESS CANE PR ICE PAID TO ITS MEMBERS WHICH WAS DISALLOWED BY THE A.O U/S. 37(1) OF THE ACT. T HE LD CIT(A) HAS ALLOWED THE SAME FOLLOWING THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MANJARA S.S.K. LTD. & OTHERS V/S. CIT, UPHELD BY TH E HONBLE BOMBAY HIGH COURT, 301 ITR 191(BOM). WE, HOWEVER, FIND THAT THE HONB LE SUPREME COURT IN ITS RECENT ITA . NO 393/PN/2010 SHRI UDAYSINGRAO GAIKWAD SAHAKARI SAKHAR KARKHANA LTD. A.Y. 2004-05 PAGE OF 4 2 DECISION PRONOUNCED ON 20 TH JANUARY 2010 IN THE CASE OF DCIT V/S. SHREE SATPUD A TAPI PARISHAR SSK LTD.(SUPRA) RELIED UPON BY THE LD . D.R. HAS BEEN PLEASED TO SET ASIDE THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V/S. MANJARA SAHAKARI SAKHAR KARKHANA LTD., (2008), 301 ITR 191 (BOM) AND HAS BEEN PLEASED TO REMAND THE MATTER TO THE LD CIT(A) NOT ONLY ON T HE APPLICABILITY OF SECTION 40A(2) BUT ALSO ON THE PRIMARY QUESTION AS TO WHETH ER THE DIFFERENTIAL PAYMENT CONSTITUTED AN EXPENSE OR DISTRIBUTION OF PROFITS. ADMITTEDLY, THE BENEFIT OF THIS DECISION OF HONBLE SUPREME COURT WAS NOT AVAILABLE TO THE LD CIT(A) AS THE FIRST APPELLATE ORDER HAS BEEN PASSED ON 29 TH DECEMBER 2009. WE, THUS, SET ASIDE THE MATTER TO THE FILE OF THE LD CIT(A) TO DECIDE THE I SSUE AFRESH AFTER AFFORDING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AS DECID ED BY THE HONBLE SUPREME COURT IN THE CASE OF DCIT V/S. SHREE SATPUDE TAPI P ARISHAR S.S.K LOTD. (SUPRA). THE ISSUE IS THUS ALLOWED FOR STATISTICAL PURPOSES. GROUND NO.2 4. IT IS REGARDING SALE OF SUGAR AT CONCESSIONAL RA TE TO ITS MEMBERS BY THE SOCIETY. 5. THE RELEVANT FACTS ARE THAT THE ASSESSEE SUPPLIE D 4378 QUINTALS OF SUGAR TO CANE GROWERS AT CONCESSIONAL RATE. THE A.O THUS DI SALLOWED RS. 23,49,444/- ON THIS ACCOUNT. THE DIFFERENCE WAS WORKED OUT BY HIM BY C OMPARING THE FAIR MARKET PRICE AND THE PRICE RECOVERED FROM THE CANE GROWERS. THE A.O HELD THAT CONCESSIONAL RATE CHARGED BY THE ASSESSEE AGAINST THE PREVALENT MARKET PRICE IS NOTHING BUT APPROPRIATION OF PROFIT AND IN THE NATURE OF APPLIC ATION OF INCOME. HE ALSO OBSERVED THAT CIRCULAR NO.117 DT. 22 ND AUGUST 1973 WAS ISSUED BY THE CBDT WITH REGARD TO ALLOWANCE OF REBATE TO A MEMBER BY CONSUMER CO-OPER ATIVE STORES LTD., WHICH HAS NO APPLICATION TO THE CASE OF THE ASSESSEE. THE A. O ALSO POINTED OUT THAT ON THIS ITA . NO 393/PN/2010 SHRI UDAYSINGRAO GAIKWAD SAHAKARI SAKHAR KARKHANA LTD. A.Y. 2004-05 PAGE OF 4 3 POINT, APPEAL U/S. 260A IS PENDING BEFORE THE HONB LE HIGH COURT OF BOMBAY IN THE CASE OF TERANA SAHAKARI SAKHAR KARKHANA LTD. 6. THE LD CIT(A) HAS, HOWEVER, DELETED THE DISALLOW ANCE FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT V/S. RA MAN & CO. (NO REFERENCE OF REPORT HAS BEEN GIVEN) AND THE DECISION OF ITAT, PU NE, IN THE CASE OF CHHATRAPATI SHAHU S.S.K. LTD., ITA NO. 138/PN/2007 FOR A.Y 2003 -04, ORDER DATED 22.06.2007. FOR READY REFERENCE RELEVANT PARAGRAPHS 9.1 AND 9.2 OF THE SAID ORDER ARE REPRODUCED BELOW: 9.1 THIS ISSUE IS IN RESPECT OF ADDITION MADE ON ACCOUNT OF SUGAR SUPPLIED TO THE FARMERS AT CONCESSIONAL RATE I.E. AT RATES LOWER THAN THE MARKET RATES. WHILE DECIDING THIS ISSUE, IT IS WORTH REPRODUCTION OF THE CBDIT CIRCULAR NO. 117 DATED 22/8/1973 AS FOLLOWS: 1. AN INSTANCE HAS COME TO THE NOTICE OF THE CBDT WHEREIN THE INCOME TAX OFFICER IN THE CASE OF CONSUMER CO-OPERATIVE ST ORE HAD DISALLOWED THE CLAIM OF DEDUCTION ON ACCOUNT OF REBATE ALLOWED ON THE PURCHASES MADE BY THE MEMBERS OF THE STORE. 