Kisan Sahkari Chini Mills Ltd, Sitapur V. Asstt. Commissioner of Income Tax, Sitapur

ITA 800/LKW/2013

• Counselvise Citation: 80023714 RSA 2013
• Duration Of Justice: 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 11-09-2014
• Assessment Year: 1993-1994
• Appeal Filed On: 23-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALOK MITRA
• Assessee Lawyers: S K ARORA
• Keywords: Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A , LUCKNOW BEFORE SHRI S UNIL KUMAR YADAV , JUDICIAL MEMBER AND SHRI. A. K. GARODIA , ACCOUNTANT MEMBER ITA NO S . 800 & 801/LKW/2013 ASSESSMENT YEAR S : 1993 - 94 & 1994 - 95 KISAN SAHKARI CHINI MILLS LTD. MAHMUDABAD SITAPUR V. ACIT SITAPUR PAN: AAAAK1132A (APP ELL ANT) (RESPONDENT) APP ELL ANT BY: SHRI. S. K. ARORA, C.A. RESPONDENT BY: SHRI. ALOK MITRA, D.R. DATE OF HEARING: 11 09 2014 DATE OF PRONOUNCEMENT: 14 10 2014 O R D E R PER SUNIL KUMAR YA DAV: THESE APPEALS ARE PREFERRED BY THE ASSESSEE AGAINST THE RESPECTIVE ORDER OF THE LD. CIT(A) ON COMMON GROUNDS EXCEPT THE DIFFERENCE IN QUANTUM. FOR THE SAKE OF REFERENCE, WE EXTRACT THE GROUNDS RAISED IN I.T.A. NO.800/LKW/2013 FOR ASSESSMENT YEAR 19 93 - 94 AS UNDER: - 1 . THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), BAREILLY HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE ACTION OF LEARNED A.O. IN MAKING DISALLOWANCE OF RS.14,49,563.25 ON ACCOUNT OF NON REFUNDABLE DEPOSIT RECEIVED DURING THE YEAR AS AP PELLANT INCOME. 2 . THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) BAREILLY HAS ALSO ERRED ON FACTS AND IN LAW IN CONFIRMING THE ACTION OF A.O. IN NOT CORRECTLY APPRECIATING THE FACTS OF THE CASE IF SIDEHESHWAR SAHKARI SAKKAR KARKHANA LTD. VS. CIT & OTHERS 2 70 ITR PAGE NO. 1 (SUPREME COURT) ON WHICH FACTS THE HONORABLE IT AT, B - BENCH, LUCKNOW HAS RESTORED THE MATTER TO PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 2 - : THE FILE OF A.O. FOR DECISION. 3 . THE LEARNED CIT(A) BAREILLY IS NOT JUSTIFIED IN GIVING THE ALTER N ATIVE APPROACH ON THE ISSUE THAT THE AMOUNT OF DEDUCTION IS LIABLE TO BE TAXED AS INCOME OF THE ASSESSEE AS PER PROVISION OF SECTION 41 OF I . T ACT , 1961 . 2 . DURING THE COURSE OF HEARING OF THE APPEALS, THE LD. COUNSEL FOR THE ASSESSEE HAS INVITED OUR ATTENTION THAT THE IMPUGNED ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE LUCKNOW BENCH OF THE TRIBUNAL IN THE CASE OF ACIT, SITAPUR VS. KISAN SAHKARI CHINI MILL LTD., SITAPUR IN I.T.A. NO.303/LKW/2013 AND THE JUDGMENT S OF THE HON'BLE APEX COURT IN THE CASE OF SIDDHESHWAR SAHAKARI SA KHAR KARKHANA LTD. VS. CIT , 270 ITR 1 AND HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. RAMALA SAHKARI CHINI MILLS L TD . , 278 ITR 670. THEREFORE, FOLLOWING THE AFORESAID JUDGMENTS, THE APPEALS MAY BE DECIDED IN FAVOUR OF THE ASSESSEE. THE COPIE S OF THE ORDER OF THE TRIBUNAL AND THE JUDGMENTS OF THE HON'BLE APEX COURT AS WELL AS THE HIGH COURT ARE PLACED ON RECORD. 