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TMI Blog2019 (10) TMI 141X X X X Extracts X X X X X X X X Extracts X X X X ..... i. Addition on account of sale of sugar at concessional rate to the members/shareholders by the assessees. Apart from the above two primary issues, there is one another issue which is emerging from some of the appeals herein which reads as under: i. Treating Advance Lease rent received as income for the year. 4. The Ld. AR of the assessee and Ld. DR representing the Department submitted at the outset that the issues raised in present set of appeals by the assessee have already been considered and adjudicated by the Co-ordinate Bench of Tribunal in bunch of appeals except the issue on "treating Advance Lease rent received as income for the year". The facts and issues raised in present appeals are similar. The Ld. DR furnished copy of order of Tribunal dated 14-03-2019 vide which bunch of 162 appeals were disposed of by the Co-ordinate Bench, the lead case being Majalgaon Sahakari Sakhar Karkhana Ltd. Vs. ACIT in ITA No. 308/PUN/2018 for the assessment year 2013-14 and also by the order of Tribunal dated 13.06.2019, the lead case being ACIT Vs. Shri Shankar SSK Ltd. in ITA No.382/PUN/2014 for the assessment year 2010-11, copy of which has also been placed on records. 5. After he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 974 on the basis of the recommendations made by the Bhargava Commission, which recommended payment of additional price at the end of the season on 50:50 profit sharing basis between the growers and factories, to be worked out in accordance with the Second Schedule to the Control Order, 1966. Their Lordships noted that at the time when additional purchase price is determined/fixed under clause 5A, the accounts are settled and the particulars are provided by the concerned Co-operative Society as to what will be the expenditure and what will be the profit etc. Considering the fact that Statutory Minimum Price (SMP), determined under clause 3 of the Control Order, 1966, which is paid at the beginning of the season, is deductible in the entirety and the difference between SMP determined under clause 3 and SAP/additional purchase price determined under clause 5A, has an element of distribution of profit which cannot be allowed as deduction, the Hon'ble Supreme Court remitted the matter to the file of the AO for considering the modalities and manner in which SAP/additional purchase price/final price is decided. He has been directed to carry out an exercise of considering accounts/balance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder consideration, is squarely covered by the aforesaid judgment of the Hon'ble Supreme Court. Respectfully following the precedent, 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. At this stage, it is made clear that the distribution of profits can only be qua the payments made to the membe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as under : "11. 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 practice?; The CIT(A) would also consider on what basis the quantity of the final product, i.e. sugar, is being fixed for s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve the annual lease rent at Rs. 829.56 lakhs. The assessee disclosed lease rent during the year at Rs. 414.78 lakhs (for half year) in its books. The case of the Assessing Officer is that there is no clause in the lease deed to provide for any advance lease rentals and in absence of the same, the actual amount received is the income of the assessee. On the other hand, the case of the assessee briefly is that this is an operating lease and the lease being of immovable property was governed by Section 105 of the Transfer of Property Act. The assessee has also submitted the accounting standards of the ICAI with respect to the recognition of lease income wherein it is stated that lease income has to be recognized in a straight line method over the life of the lease. 12. The Ld. CIT(Appeals) had upheld the addition made by the Assessing Officer on this issue as per reasons recorded in his order which is on record. The Ld. CIT(Appeals) has analyzed the lease agreement entered into between the assessee and the lessee, Shree Renuka Sugars and it appears that the addition was upheld by the Ld. CIT(Appeals) mainly on the reason that if the lease agreement is terminated at any point of time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he lease agreement, it is very clear that only in the situation of termination of the lease agreement as result of non-performance by the lessee company of certain essential duties casted upon them as enshrined therein then only the lessor assessee company will have the right to forfeit the advance money. 15. Per contra, the Ld. DR relied on the orders of the Sub-ordinate Authorities. 16. We have perused the case records and heard the rival contentions. We have also analyzed the facts and circumstances in this case. We have also perused the lease agreement and further relevant documents related to this case. The observation of the Ld. CIT(Appeals) is not correct that in the event of termination of lease agreement, the money will be retained by the assessee and therefore it needs to be taxed as income of the assessee. This is so because, first of all the termination of the lease agreement should take place and it takes place since certain important duties which were casted upon the lessee company has not been performed by them. That for non-performance, it is quite possible that some loss or damages may arise to the lessor assessee for which the relevant clause emanates the lessor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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