2. THE CBDT IN CONSULTATION WITH THE DEPARTMENT OF COMMUNITY DEVELOPMENT AND CO-OPERATION HAS DECIDED THAT REBAT E OR BONUS (WHICH IS IN THE NATURE OF DEFERRED DISCOUNT) PASSE D ON BY THE CONSUMER CO-OPERATIVE STORES TO THEIR MEMBERS ON TH E VALUE OF THE PURCHASES MADE BY THEM DURING A YEAR SHOULD BE ALLO WED AS A DEDUCTION IN COMPUTING THE BUSINESS INCOME OF SUCH A SOCIETY. 9.2 SO, IT WAS HELD THAT THE A.O HAS NOT GIVEN ANY REASON AS TO WHY SUCH A CONCESSIONAL SALE OF SUGAR TO MEMBERS WAS HELD AS TAXABLE, ON THE OTHER HAND, THE CBDT CIRCULAR HAS CLARIFIED THAT SUCH DEDUCTION SHOULD BE ALLOWED . AFTER HEARING THE SUBMISSION OF THE LEARNED D.R., WE FIND NO FORCE BECAUSE IT HAS COME TO OUR NOTICE THAT ITAT PUNE, B BENCH, HAD AN OCCASION TO DISCUSS THIS MATTER IN THE CASE OF SHRI CHHATRAPATI SAHU S.S.K LTD., IN A CONSOLIDATED ORDER FOR THE A.Y. 1983-84 AND 1988-89 IN VARIOUS APPEALS INCLUDING ITA NO. 1922/PN/90 PERTAINING TO THE A.Y. 1993-94, ORDER DATED 8-8-96 VIDE PARA NO. 32 TO 39 AND DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE RELYING UPON THE DECISION OF HONBLE SUPR EME COURT IN THE CASE OF CIT V/S. A. RAMAN & CO., 67 ITR 11. IT WAS POINTED OUT THAT THE LAW DOES NOT OBLIGE A TRADER TO MAKE MAXIMUM PROFIT THAT HE CAN MAKE OUT OF HIS TRADING TRANSACTION. HE CAN ONLY BE TAXED ON WHAT HE HAS EARNED AND NOT ON WHAT HE COULD HAVE EARNED. IN THIS MANNER, THE PRI NCIPLE OF REAL INCOME WAS INVOKED AND THE MATTER WAS DECIDED IN FAVOUR OF THE ASSESSEE. ANOTHER TWO CASES, BY ITAT PUNE BENCH, NAMELY SHRI CHHATRAPATI SAHU SSK LTD., KAGAR, BEARING ITA NOS. 1924 TO 1926/PN/96, ORDER DATED 1- 8-96 AND SRIRAM SSK LTD., SATARA, BEARING ITA NO. 304 TO 309/PN/05, A.Y . 1989-90 TO 2001-02, ORDER DATED DECEMBER, 2005, WHEREIN THE SAME ISS UE HAS BEEN DECIDED IN FAVOUR OF ASSESSEE, HAVE ALSO BEEN NOTED BY US. CON SIDERING THE TOTALITY OF THE CIRCUMSTANCES AND A VIEW ALREADY BEEN TAKEN BY THE CO-ORDINATE BENCH, WE ARE OF THE CONSIDERED OPINION THAT THE LD. CIT(A ) HAS RIGHTLY DELETED THE ADDITION. THIS GROUND OF THE REVENUE IS, THEREFORE , DISMISSED . ITA . NO 393/PN/2010 SHRI UDAYSINGRAO GAIKWAD SAHAKARI SAKHAR KARKHANA LTD. A.Y. 2004-05 PAGE OF 4 4 WE, RESPECTFULLY FOLLOWING THE ABOVE-CITED ORDER OF THIS TRIBUNAL DO NOT FIND REASON TO INTERFERE WITH FIRST APPELLATE ORDER ON THE ISSU E., GROUND NO. 2 IS THUS DISMISSED. 7. IN THE RESULT, APPEAL IS PARTLY ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 5TH AUGUST 2011. SD/- SD/- ( G.S. PANNU ) ACCOUNTANT MEMBER ( I.C. SUDHIR ) JUDICIAL MEMBER PUNE, DATED THE 5 TH AUGUST, 2011 US COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT I/II, KOLHAPUR/CIT (CENTRAL), PUNE 4. THE CIT(A)- KOLHAPUR 5. THE D.R. A BENCH, PUNE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL PUNE