3 . THE LD. D.R., ON THE OTHER HAND, HAS PLACED HEAVY RELIANCE UPON THE ORDERS OF THE LD. CIT(A). 2 . HAVING GIVEN A THOUGHTFUL CONSIDERATI ON TO THE RIVAL SUBMISSIONS AND FROM A CAREFUL PERUSAL OF THE ORDER OF THE TRIBUNAL AND JUDGMENTS OF THE HON'BLE APEX COURT AND THE JURISDICTIONAL HIGH COURT REFERRED TO ABOVE, WE FIND THAT THE IMPUGNED ISSUE HAS BEEN EXAMINED BY THE HON'BLE APEX COURT AS WELL AS THE JURISDICTIONAL HIGH COURT IN THE AFOREMENTIONED CASES. 3 . IN THE CASE OF SIDDHESHWAR SAHAKARI SAKHAR KARKHANA LTD. VS. CIT (SUPRA), THEIR LORDSHIPS HAVE ADJUDICATED THE IMPUGNED ISSUE AND HAS GIVEN A CATEGORICAL FINDING THAT THE AMOUNTS DEDUCTED F ROM THE CANE PRICE TOWARDS THE NON - REFUNDABLE DEPOSITS WERE NOT TRADING RECEIPTS OF THE ASSESSEE. THE RELEVANT OBSERVATIONS OF THE HON'BLE APEX COURT ARE EXTRACTED HEREUNDER FOR THE SAKE OF REFERENCE: - PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 3 - : THE ASSESSEE WAS A CO - OPERATIVE SOCIETY, WHICH CARRI ED ON THE BUSINESS OF MANUFACTURING SUGAR. ITS MEMBERS WERE PREDOMINANTLY SUGARCANE FARMERS. THE SHARE CAPITAL OF THE SOCIETY WAS CONTRIBUTED NOT ONLY BY THE MEMBERS BUT ALSO BY THE STATE GOVERNMENT. ITS BYE - LAWS PROVIDED FOR DEDUCTION OF AMOUNTS TOWARDS R EFUNDABLE AND NON - REFUNDABLE DEPOSITS FROM THE CANE PRICE PAYABLE TO THE GROWER MEMBERS. UNDER BYE - LAW NO. 61 - A, (I) THE NON - REFUNDABLE DEPOSITS WERE NOT TO BE REFUNDED TILL THE GOVERNMENT SHARE CAPITAL AND THE TERM LOANS TAKEN FROM IFCI AND OTHER FINANC IAL INSTITUTIONS FOR CAPITAL EXPENDITURE WERE REPAID FULLY, (II) THE BOARD OF DIRECTORS OF THE SOCIETY MAY CONVERT SUCH DEPOSITS INTO SHARES AFTER REPAYMENT OF THE LOANS TAKEN TOWARDS CAPITAL EXPENDITURE AND LONG TERM LOANS TAKEN FROM BANKS FOR CAPITAL E XPENDITURE, (III) THE AMOUNT STANDING TO THE CREDIT OF A MEMBER COULD BE TRANSFERRED AT HIS OPTION TO THE ACCOUNT OF ANOTHER, (IV) AFTER ONE YEAR OF HIS CEASING TO BE A MEMBER, THE AMOUNT COULD BE REFUNDED TO HIM SUBJECT TO APPROVAL OF THE BOARD, AND (IV) ON HIS DEATH, THE AMOUNT COULD BE PAID TO HIS HEIRS WITH THE APPROVAL OF THE BOARD. UNTIL REPAYMENT THE DEPOSITS SO COLLECTED WERE TO BE UTILISED FOR REPAYING THE TERM LOANS TAKEN FOR CAPITAL EXPENDITURE. INTEREST WAS PAYABLE ON THE DEPOSITS. THE AMOUNTS S O DEDUCTED WERE CREDITED TO THE INDIVIDUAL ACCOUNTS OF THE MEMBERS. THE ASSESSEE WAS ALSO ENTITLED TO COLLECT BY DEDUCTION FROM THE CANE PRICE PAYABLE TO THE MEMBERS TERM DEPOSITS FOR A PERIOD NOT EXCEEDING FIVE YEARS ON WHICH INTEREST NOT EXCEEDING 12 PER CENT. WAS PAYABLE. PURSUANT TO INSTRUCTIONS ISSUED BY THE DIRECTOR OF SUGAR, CERTAIN AMOUNTS AT PRESCRIBED RATES WERE ALSO DEDUCTED BY THE ASSESSEE FROM THE CANE PRICE AND CREDITED TO CERTAIN FUNDS, VIZ., THE CHIEF MINISTERS RELIEF FUND, LATE SHRI Y. B. CHAVAN MEMORIAL FUND, HUTMENT FUND, AREA DEVELOPMENT FUND AND CANE DEVELOPMENT FUND. THE APPELLATE TRIBUNAL HELD THAT THE AMOUNTS COLLECTED BY THE ASSESSEE TOWARDS THE NON - REFUNDABLE PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 4 - : DEPOSITS AND THE REFUNDABLE DEPOSITS (TERM DEPOSITS) COULD NOT BE TREATED AS THE INCOME OF THE ASSESSEE AND THE AMOUNTS DEDUCTED FOR BEING CREDITED TO THE FUNDS WERE NOT TRADING RECEIPTS OF THE ASSESSEE. THE HIGH COURT HELD THAT THE AMOUNTS COLLECTED TOWARDS THE NON - REFUNDABLE AND REFUNDABLE DEPOSITS WERE TRADING RECEIPTS OF TH E ASSESSEE BUT THE AMOUNTS DEDUCTED TOWARDS THE FUNDS WERE DIVERTED BY OVERRIDING TITLE AND WERE NOT ITS INCOME. ON CROSS APPEALS TO THE SUPREME COURT : HELD, (I) REVERSING THE DECISION OF THE HIGH COURT, THAT THE LINE OF ENQUIRY, IN ORDER TO DETERMINE THE TRUE NATURE AND CHARACTER OF THE RECEIPTS, DID NOT STOP AT ASCERTAINING THE MERE FACT WHETHER THE REALIZATION WAS IN THE COURSE OF TRADING. ALTHOUGH THE USE OF THE EXPRESSION DEPOSIT DID NOT CONCLUDE THE ISSUE, THE EXPRESSION WAS USED IN THE BYE - LAWS TO MEAN JUST WHAT IT SAID. THE REPAYMENT OF LOANS TAKEN FOR CAPITAL EXPENDITURE AND THE SHARE CAPITAL OF THE GOVERNMENT WERE TWO SPECIFIED EVENTS WHICH WERE BY NO MEANS UNCERTAIN, THOUGH THE TIME OF REPAYMENT WAS INDEFINITE. ON THE OCCURRENCE OF THE TWO EVEN TS THE RIGHT TO DEMAND REFUND WOULD ACCRUE TO THE MEMBER - DEPOSITOR. SUCH A RIGHT, THOUGH CONTINGENT IN NATURE INITIALLY, INHERED IN THE DEPOSITOR FROM THE BEGINNING. THE WORD MAY IN THE BYE - LAWS HAD TO BE CONSTRUED AS SHALL AND THE BOARD WAS BOUND TO A LLOT SHARES TO THE MEMBERS IN RELATION TO THE DEPOSITS, AFTER FULL REPAYMENT TO THE GOVERNMENT AND THE FINANCIAL INSTITUTIONS. THE EXISTENCE OF THE OTHER FEATURES SUCH AS TRANSFERABILITY OF THE DEPOSIT TO ANOTHER MEMBER AND THE PROVISION FOR REFUND OF THE DEPOSITED AMOUNT TO THE MEMBER IN CASE OF CESSATION OF MEMBERSHIP OR TO HIS LEGAL HEIRS IN CASE OF DEATH INDICATED THAT THE DEPOSITED AMOUNT COULD NOT BE TREATED AS MONEY BELONGING TO THE ASSESSEE - SOCIETY. THE PAYMENT OF INTEREST AT A SPECIFIED RATE FROM Y EAR TO YEAR WAS CONSISTENT ONLY WITH THE FACT THAT THE DEPOSITED AMOUNT STILL PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 5 - : BELONGED TO THE MEMBERS. AND THE FACT THAT THE DEPOSITED AMOUNTS WERE CREDITED TO THE INDIVIDUAL ACCOUNTS OF THE MEMBERS CORROBORATED THE CIRCUMSTANCE THAT THE DEPOSITS BELONGED TO THE MEMBERS. THE AMOUNTS DEDUCTED FROM THE CANE PRICE TOWARDS THE NON - REFUNDABLE DEPOSITS WERE NOT TRADING RECEIPTS OF THE ASSESSEE. 4 . THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. RAMALA SAHKARI CHINI MILLS LTD. (SUPRA) HAS ALSO EXAMINED THE SAME ISSUE AND HAS HELD THAT THE AMOUNT OF RS. 7.50 PER T ONN E OF SUGARCANE, COLLECTED BY THE RESPONDENT - ASSESSEE FROM ITS MEMBER - CANE GROWERS, WAS TOWARDS DEPOSIT IN TERMS OF CLAUSES 41 TO 44 OF THE BYE - LAWS AND WAS TO BE ADJUSTED ON CONVERSION INTO SHARES. THE EXCESS AMOUNT WAS TO BE REFUNDED. THUS, IT WAS A CLEAR CASE OF COLLECTION OF AMOUNT TOWARDS ISSUANCE OF SHARES IN FUTURE AND COULD NOT BE TERMED AS TRADING RECEIPTS. THE RELEVANT OBSERVATIONS OF