TMI Blog2016 (1) TMI 1391X X X X Extracts X X X X X X X X Extracts X X X X ..... st the order of Commissioner of Income Tax (Appeals)-Kolhapur dated 16-12-2013 for the assessment year 2010-11. 2. The assessee has impugned the order of Commissioner of Income Tax (Appeals) on the following grounds: 1. The Ld. CIT(A) erred in disallowing ₹ 2,41,58,633 paid for Sugarcane Purchases in season 2008-09 ignoring the facts, circumstances and compulsions requiring the appellant to pay farmers a competitive sugarcane price of ₹ 1400/Mt. 2. In the facts and circumstances of the case, the Ld. CIT(A) erred in holding that additional price paid for cane purchases of season 2008-09 was prior period expenditure in financial year 2009-10 and the liability to pay additional did not crystallise in the financial year 2009-2010. 3. In the facts and circumstance of the case, the Ld. CIT(A) erred in help that the expenditure is in excess of price decided earlier which is in nature of appropriation of profits as the amount was decided after close of the financial year. 4. In the facts and circumstances of the case the disallowance of ₹ 2,41,58,633 confirmed by the Ld. CIT(A) be deleted and the Assessing officer be directed to allow the payment made to ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ased up to 10-01-2009 and ₹ 1300/- for sugarcane purchased from 11-01-2009 to March 2009. This price paid by the assessee for procuring sugarcane was below the sugarcane price paid by sugar factories in surrounding area. There was resentment amongst the farmers and they started demanding more prices for the sugarcane supplied by them during the period relevant to the assessment year 2009-10. There was agitation by the farmers and they threatened not to supply sugarcane during the financial year 2009-10 unless the difference in cane rate for the earlier year is settled. To protect the interest of the company, the management decided to compensate the farmers for the sugarcane supplied in the earlier year by fixing the rate at par with the price paid by the other sugar factories in the surrounding area. Accordingly, the rate was fixed at ₹ 1400/- per MT for the purchase of sugarcane in financial year 2009-10. A Board Resolution to this effect was passed on 24-08-2009. A copy of the Board resolution is placed at page 79 of the paper book. Thus, the payment of additional price accrued on the date of decision taken by the management and is accordingly accounted in the year of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. AR further submitted that the Commissioner of Income Tax (Appeals) in the impugned order has given wrong finding of fact that the expenditure has been made in excess of price decided earlier and it is in the nature of appropriation out of profit that the payments have been made after the close of the financial year and closing of books of account on 31-03-2009. 7. We have heard the submissions made by the representatives of rival sides and have perused the orders of the authorities below. We have also considered the decisions on which both the sides have placed reliance. The assessee in appeal has assailed the order of Commissioner of Income Tax (Appeals) in disallowing ₹ 2,41,58,633/- paid towards sugarcane purchase in the season 2008-09. However, we find that the additional amount paid by the assessee for purchase of sugarcane is ₹ 2,33,30,414/-. The Department has not raised any doubt over the payment of such amount. It is an undisputed fact that the assessee has paid additional price to the farmers for purchase of sugarcane for the season 2008-09. It has been stated that the assessee had initially fixed the sugarcane price @ ₹ 1200/- per MT which was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he judgment of Hon'ble Madras High Court in the case of Madras Fertilizers Limited Vs. Commissioner of Income Tax (supra). In the said case the assessee had claimed expenditure towards publicity and promotional expenses incurred during the previous years up to March 31, 1970 while computing the income for the assessment year 1972-73. The Assessing Officer disallowed the same, as the expenditure were incurred prior to April 1, 1970. The Commissioner of Income Tax (Appeals) confirmed the findings of the Assessing Officer. However, the Tribunal accepted the appeal of the assessee and allowed the expenditure. The matter travelled to the Hon'ble High Court. The Hon'ble Court held that where the accounts are kept on mercantile basis, allowance must be granted in the year in which the liability is incurred, irrespective of the question whether the disbursement has been made or not. We find that the issue raised in the said judgment has no relevance in the facts and circumstances of the present case. There is no quarrel over the well settled law that where the books are maintained on mercantile system of accounting, the expenditure is allowed only in the year in which the liabi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee to pay for period January, 2002 to March, 2002 arose and crystallized in August 2002. It is pertinent to mention that CIT(A) had observed that the assessee had shown prior period expense of ₹ 1,34,34,500 against which the prior period income was shown as ₹ 83,21,000 and the net amount of ₹ 51,13,000 had been shown as expenditure in the P L a/c. CIT(A) held that if the assessee has shown prior period income and the AO has not excluded it while working out the current year's taxable income then there was no reason on the part of AO to disallow only one part of the prior period adjustments i.e., the prior period expenditure. 15. Consequently, the addition made by the AO cannot be sustained. In any event, in view of the settled legal position, no substantial question of law arises in the present proceedings. Hence, the present appeal, being bereft of merit, is dismissed but with no order as to costs. 10. Thus, in view of the facts of the case and decision of the Hon'ble Delhi High Court discussed above, we are of the considered view that the amount of ₹ 2,33,30,414/- paid by the assessee towards the additional cost for procurement of sugarcan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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