Krantiagani DR G D Bapu Lad Sahakari Sakhar Karkhana Limited, Kundal V. ACIT, Sangali

ITA 67/PUN/2024

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 2324 (ITAT-PUNE)
• Duration Of Justice: 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-05-2024
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 11-01-2024
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SHUBHADA A KOPPA
• Keywords: Question of law; Assessment record
• Section: 154; 250

Judgement Text

।आयकर अपीलीय अिधकरण ”ए” Ɋायपीठ पुणेमŐ। IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES “A” :: PUNE BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No.78/PUN/2024 िनधाᭅरण वषᭅ / Assessment Year: 2007-08 Krantiagrani Dr G D Bapu Lad SahakariSakharKarkhana Ltd., Gat No.514, Kundal S.O. Sangli – 416309. Maharashtra. PAN: AAAAK1277C V s The ACIT, Sangli. Appellant/ Assessee Respondent / Revenue आयकर अपील सं. / ITA Nos.67 & 68/PUN/2024 िनधाᭅरण वषᭅ / Assessment Years : 2008-09 & 2009-10 Krantiagrani Dr G D Bapu Lad Sahakari Sakhar Karkhana Ltd., Gat No.514, Kundal S.O. Sangli – 416309.Maharashtra. PAN: AAAAK1277C V s The ACIT, Sangli. Appellant / Assessee Respondent / Revenue Assessee by Shri Shubhada A Koppa – CA Revenue by Shri Ramnath P Murkunde – DR Date of hearing 02/05/2024 Date of pronouncement 16/05/2024 आदेश/ ORDER PER DR. DIPAK P. RIPOTE, AM: These three appeals filed by the Assessee are against the separate orders of Ld.Commissioner of Income Tax(Appeals)[NFAC], passed under section 250 of the Income Tax ITA Nos.67, 68 & 78/PUN/2024 Krantiagrani Dr G D Bapu Lad SSK Ltd., [A] 2 Act, 1961 for all dated 10.11.2023 emanating from the assessment order u/s.143(3) r.w.s 254 r.w.s 144B of the Income Tax Act, 1961 dated 20.09.2021 for A.Y.2007-08 and both dated 28.09.2021 for A.Y.2008-09 & 2009-10 respectively. The Assessee in ITA No.78/PUN/2024 has raised the following grounds of appeal: “1) On facts and in the circumstances of case and in law the learned NFAC - Commissioner of Income Tax (Appeals) Delhi has erred in confirming the addition of Rs.69,16,137 /- being 50 percent of excess sugarcane price paid over SMP/FRP to the members as distribution of profit. 2) The learned AO and NFAC - Commissioner of Income Tax (Appeals) Delhi failed to appreciate the fact that the entire sugarcane price paid to member is allowable expenditure on account of commercial expendiency considering the sugarcane price paid by private sugar factories. 3) Ld. CIT(A) -NFAC ought to have held that while computing profits of appellant society, the price to be allowed as a deduction for sugarcane supplied by farmers is the price fixed on co-operative principles and the same cannot be restricted to the notified Fair and Remunerative Price (FRP) which is a support price. 4) Ld. CIT(A)-NFAC ought to have held that the price of cane purchased by appellant from its members and other farmers was contractually fixed as permitted by section 9 of the Sale of Goods Act and the said purchase price was deductible in computing the co- operative society's profits and gains from business. 5) Ld. CIT(A)-NFAC erred in holding that 50 present of payment of the same cane price, to its members in excess of the notified FRP was a distribution of the appellant society’s profits. 6) Ld. CIT(A)-NFAC erred in ignoring the fact that comparable cane prices paid by private sector sugar mills were allowed as deductions in their assessments but cane price in excess of FRP was disallowed in the hands of co-operative sugar factories. 7) Ld. CIT(A)-NFAC erred in ignoring the opportunity cost to the farmers for supplying sugarcane to appellant as well as agitations by ITA Nos.67, 68 & 78/PUN/2024 Krantiagrani Dr G D Bapu Lad SSK Ltd., [A] 3 farmers demanding higher prices which were much more than FRP. 8) On the facts and in the circumstances of the case and in law the learned NFAC - Commissioner of Income Tax (Appeals) Delhi, has erred in confirming the of addition of RS 66669 in respect of sale of sugar at concessional price to members. 9) 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.” 1.1 The Assessee for A.Y.2008-09 has raised the following grounds of appeal : 1) On facts and in the circumstances of case and in law the learned NFAC - Commissioner of Income Tax (Appeals) Delhi has erred in confirming the addition of Rs. 6,64,133 /- being 50 percent of excess sugarcane price paid over SMP/FRP to the members as distribution of profit. 2) The learned AO and NFAC - Commissioner of Income Tax (Appeals) Delhi failed to appreciate the fact that the entire sugarcane price paid to member is allowable expenditure on account of commercial expendiency considering the sugarcane price paid by private sugar factories. 3) Ld. CIT(A) ought to have held that while computing profits of appellant society, the price to be allowed as a deduction for sugarcane supplied by farmers is the price fixed on co-operative principles and the same cannot be restricted to the notified Fair and Remunerative Price (FRP) which is a support price. 4) Ld. CIT(A) ought to have held that the price of cane purchased by appellant from its members and other farmers was contractually fixed as permitted by section 9 of the Sale of Goods Act and the said purchase price was deductible in computing the co- operative society’s profits and gains from its business. 5) Ld. CIT(A) erred in holding that 50 percent of payment of the same cane price, to its members in excess of the notified FRP was a distribution of the appellant society’s profits. 6) Ld. CIT(A) erred in ignoring the fact that comparable cane prices paid by private sector sugar mills were allowed as deductions in their assessments but cane price in excess of FRP was disallowed ITA Nos.67, 68 & 78/PUN/2024 Krantiagrani Dr G D Bapu Lad SSK Ltd., [A] 4 in the hands of co-operative sugar factories. 7) Ld. CIT(A) erred in ignoring the opportunity cost to the farmers for supplying sugarcane to appellant as well as agitations by farmers demanding higher prices which were much more than FRP. 8) On the facts and in the circumstances of the case and in law the learned NFAC - Commissioner of Income Tax (Appeals) Delhi, has erred in confirming the of addition of Rs.4423275 in respect of sale of sugar at concessional price to members. 9) 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. 1.2 The Assessee for A.Y.2009-10 has raised the following grounds of appeal : 1) On facts and in the circumstances of case and in law the learned NFAC - Commissioner of Income Tax (Appeals) Delhi has erred in confirming the addition of Rs. 2,87,68,048 /- being 50 percent of excess sugarcane price paid over SMP/FRP to the members as distribution of profit. 2) The learned AO and NFAC - Commissioner of Income Tax (Appeals) Delhi failed to appreciate the fact that the entire sugarcane price paid to member is allowable expenditure on account of commercial expendiency considering the sugarcane price paid by private sugar factories. 3) Ld. CIT(A) ought to have held that while computing profits of appellant society, the price to be allowed as a deduction for sugarcane supplied by farmers is the price fixed on co-operative principles and the same cannot be restricted to the notified Fair and Remunerative Price (FRP) which is a support price. 4) Ld. CIT(A) ought to have held that the price of cane purchased by appellant from its members and other farmers was contractually fixed as permitted by section 9 of the Sale of Goods Act and the said purchase price was deductible in computing the cooperative society’s profits and gains from its business. 5) Ld. CIT(A) erred in holding that 50 percent of payment of the same cane price, to its members in excess of the notified FRP was a ITA Nos.67, 68 & 78/PUN/2024 Krantiagrani Dr G D Bapu Lad SSK Ltd., [A] 5 distribution of the appellant society’s profits. 6) Ld. CIT(A) erred in ignoring the fact that comparable cane prices paid by private sector sugar mills were allowed as deductions in their assessments but cane price in excess of FRP was disallowed in the hands of co-operative sugar factories 7) Ld. CIT(A) erred in ignoring the opportunity cost to the farmers for supplying sugarcane to appellant as well as agitations by farmers demanding higher prices which were much more than FRP. 8) The appellant craves for the leave, add, alter, amend, modify and delete any or all the above grounds of appeals before On the facts and in the circumstances of the case and in law the learned NFAC - Commissioner of Income Tax (Appeals) Delhi, has erred in confirming the addition of Rs 10042920 in respect of sale of sugar at concessional price to members. 9) 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. Brief facts of the case : 2. We will first discuss A.Y.2007-08 as lead appeal : The ITAT in ITA No.2530/PUN/2012 and ITA No.2532/PUN/2012 in a common order dated 20.03.2019 in assessee’s own case had set-aside to the Assessing Officer(AO), the issue of excess sugarcane price paid to sugarcane suppliers and sale of sugar at concessional rate to members. The AO passed the order u/s.143(3) r.w.s. 254 on 20.09.2021. Aggrieved by the order of the AO, assessee filed before the ld.CIT(A). The ld.CIT(A) passed the order on 10.11.2023 for A.Y.2007-08. Aggrieved by ITA Nos.67, 68 & 78/PUN/2024 Krantiagrani Dr G D Bapu Lad SSK Ltd., [A] 6 the order of the ld.CIT(A), assessee filed appeal before this Tribunal. Submission of ld.Authorised Representative(ld.AR) : 3. The ld.Authorised Representative(ld.AR) for the Assessee submitted as under : “These appeals arise from the CIT(A)'s orders which are pursuant to Hon'ble ITAT's set aside of assessments to the AO to determine [following directions of Hon'ble Supreme Court in CIT v. Tasgaon TSSK 412 ITR 420)] as to what quantum of price which was paid in excess of the minimum cane price was chargeable as income of the Co-op Sugar Mill? For all the years, the AO has taken 50% of the price paid in excess of SMP/FRP as profits on the basis of "Bhargava formula" i.e. Additional Price under clause 5A of the Sugarcane Control Order [which was valid till season 2009-09]. The CIT(A) has confirmed the said disallowance. Till AY 2009-10 the Sugarcane Control Order provided SMP as the minimum price with an "Additional Price" which was held by Hon'ble Supreme Court to be a mandatory liability of the sugar mills [in levy price fixation matters]. From AY 2010-11 and the FRP regime began in place of SMP and Additional Price which were omitted from the Sugarcane Control Order. The preamble to the Essential Commodities Amendment Bill, 2009, states that the purpose of FRP is for taking it as the cane cost for calculating the "levy sugar price". It has nothing to do with determination of Business Profits. ITA Nos.67, 68 & 78/PUN/2024 Krantiagrani Dr G D Bapu Lad SSK Ltd., [A] 7 Hon'ble Supreme Court's judgment in Tasgaon TSSK [supra] was delivered on 5-3-2019. Subsequently, on 22-04-2020 the Constitution Bench of the Hon'ble Supreme Court [2020 SCC Online 380] held that both the Central Governmentand the State Government had the powers to fix the price of sugarcane. While the Central Government was empowered to fix the minimum price i.e. SMP/FRP and the State Government could fix a higher cane price. Pursuant to this judgment, the Finance Act, 2023, brought in clause (19) in section 155 in the Income tax Act to extend the provisions of section 36(1)(xvii) to the years prior to AY 2016-17. CBDT issued a Circular 14 of 2023 specifying SOPs for the assessee Co-op Sugar Mills to file applications u/s 155(19) with the Assessing Officers who would examine them and allow as deduction the cane purchases to the extent they were approved by State Government. CBDT Circular 18 of 2021 also clarified that "Government" in section 36(l)(xvii) included "State Government" and "price approved" included prices fixed by State Government under its regulatory mechanism under State Acts, Orders, or other legal instruments. This Hon'ble Tribunal was pleased to consider these developments in Law and hold in ITA Nos. 338 & 339 /PUN/2023 by order Dt. 15-05- 2023 that the Assessing Officer shall have to verify the all necessary facts in the remand proceedings in light of the foregoing legislative developments. It is therefore prayed that for the aforesaid AYs, in terms of the aforesaid submissions, the AO be directed to consider the applications filed by the appellant u/s 155(19) and allow such price for the cane purchases as deductible as have been approved by the State Government.” ITA Nos.67, 68 & 78/PUN/2024 Krantiagrani Dr G D Bapu Lad SSK Ltd., [A] 8 Submission of ld.Departmental Representative(ld.DR) : 4. The ld.DR for the Revenue relied on the order of Assessing Officer(AO) and ld.CIT(A)[NFAC]. Findings &Analysis : 5. We have heard both the parties and perused the records. We are discussing A.Y.2007-08 as lead case. Sugarcane Price paid : 5.1 It is observed that Finance Act, 2023 has introduced following amendmentsto sub-clause 19 of section 155 of the Income Tax Act, 1961 : [(19) Where any deduction in respect of any expenditure incurred for the purchase of sugarcane has been claimed by an assessee, being a co-operative society engaged in the business of manufacture of sugar, and such deduction has been disallowed wholly or partly in any previous year commencing on or before the 1st day of April, 2014, the Assessing Officer shall, on the basis of an application made by such assessee in this regard, recompute the total income of the assessee for such previous year after allowing deduction to the extent such expenditure is incurred at a price which is equal to or less than the price fixed or approved by the Government for that previous year, and the provisions of section 154 shall, so far as may be, apply thereto, and the period of four years specified in sub-section (7) of that section shall be reckoned from the end of previous year commencing on the 1st day of April, 2022.] 