THE HON'BLE HIGH COURT ARE EXTRACTED HEREUNDER: - THE ASSES SEE WAS A CO - OPERATIVE SUGAR MILL . IT HAD OBTAINED A LOAN OF RS. 80,00,000 FROM THE INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA LTD. IT HAD ENTERED INTO A MORTGAGE DEED WITH THE ICICI, ACCORDING TO WHICH, IT UNDERTOOK TO COLLECT NON - REFUNDABLE DEP OSITS FROM THE GROWER MEMBERS AT A MINIMUM RATE OF RS. 7.50 PER TONNE OF SUGARCANE SUPPLIED BY THEM. THESE DEPOSITS WERE NOT TO BEAR ANY INTEREST. AS PER CLAUSES 41, 42, 43 AND 44 OF THE BYE - LAWS OF THE ASSESSEE AS APPROVED BY THE U. P. GOVERNMENT, THE DEP OSITS WERE FINALLY TO BE CONVERTED INTO THE SHARES IN THE ASSESSEE IN THE NAMES OF THEIR RESPECTIVE MEMBERS AND IN CASE AFTER THE ISSUE OF SHARES AS PER CLAUSE 28(KHA) OF THE BYE - LAWS THERE REMAINED ANY SURPLUS IT HAD TO BE REFUNDED TO THE PARTIES CONCERNE D. DURING THE ASSESSMENT YEAR 1981 - 82 THE ASSESSEE RECEIVED A SUM OF RS. 4,32,685 FROM THE CANE GROWERS ON ACCOUNT OF THE LOSS EQUALISATION FUND, WHICH WAS SHOWN IN THE BALANCE - SHEET AS NON - REFUNDABLE DEPOSIT. THE ASSESSING OFFICER HELD THAT THIS WAS A REV ENUE RECEIPT AND ADDED THE SUM OF RS. 4,32,685 IN PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 6 - : THE TOTAL INCOME OF THE ASSESSEE. THE COMMISSIONER (APPEALS), HOWEVER, CAME TO THE CONCLUSION THAT THE AMOUNTS REALISED BY THE ASSESSEE ON THE DIRECTIONS OF THE GOVERNMENT COULD NOT CONSTITUTE INCOME OF THE ASSESSEE MERELY BECAUSE THE AMOUNTS HAD NOT BEEN UTILISED SO FAR. THIS WAS UPHELD BY THE TRIBUNAL. ON A REFERENCE: HELD, THAT IT WAS ABSOLUTELY CLEAR THAT THE AMOUNT OF RS. 7.50 PER TONNE OF SUGARCANE, COLLECTED BY THE RESPONDENT - ASSESSEE FROM ITS MEMBER - CANE GROWERS, WAS TOWARDS DEPOSIT IN TERMS OF CLAUSES 41 TO 44 OF THE BYE - LAWS AND WAS TO BE ADJUSTED ON CONVERSION INTO SHARES. THE EXCESS AMOUNT WAS TO BE REFUNDED. THUS, IT WAS A CLEAR CASE OF COLLECTION OF AMOUNT TOWARDS ISSUANCE OF SHARES IN FUTURE AN D COULD NOT BE TERMED AS TRADING RECEIPTS. 5 . FOLLOWING THE AFORESAID JUDGMENTS, THE TRIBUNAL HAS ALSO EXAMINED THIS ISSUE AND DECIDED IT IN FAVOUR OF THE ASSESSEE. 6 . IN THE INSTANT CAS E, THE FACTS ARE ALMOST SIMILAR. T HEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE NON - REFUNDABLE DEPOSIT RECEIVED BY THE ASSESSEE IS NOT REVENUE RECEIPTS , T HEREFORE, NOT EXIGIBLE TO TAX. ACCORDINGLY, THE ADDITION CONFIRMED BY THE LD. CIT(A) IS DELETED AND THE APPEALS OF THE ASSESSEE STAND ALLOWED. 7 . IN THE RESULT, APPEALS OF TH E ASSESSEE ARE ALLOWED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENT I ONED ON THE CAPTION PAGE. SD/ - SD/ - [ A. K. GARODIA ] [ S UNIL KUMAR Y ADAV ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 14 TH OCTOBER , 2014 JJ: 1109 PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 7 - : COPY FORWARDED TO: 1 . APPEL LANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT 5 . DR ASSISTANT REGISTRAR PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ )