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2016 (6) TMI 746 - GUJARAT HIGH COURT

2016 (6) TMI 746 - GUJARAT HIGH COURT - TMI - Reopening of assessment - taxability of income of the sugarcane - Held that:- A Division Bench of this Court in the case of Shri Chalthan Vibhag Khand Udylog Mandli Ltd. vs. Deputy Commissioner of Income-Tax, reported in [2015 (7) TMI 297 - GUJARAT HIGH COURT ], had quashed the notice for re-opening which was based on identical reasons, it was held that the difference between the price to be paid to cane growers and the purchase price declared by the .....

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ECIAL CIVIL APPLICATION NO. 4513 of 2016 - Dated:- 14-6-2016 - MR. AKIL KURESHI AND MR. A.J. SHASTRI, JJ. FOR THE PETITIONER : MR MANISH J SHAH, ADVOCATE FOR THE RESPONDENT : MR SUDHIR M MEHTA, ADVOCATE ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) The petitioner is a sugar co-operative society and has challenged the notice for re-opening assessment issued by the Assessing Officer for the assessment year 2010-11. The Assessing Officer has recorded reasons for re-opening which read as .....

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ses of sugarcane growers that the co-operative sugar factories were following a practice of deciding the purchase price of sugarcane after finalisation of its accounts and its profits in the financial year subsequent to procurement of sugar cane. Till the time of finalisation of the purchase price, ad hoc payments were distributed amongst the sugarcane farmers. The final purchase price is declared after arriving at the profits earned by the co-operative sugar factories during the year of procure .....

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ent by virtue of the powers vested with it under The Essential Commodities Act, 1955 . By this order, fixation of a Statutory Minimum Price (SMP) by the Central Government every year, for every sugar factory, came into place. This price is fixed as per the recommendations of the Commission for Agricultural Costs and Prices, after consulting the State Government, associations of sugar industries and sugarcane growers and after considering all factors like cost of production of sugarcane, returns .....

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ire profits earned from such activity is liable to be taxed. During the course of assessment proceedings, made in the cases of M/s. Shree Chalthan Vibhag Khand Udyog Sahakari Mandli Ltd. And M/s. Shri Khedut Sahakari Khand Udyog Mandli Ltd., it was seen that those sugar factories had purchased sugarcane over and above the Minimum Support Price (SMP)/Fair and Remunerative Price (FRP) declared by the Central Government. It was also seen therein that during a crushing season, the co-operative sugar .....

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purchase of the commodity. In this case, the amount to be paid to sugarcane suppliers was neither before the crushing season nor during the crushing season. This practice of deciding the cane price after the end of crushing season at the time of finalisation of their accounts, was being followed by them so that these sugar factories came to know of the profits earned by it in that crushing season by that time and so that the cane purchase price can be so adjusted that there would be no incidenc .....

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cane below the SMP/FRP decided by the Central Government. Thus, it is reasonable to consider that in absence of any purchase price fixed by the co-operative sugar factories for sugar cane, it would be reasonable to adopt the SMP/FRP as the purchase price. 5. The case of the assessee for the year under consideration was also perused from this angle. It was seen that the assessee had purchased 1,14,36,300/- quintals of sugarcane during the year for a consideration of ₹ 3,01,78,80,994/-. The .....

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4.91) per quintal. Since the total purchases of the society for the year was 1,14,36,300/- quintals, the excess payment made during the year to its members works out to ₹ 1,36,,06,90,974/- (118.98 x 1,14,36,300/-). Thus, the purchases of the assessee were inflated to the extent of ₹ 1,36,06,90,974/- upon which, the assessee ought to have paid taxes and thereafter distributed it to its members as dividend. The Real Income theory states that the income that was taxable under the Income .....

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