TMI Blog2019 (9) TMI 730X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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). Disallowance on account of sugar sold to members at concessional price - HELD THAT:- It would be just and fair if the impugned order on this score is set aside and the matter is restored to the file of AO, instead of to the CIT(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, in the light of the directions given by the Hon ble Supreme Court in the case of Krishna Sahakari Sakhar Karkhana Limited [ 2012 (11) TMI 669 - SUPREME COURT] . Restoration to the AO is necessitated because, following the judgment of Tasgaon Taluka S.S.K. Ltd. [ 2019 (3) TMI 321 - SUPREME COURT] we have remitted the issue of payment of excessive price to the file of AO, and as such, the instant issue cannot be sent to CIT(A) as it would amount to simultaneously sending one part of the same assessment ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id both to the members and non-members at ₹ 6,26,25,768 and made addition for the said sum. The ld. CIT(A) restricted the said addition on this score to ₹ 96,54,850/-, against which the assessee has approached the Tribunal. 5. We have heard both the sides and gone through the relevant material on record. The 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) 103 taxmann.com 57 (SC) . The Hon ble Apex Court has elaborately dealt with this issue. It recorded the factual matrix that the assessee in that case purchased and crushed sugarcane and paid price for the purchase during crushing seasons 1996-97 and 1997-98, firstly, at the time of purchase of sugarcane and then, later, as per the Mantri Committee advice. It further noted that the production of sugar is covered by the Essential Commodities Act, 1955 and the Government issued Sugar Cane (Control) Order, 1966, which deals with all aspects of production of sugarcane and sales thereof including the price to be paid to the cane growers. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the component of profit which will be a part of the final determination of SAP and/or the final price/additional purchase price fixed under Clause 5A would certainly be and/or said to be an appropriation of profit. However, at the same time, the entire/whole amount of difference between the SMP and the SAP per se cannot be said to be an appropriation of profit. As observed hereinabove, only that part/component of profit, while determining the final price worked out/SAP/additional purchase price would be and/or can be said to be an appropriation of profit and for that an exercise is to be done by the assessing officer by calling upon the assessee to produce the statement of accounts, balance sheet and the material supplied to the State Government for the purpose of deciding/fixing the final price/additional purchase price/SAP under Clause 5A of the Control Order, 1966. Merely because the higher price is paid to both, members and non-members, qua the members, still the question would remain with respect to the distribution of profit/sharing of the profit. So far as the non-members are concerned, the same can be dealt with and/or considered applying Section 40A (2) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mation of disallowance of ₹ 36,294/- on account of sugar sold to members at concessional price. 9. Having heard both the sides and gone through the relevant material on record, it is observed that the AO made addition of the difference between the market price and the concessional price at which sugar (final product) was given to farmers and cane growers. In this regard, it is observed that this issue has been considered by the Hon ble Supreme Court in the case of CIT Vs. Krishna Sahakari Sakhar Karkhana Limited (2012) 27 taxmann.com 162 (SC). Vide judgment dated 25-09-2012, the Hon ble Supreme Court noticed that 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 Co-operative sugar industry?; and whether any Resolution has been passed by the State Government supporting the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 15- 20 gents and 15-20 ladies with payment to each individual at less than ₹ 3,000/- to ₹ 4,000/- per month. The assessee further submitted that no payment during the year to such individuals exceeded ₹ 50,000/-. It is noted that the Hon ble jurisdictional High Court in the case of CIT Vs. Dwarkadheesh Sakhar Karkhana Ltd. vide its judgment dated 08-01-2018 in ITA No.480/2015 has held that the provisions of section 194C are not attracted in respect of payments made by the assessee, a sakhar karkhana as is the assessee also under consideration, to Mukadams and Transporters. As the assessee made payment to group labourers and such annual payments did not exceed ₹ 50,000/- per individual, which at the material time was the threshold for invocation of section 194C, respectfully following the judgment in the case of CIT Vs. Dwarkadheesh Sakhar Karkhana Ltd. (supra), we hold that the disallowance u/s.40(a)(ia) has been wrongly sustained. We, therefore, order to delete the disallowance. 13. In the result, the appeal is partly allowed. Order pronounced in the Open Court on 16th September, 2019. - - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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