Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2019 (4) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2019 (4) TMI 857 - AT - Income TaxExcessive sugarcane price paid to members as well as non-members of the respective assessee - appropriation of profit or not - Relying on clause-3 and additional price payable as per clause 5A of the Sugarcane Control Order, 1966, the AO opined that the excessive price paid was in the nature of `distribution of profits’ and hence not deductible - HELD THAT:- Issue of payment of excessive price on purchase of sugarcane by the assesses is no more res integra in view of the recent judgment of Hon’ble Supreme Court in CIT Vs. Tasgaon Taluka S.S.K. Ltd. (2019 (3) TMI 321 - SUPREME COURT) - we set-aside the impugned orders on this score and remit the matter to the file of the respective A.Os. for deciding it afresh as per law in consonance with the articulation of law by the Hon’ble Supreme Court in the aforenoted judgment. The AO would allow deduction for the price paid under clause 3 of the Sugar Cane (Control) Order, 1966 and then determine the component of distribution of profit embedded in the price paid under clause 5A, by considering the statement of accounts, balance sheet and other relevant material supplied to the State Government for the purpose of deciding/fixing the final price/additional purchase price/SAP under this clause. The amount relatable to the profit component or sharing of profit/distribution of profit paid by the assessee, which would be appropriation of income, will not be allowed as deduction, while the remaining amount, being a charge against the income, will be considered as deductible expenditure. Distribution of profits can only be qua the payments made to the members. In so far as the non-members are concerned, the case will be considered afresh by the AO by applying the provisions of section 40A(2) of the Act, as has been held by the Hon’ble Supreme Court supra. Needless to say, the assessee will be allowed a reasonable opportunity of hearing by the AO in such fresh determination of the issue. Addition of giving sugar to members at concessional rates - difference between the average price of sugar sold in the market and that sold to members is appropriation of profit or not - HELD THAT:- As decided in Krishna Sahakari Sakhar Karkhana Limited [2012 (11) TMI 669 - SUPREME COURT] the difference between the average price of sugar sold in the market and the price of sugar sold by the assessee to its members at concessional rate was taxed by the Department under the head “Appropriation of profit”. The Hon’ble Summit Court remitted the matter to the CIT(A) for considering, inter alia,: “whether the abovementioned practice of selling sugar at concessional rate has become the practice or custom in the Cooperative 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 to farmers/cane growers/Members each year on month-to-month basis, apart from others from Diwali?” The issue under consideration can be decided by an appropriate lower authority only on the touchstone of the relevant factors noted in the above judgment. In our considered opinion, it would be just and fair if the impugned orders on this score are set aside and the matter is restored to the file of AOs, instead of to the CITs(A), for fresh consideration as to whether the difference between the average price of sugar sold in the market and that sold to members at concessional rate is appropriation of profit or not. Addition on account of expenses viz. purchases, power & fuel, repairs to machinery, hospitality Advertisement, Travelling Expenses, Telephone expenses - CIT-A restricted pat addition - HELD THAT:- CIT(A) has categorically mentioned that the assessee is governed by the provisions of Cooperative Societies Act and under the control and supervision of various Govt. authorities. The assessee has maintained books of accounts and the same are subjected to audit. He further noted that the AO failed to verify the books of account and made addition. Under these circumstances and considering the totality of facts and circumstances of the case we are of the considered opinion that the ld. CIT(A) has taken a reasonable view. Thus, we countenance the view taken by the ld. CIT(A) on this score. Appeals are fully/partly allowed for statistical purposes.
|