ITO Wd- 11[3] Pune, Pune V. Karmayogi Shankarraoji Patil.SSK Ltd, Pune

ITA 692/PUN/2012

• Counselvise Citation: 69224514 RSA 2012
• Duration Of Justice: 2 year(s) 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 04-04-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K MODI
• Assessee Lawyers: S N DOSHI
• Keywords: Opportunity of being heard; Principle of natural justice

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE: SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO. 692 /PN/20 1 2 ASSESSMENT YEAR : 200 8 - 09 THE INCOME TAX OFFICER, WARD - 11(3) , PUNE VS. KARMAYOGI SHANKARRAOJI PATIL, SAHAKARI SAKHAR KARKHANA L TD., A/P MAHATMAPHULE NAGAR, TAL. - INDAPUR, DISTT. - PUNE (APPELLANT) (RESPONDENT) PAN NO. AAAAI0225N APPELLANT BY: SHRI A.K. MODI RESPONDENT BY: SHRI S.N. DOSHI DATE OF HEAR ING : 16 - 0 7 - 2014 DATE OF PRONOUNCEMENT : 26 - 08 - 2014 ORDER P ER R.S. PADVEKAR , JM : - IN THIS APPEAL , THE REVENUE HAS CHALLENGED T HE IMPUGNED ORDER OF THE LD. CIT(A) - I, PUNE DATED 18 - 10 - 2011 FOR THE A.Y. 200 8 - 09. THE REVENUE HAS TAKEN THE FOLLOWING GR OUNDS IN THE APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE L EARNED COMMISSIONER OF INCOME - TAX (APPEALS) ERRED IN DELETING THE ADDITION OF RS.7,69,776/ - MADE ON ACCOUNT OF SALE OF SUGAR TO THE MEMBERS AT CONCESSIONAL RATE . 2. ON THE FACTS A ND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) GROSSLY ERRED IN RELYING ORDER OF THE ITAT IN ASSESSEE CASE FOR THE A.Y. 1997 - 98 ON THE ISSUE OF PROVISION FOR VSI CONTRIBUTION FOR WHICH THE APPEAL TO THE HIGH COURT FIL ED BY THE DEPARTMENT IS STILL PENDING. 3. FOR THIS AND SUCH OTHER REASONS AS MAY BE URGED AT THE TIME OF HEARING, THE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) MAY BE VACATED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 2 ITA NO. 692 /PN/2012, KARMAYOGI SHANKARRAOJI PATIL S.S. KARKHANA L TD., PUNE 2. THE FIRST ISS UE IS IN RESPECT OF THE ADDITION MADE BY THE ASSESSING OFFICER TOWARDS THE SALE OF SUGAR TO ITS MEMBERS AT CONCESSIONAL RATE. THE FACTS WHICH ARE REVEALED FROM THE RECORD AS UNDER. THE ASSESSEE IS A CO - OPERATIVE SOCIETY WHICH IS ENGAGED IN THE MANUFACTUR ING AND SALE OF SUGAR AND ITS BY - PRODUCTS. IT WAS NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS SOLD/SUPPLIED SUGAR TO CANE GROWERS/MEMBERS AT CONCESSIONAL RATE. IN THE OPINION OF THE ASSESSING OFFICER THE DIFFERENCE BETWEEN THE MARKET PRICE OF THE SUGAR AND THE CONCESSIONAL PRICE IS NOTHING BUT THE DISTRIBUTION OF P ROFIT. AS NOTED BY THE ASSESSING OFFICER TO THE EXTENT OF 8848 QTLS ., TH E ASSESSEE HAS SOLD/SUPPLIED SUGAR AT CONCESSIONAL RATE I.E. LESS THAN THE FAIR MARKET RATE. THE ASSESSING OF FICER, THEREFORE, WORKED OUT THE TOTAL MONETARY CONCESSION GAIN ED BY THE MEMBERS WHICH WAS TO THE EXTENT OF RS. 7,69,776/ - AND MADE THE ADDITION TO THE TOTAL INCOME OF THE ASSESSEE. THE