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2019 (5) TMI 629 - AT - Income TaxAddition towards excessive sugarcane price paid to members as well as non-members of the assessee - deductible expenditure u/s 37(1) - application of provisions of section 40A(2) - assessee is a Co-operative Society engaged in the business of manufacturing and sale of sugar and its bye-products - HELD THAT:- Both the sides are unanimously agreeable that the extant issue of deduction for payment of excessive price for purchase of sugarcane, raised in the appeal under consideration, is squarely covered by the case of C.I.T. BOMBAY VERSUS TASGAON TALUKA S.S.K. LTD. [2019 (3) TMI 321 - SUPREME COURT] We set-aside the impugned order on this score and remit the matter to the file of the A.O for deciding it afresh as per law in consonance with the articulation of law by the Hon’ble Supreme Court in the aforenoted judgment. 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. The 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 - Decided in favour of assessee for statistical purposes.
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