5.2 The ld.AR submitted that assessee may be permitted to file an application as per section 155(19) of the Act before the ITA Nos.67, 68 & 78/PUN/2024 Krantiagrani Dr G D Bapu Lad SSK Ltd., [A] 9 Assessing Officer and Assessing Officer may be directed to consider the said application as per the Amended Provisions. The ld.DR for the Revenue has not objected to the said submission of ld.Authorised Representative of the assessee. 5.3 In these facts and circumstances of the case, we accept the request made by the ld.AR of the assessee and direct the Assessing Officer to accept the application u/s.155(19) to be filed by the assessee. The Assessing Officer shall decide the application as per the procedure laid down in the Act. The AO shall provide opportunity of hearing to the assessee. Accordingly, assessment order is set-aside to the Assessing Officer for denovo adjudication of issue of Sugarcane Price as per our above directions. Hence, the Ground No.1 of the assessee is allowed for statistical purpose. Ground Nos.2 to 7 : 6. The assessee has raised the ground that as compared to private sugar factories, the price paid by assessee is comparable. However, these pleadings were never made during the assessment proceedings before the Assessing Officer. Similarly, these grounds were never raised before the ITAT also in ITA ITA Nos.67, 68 & 78/PUN/2024 Krantiagrani Dr G D Bapu Lad SSK Ltd., [A] 10 No.2530/PUN/2012. Therefore, also the facts pertaining to these grounds are not emanating from the order of ld.CIT(A) or Assessing Officer. 6.1 The Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd. vs Commissioner Of Income Tax on 4 December, 1996 [1998] 229 ITR 383 SC held as under : “But where the Tribunal is only required to consider a question of law arising from the facts which are on record in the assessment proceedings we fail to see why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee.” 6.2 Thus, the Hon’ble Supreme Court(supra) has held that tribunal can entertain a question of law only if it emanates from the facts which are on record in the assessment proceedings. In this case, as discussed above, the facts are not emanating from assessment records. Therefore, respectfully following the Hon’ble Supreme Court’s decision(supra), these grounds i.e.Ground No.2 to 7 cannot be admitted at this stage. Accordingly, Ground No.2 to 7 are dismissed as not admitted. Ground No.8 – Sugar sold at concessional rate to members : 7. The ITAT in ITA No.2530/PUN/2012, dated 20.03.2019 had directed the Assessing Officer to verify whether the practice of ITA Nos.67, 68 & 78/PUN/2024 Krantiagrani Dr G D Bapu Lad SSK Ltd., [A] 11 selling sugar at concessional rate has become practice or customs in the sugar industry or not! 7.1 Whether any resolution passed by the State Government supporting the practice! 7.2 What was the basis for deciding the quantity of sugar to be sold to members. 7.3 On perusal of the assessment order as well as ld.CIT(A)’s order the AO has not discussed the issues raised by ITAT in the order. There are no factual findings by the AO or ld.CIT(A) regarding the issues on which ITAT has set-aside the order to AO for denovo adjudication. In these facts and circumstances of the case, we are compelled to set-aside the order of Assessing Officer to Assessing Officer for denovo adjudication of the issue of sugar sold at concessional rate. The AO shall collect the information as directed by ITAT in ITA No.2530/PUN/2012(supra). The assessee shall file all the necessary documents before the Assessing Officer. The Assessing Officer shall provide opportunity of hearing to the assessee. Accordingly, the Ground No.8 of the assessee is allowed for statistical purpose. ITA Nos.67, 68 & 78/PUN/2024 Krantiagrani Dr G D Bapu Lad SSK Ltd., [A] 12 8. The Ground No.9 is general in nature, hence, needs no adjudication. Accordingly, ground no.9 is dismissed. 9. In the result, appeal of the assessee is partly allowed. ITA No.67 & 68/PUN/2024 for A.Y.2008-09 & 2009-10 : 10. Since we have already discussed the issue at length and the facts of ITA No.78/PUN/2024 are similar to the facts of ITA Nos.67 & 68/PUN/2024, therefore, our decision in ITA No.78/PUN/2024 shall apply mutatis mutandis to these two appeals also, accordingly, grounds of appeal raised by the assessee in ITA Nos.67 & 68/PUN/2024 are partly allowed. 11. In the result, both appeals of the assessee are partly allowed. 12. To sum up, three appeals of the assessee i.e.ITA No.78/PUN/2024 and ITA Nos.67 & 68/PUN/2024 are partly allowed. Order pronounced in the open Court on 16 th May, 2024. Sd/- Sd/- (S.S.GODARA) (DR. DIPAK P. RIPOTE) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 16 th May, 2024/ SGR* ITA Nos.67, 68 & 78/PUN/2024 Krantiagrani Dr G D Bapu Lad SSK Ltd., [A] 13 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 आयकर अपीलीय अिधकरण, पुणे/ITAT, Pune.