LD. CIT(A) DELETED THE SAID ADDITION . NOW, THE REVENUE IS IN APPEAL B EFORE US. 3. W E HAVE HEARD THE PARTIES. BOTH THE PARTIES AGREED THAT THE IDENTICAL ISSUE COME BEFORE THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. KRISHNA SSK LTD. AND OTHERS IN CIVIL APPEAL NO. 6950 OF 2012 ETC. JUDGMENT DATED 25 - 09 - 2012 AND THE HO N'BLE SUPREME COURT HAS RESTORED THE ISSUE FOR FRESH ADJUDICATION WITH CERTAIN DIRECTIONS TO THE FILE OF THE CIT(A) . BOTH THE PARTIES AGREED THAT THE ISSUE MAY BE RESTORED TO THE FILE OF THE LD. CIT(A). WE ALSO FIND THAT THE RELEVANT FACTS ARE NOT AVAILA BLE ON RECORD. IN THE CASE OF KRISHNA SSK LTD. AND OTHERS (SUPRA) THE HON'BLE SUPREME COURT RESTORED THE ISSUE WHETHER THE DIFFERENCE BETWEEN THE CONCESSIONAL RATE OF SUGAR SOLD/SUPPLIED TO ITS MEMBERS AND THE MARKET RATE IS TO BE ADDED IN THE HANDS OF TH E ASSESSEE SUGAR FACTORIES. THE RELEVANT PART OF THE OBSERVATIONS AND DIRECTIONS OF THE APEX COURT IN THE CASE OF KRISHNA SSK LTD. AND OTHERS (SUPRA) ARE AS UNDER: 3 ITA NO. 692 /PN/2012, KARMAYOGI SHANKARRAOJI PATIL S.S. KARKHANA L TD., PUNE THE QUESTION, WHETHER THE ABOVE DIFFERENCE BETWEEN THE FAIR MARKET PRICE AND THE CONCES SIONAL PRICE SHOULD OR SHOULD NOT BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE SOCIETY, NEEDS TO BE RE - LOOKED BY CIT(A). APART FROM THE AFORESAID QUESTION, CIT(A) WOULD TAKE INTO ACCOUNT, WHETHER THE ABOVE MENTIONED PRACTICE OF SELLING SUGAR AT CONCESSION AL RATE HAS BECOME THE PRACTICE OR CUSTOM IN THE IN THE CO - OPERATIVE SUGAR INDUSTRY? AND WHETHER ANY RESOLUTION HAS BEEN PASSED BY THE STATE GOVERNMENT SUPPORTING THE PRACTICE? THE CIT(A) WOULD ALSO CONSIDER ON WHAT BASIS THE QUANTITY OF THE FINAL PRODUCT , I.E. SUGAR, IS BEING FIXED FOR SALE OF FARMERS/CANE GROWERS/MEMBERS EACH YEAR ON MONTH TO - MONTH BASIS, APART FROM DIWALI? THERE ARE SOME OF THE QUESTIONS WHICH HAVE NOT BEEN ADDRESSED BY THE AUTHORITIES BELOW IN THE IMPUGNED ORDERS. THE CIT(A) WOULD BE ENTITLED TO LOOK INTO THE ACCOUNTS AND VERIFY THE BASIS FOR SALE OF SUGAR AT CONCESSIONAL PRICE ON MONTH - TO - MONTH BASIS WE THEREFORE, KEEP ALL QUESTIONS OF LAW AND FACTS OPEN. NEEDLESS TO ADD, THE CIT(A) WOULD GIVE LIBERTY TO BOTH THE SIDES TO PRODUCE RELEVANT DOCUMENTS. FOR THE ABOVE REASONS, WE REMIT THE CASES TO CIT(A) TO DE - NOVO CONSIDER THE MATTER. 4 . WE, THEREFORE, IN THIS CASE ALSO RESTORE THE ISSUE OF SALE OF SUGAR AT CONCESSIONAL RATE TO THE FILE OF THE LD. CIT(A) FOR FRESH ADJUDICATION WIT H DIRECTIONS TO DECIDE THE SAME IN THE LIGHT OF DIRECTIONS AND OBSERVATIONS OF THE HON'BLE SUPREME COURT IN THE CASE OF KRISHNA SSK LTD. AND OTHERS (SUPRA). NEEDLESS TO SAY THE ASSESSING OFFICER SHOULD GIVE REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASS ESSEE AS PER THE PRINCIPLES OF NATURAL JUSTICE. ACCORDINGLY, GROUND NO. 1 IS ALLOWED FOR THE STATISTICAL PURPOSES. 5. THE GROUND NO. 2 IS THE ADDITION MADE BY THE ASSESSING OFFICER IN RESPECT OF THE CONTRIBUTION TO VSI U/S. 43B. 4 ITA NO. 692 /PN/2012, KARMAYOGI SHANKARRAOJI PATIL S.S. KARKHANA L TD., PUNE 6. WE HAVE HEARD THE PARTIES. THE LD. COUNSEL SUBMITS THAT THE ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE ITAT, PUNE IN THE FOLLOWING CASES: (I). SHRI P ANCHGANGA SSK LTD., GANGANAGAR VS. DCIT, SR II, KOLHAPUR, ITA NOS. 491 & 1365/PN/1991 ORDER DAT ED 20 - 07 - 1994. (II). SHRI PANDURANG SSK LTD., SHREEPUR, VS. DCIT, SR I, KOLHAPUR ITA NO. 881/PN/1998 ORDER DATED 15 - 12 - 2003. 7. THE LD. COUNSEL HAS FILED THE COPIES OF THE ORDERS IN THE ABOVE REFERRED CASES WHICH ARE PLACED ON RECORD. WE FIND THAT TH E IDENTICAL ISSUE HAS COME FOR THE CONSIDERATION IN THE CASE OF SHRI PANCHGANGA SSK LTD. (SUPRA) AND THE SAME HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE. THE OPERATIVE PART OF THE DECISION OF THE TRIBUNAL IN THE CASE OF SHRI PANCHGANGA SSK LTD. (SUPRA) IS AS UNDER: 11. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIES TO THE DISPUTE. THE EXPENDITURE ON SCIENTIFIC RESEARCH IS AN ALLOWABLE DEDUCTION U/S. 35(1)(II) OF THE ACT, PROVIDED THE AMOUNT HAS BEEN ACTUALLY PAID BY AN ASSESSEE. THE WORD PAID HAS B EEN DEFINED U/S. 43(2) OF THE ACT, ACCORDING TO WHICH, THE WORD PAID MEANS ACTUALLY PAID OR INCURRED ACCORDING TO THE METHOD OF ACCOUNTING UPON THE BASIS OF WHICH THE PROFITS OR GAINS ARE COMPUTED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSI ON IN THE CASE OF ASSESSEE. THERE IS NO DISPUTE THAT THE ASSESSEE HAS MAINTAINED THE BOOKS OF ACCOUNTS ON MERCANTILE BASIS AND THE CONTRIBUTION TO DECCAN SUGAR I NSTI TUTE IS THE LIABILITY WHICH THE ASSESSEE HAS INCURRED DURING THE ACCOU N TING YEAR RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATION. SINCE THE ASSESSEE HAS INCURR E D THIS LIABILITY DURING THE YEAR UNDER APPEAL, THE ASSESSEE IS ENTITLED FOR THE DEDUC TION. MOREOVER, THE ASSESSEE ALSO HAS MADE THE PAYMENT AS PER THE DIRECTION OF THE DIREC T OR OF SUG AR, GOVERNMEN T OF M AHAR ASHTRA. WE ARE, THEREFORE, OF THE VIEW THAT THE CIT(A) WAS NOT JUSTIFIED IN DISALLOWING THE CLAIM OF THE ASSESSEE WE ACCORDINGLY 5 ITA NO. 692 /PN/2012, KARMAYOGI SHANKARRAOJI PATIL S.S. KARKHANA L TD., PUNE REVERSE HIS ORDER AND DIRECT THE ASSESSING OFFICER TO ALLOW THE CLAIM OF THE ASSESSEE. 8. WE, ACCORDIN GLY, CONFIRM THE ORDER OF THE LD. CIT(A) ON GROUND NO. 2 AND DISMISS THE GROUND NO. 2. THE GROUND NO. 3 IS GENERAL IN NATURE. 9 . IN THE RESULT, THE REVENUES APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 26 - 0 8 - 2 01 4 SD/ - SD/ - ( G . S . PAN NU ) ( R.S. PADVEKAR ) ACCOUNTANT MEMBER JUDICIAL MEMBER RK /PS PUNE , DATED : 26 TH AUGUST, 2014 COPY TO 1 ASSESSEE 2 DEPARTMENT 3 THE CIT(A) - I, PUNE 4 THE CIT - I , PUNE 5 THE DR, ITAT, B BENCH, PUNE . 6 GUARD FILE. //TRUE COPY// BY ORDER PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE