TMI Blog2019 (5) TMI 1776X X X X Extracts X X X X X X X X Extracts X X X X ..... he issue back to the file of Assessing Officer vide its deliberations of order to apply the ratio laid down in CIT Vs. Krishna Sahakari Sakhar Karkhana Ltd. [ 2012 (11) TMI 669 - SUPREME COURT] and determine whether difference between average price of sugar sold in the market and that sold to the Members at concessional rate was the appropriation of profits or not. Following the same parity of reasoning, this issue is also remitted back to the Assessing Officer to decide in line with same directions. Further in some cases, sugar is given at particular quantity, free of cost, as per Government approval, instead of monthly concessional sugar. Such cases are to be decided independent of Krishna S.S.K. Ltd. ratio. The Assessing Officer is directed to take note of the Government approval in this regard, while deciding the issue. Area Development Fund - HELD THAT:- Assessee is entitled to the claim of Area Development Fund and same is to be allowed in the hands of assessee. See LOKNETE BALASAHEB DESAI SAHAKARI SAKHAR KARKHANA LTD. VERSUS DEPUTY COMMISSIONER OF INCOME-TAX [ 2014 (9) TMI 264 - ITAT PUNE] Deduction on account of provision of VSI contribution stands decided in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of Co-operative Sugar Mills. As per the said Circular, it was held that expenses were incurred by Sugar Mills for ensuring an adequate and sustained supply of freshly cut sugarcane, which was an essential input for continuous running of such mills and hence, expenses were for commercial expediency. In view thereof, we hold that H T expenses paid by the assessee are to be allowed as expenditure incurred wholly and exclusively for the purpose of business. Status of assessee to be adopted - assessee had claimed itself to be Cooperative Society and the authorities below have assessed the status as Association of Persons - HELD THAT:- AR pointed out that status to be adopted is Co-operative Society and not AOP. We find merit in the plea of assessee and the said issue raised is thus, allowed. Allowability of cane grant - Allowable business expenditure - HELD THAT:- Assessee claimed the said expenditure as deductible as the same was compensation paid to the cane suppliers for not crushing their cane after cutting and harvesting as per agreement entered into with the aforesaid parties. In view of the settled terms of agreement, the assessee in order to protect its supply of can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PUN/2014, 553/PUN/2014 TO 556/PUN/2014, 897/PUN/2015, 600, 601/PUN/2014, 626 627/PUN/2014, 958 960/PUN/2014, 1225/PUN/2017 1227/PUN/2014, 1230/PUN/2014 TO 1232/PUN/2014, 1073/PUN/2015, 282/PUN/2016, 167/PUN/2013 TO 170/PUN/2013, 1666/PUN/2016, 1090/PUN/2016, 1500/PUN/2016, 1498/PUN/2016, 2192/PUN/2016, 2193/PUN/2016, 1199/PUN/2016, 734/PUN/2016, 1256/PUN/2016, 2496/PUN/2016, 2852/PUN/2016, 2897/PUN/2016, 2768/PUN/2016, 1497/PUN/2012, 1541/PUN/2012 Shri Pandurang SSK Ltd., Karmyogi Shankarraoji Patil SSK Ltd., Vaidyanath SSK Ltd. Versus The Jt. Commissioner of Income Tax, Range-2, Aurangabad The Dy. Commissioner of Income Tax, Circle-1, Jalgaon Versus Bhaurao Chavan SSK Ltd., Chopda Shetkari SSK Ltd., Kumbhi Kasari Sahakari Sakhar Karkhana Ltd., Shri Tatyasaheb Kore Warana Sahakari Sakhar Karkhana Ltd., Shri Chh. Sahu SSK Ltd., Kadwa SSK Ltd., Shri Ashok SSK Ltd. Versus The Income Tax Officer, Ward-3, Ahmednagar Shivajirao NilangekarPatil Sahakari Sakhar Karkhana Ltd., Dyaneshwar SSK Ltd., Sadashivrao Mandlik Kagal Taluka SSK Ltd., Sahkarmahrshi Bhausaheb Thorat SSK Ltd., Satpuda Tapi Parisar SSK Ltd., Shri Vithal SSK Ltd., Shree Rameshwar SSK Ltd., Pd. Dr. Vithalr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... common ground between the parties that following issues need to be adjudicated in the bunch of appeals:- Sr. No. Issue 1 Excess Cane Price 2 Sale of sugar at concessional rates to members 3 Area Development Fund 4 Late deposit of Employees Contribution to PF, ESIC, etc 5 Provision of VSI Contribution 6 Contribution to Chief Minister‟s Fund 7 Khodki Charges 8 Deduction u/s. 80P(2)(d) on Interest and Dividend 4. Shri Pramod Shingte, the learned Authorized Representative pointed out that several issues have arisen relating to different assessee. It was pointed out that the Hon'ble Supreme Court in DCIT Vs. Shri Satpuda Tapi Parisar S.S.K. Ltd. and others (2010) 326 ITR 402 (SC) had directed verification in the hands of assessee as to whether there was any distribution of profits. However, the matter was then referred to large ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 018, relating to assessment year 2013-14, vide consolidated order dated 14.03.2019 have set aside the issue back to the file of Assessing Officer. 7. Smt. Shubhada A Koppa, the learned Counsel for Sidheshwar S.S.K. Ltd. and other bunch of appeals pointed out that the issue of Area Development Fund and its allowability has already been decided by the Pune Bench of Tribunal in bunch of appeals with lead order in Loknete Balasaheb Desai Sahakari Sakhar Karkhana Ltd. Vs. DCIT in ITA Nos.2065 to 2075/PN/2012, relating to assessment years 1991-92 to 2001-02, order dated 28.02.2014 and there was no need to set aside the issue to the file of Assessing Officer. Our attention was drawn to para 18 of the said decision and it was submitted that expenditure is to be allowed as business expenditure‟ in the hands of assessee. 8. Another point which was raised by Smt. Shubhada A Koppa, the learned Counsel that after assessment year 2009-10 the business scenario of payment of Cane Price of sugarcane had undergone change and there was no Statutory Minimum Price (in short SMP‟), but basis was Fair and Remunerative Price (in short FRP‟), which was different from SMP. So, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in favour of assessee as allowed in the hands of other S.S.K. group. 13. Similarly, deduction under section 80P(2)(d) of the Act on interest and dividend merits to be allowed in favour of assessee, as also allowed by the Tribunal in Majalgaon Sahakari Sakhar Karkhana Ltd. Vs. ACIT (supra) vide its deliberations at page 31 of order dated 14.03.2019. 14. Coming to last issue of contribution to Chief Minister‟s Fund, the learned Authorized Representative for the assessee pointed out that the said addition has to be confirmed in the hands of assessee but the matter is to be set aside to the Assessing Officer to allow the deduction under section 80G of the Act, after due verification. 15. Other Authorized Representatives supported the submissions made by these Counsels and took us through individual grounds of appeal raised. 16. It may be pointed out thereafter the cases of each of the assessee were taken up and in some cases, beside the above issues, certain other issues were also raised, which we shall deal with after deciding common issues raised in all the appeals. 17. The learned Departmental Representative for the Revenue fairly admitted that the issues stand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... borately 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. Clause 3 of the Sugar Cane (Control) Order, 1966 authorizes the Government to fix minimum sugarcane price. In addition, the additional sugarcane price is also payable as per clause 5A of the Control Order, 1966. The AO in that case concluded that the difference between the price paid as per clause 3 of the Control Order, 1966 determined by the Central Government and the price determined by the State Government under clause 5A of the Control Order, 1966, was in the nature of `distribution of profits and hence not deductible as expenditure. He, therefore, made an addition for such sum paid to members as well ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 nonmembers, 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 Act, i.e., the assessing officer on the material on record has to determine whether the amount paid is excessive or unreasonable or not........ 9.5 Therefore, the assessing officer will have to take into account the manner in which the business works, the modalities and manner in which SAP/additional purchase price/final price are decided and to determine what amount would form part of the profit and after undertaking such an exercise whatever is the profit component is to be considered as sharing of profit/distribution of profit and the rest of the amount is to be considered as deductible as expenditure. 6. Both the sides are unanimously ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year 2009-10. In such scenario, the Assessing Officer is directed to re-look into the claim of assessee as per amended guidelines issued in this regard and decide the allowability of said expenditure in the hands of S.S.K. group. Since the SMP factor is not the basis for allowing the said expenditure, it would be difficult to calculate the additional purchase price under clause 5A of Control Order, 1966. Accordingly, in the present bunch of appeals, we remit this issue of deductibility of excess cane price to the file of Assessing Officer with necessary directions to apply the ratio laid down by the Hon'ble Supreme Court in the years to which it is so applicable and for the balance years i.e. after the modification of the Rules from assessment year 2009-10, to consider the changed guidelines and decide the same after allowing reasonable opportunity of hearing to the assessee. 23. It is contended by the learned Counsels before us that in addition to the issue before the Hon'ble Supreme Court in respect of excess cane price, there are in some cases, sugarcane was purchased on contracted rates / price out of area of operations. It was pointed out by them that thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emitted the issue back to the file of Assessing Officer; but the issue stands covered by earlier order of Tribunal in Loknete Balasaheb Desai Sahakari Sakhar Karkhana Ltd. Vs. DCIT (supra), which was rendered after issue was remitted by the Apex Court in Siddheshwar Sahakari Sakhar Karkhana Ltd. Vs. CIT reported in 139 taxman 434 (SC). The learned Authorized Representatives stressed that since the issue has been decided by Tribunal itself vide para 18 of the said order, there is no merit in sending the issue back to the file of Assessing Officer. The relevant para 18 reads as under:- 18. Now the question before us is whether this collection made towards ADF by the assessee sugar factory is impressed with the specific obligation or assessee hold this money as a trustee as held in the case of Bijlee Cotton Mills (P.) Ltd. (supra)? Our answer is yes. In this case, even if initially it was by way of discretion the Sugar Co-operative factories were collecting the fund and spending the same on the different projects undertaken in the area of operation but subsequently the collection and use of fund was regulated by the intervention of the Govt. by issuing the order u/s. 79A of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... favour of assessee, we hold that the assessee is entitled to the claim of Area Development Fund and same is to be allowed in the hands of assessee. 30. Similarly, the deduction on account of provision of VSI contribution stands decided in favour of assessee by earlier decision of Tribunal and even in Majalgaon Sahakari Sakhar Karkhana Ltd. Vs. ACIT (supra). The relevant findings are in paras 17 and 18, which read as under:- 17. Another issue raised in some of the appeals is against the confirmation of disallowance of contribution to Vasantdada Sugar Institute (VSI). The AO observed that the assessee made provision for Vasantdada Sugar Institute (VSI) contribution and claimed weighted deduction at 125% u/s.35(1)(ii) of the Act. The said amount was not paid to the institute. The same being only in the nature of provision, the AO did not allow deduction u/s.35(1)(ii). The ld. CIT(A) decided this issue in favour of the assessee by following an order passed by the Pune Benches of the Tribunal in the case of Bhima S.S.K. Ltd. (ITA No.1414/PUN/2000). 18. We have heard both the sides and gone through the relevant material on record. It is found that the ld. CIT(A) has determined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting. This issue came up for consideration before the Special Bench of the Tribunal in DCIT Vs. Manjara Shetkari SSK Ltd. (2004) 85 TTJ (Mum.)(SB) 369, which granted deduction for said expenses. On further appeal by the Revenue to the Hon ble Bombay High Court, their Lordships in the aforenoted case approved the view taken by the Tribunal allowing deduction for payment of such Khodki charges. The ld. CIT(A) has recorded that the SLP filed by the Department in the case of Jadamba SSK Ltd., on similar issue, has been dismissed by the Hon ble Supreme Court on 23-03-2009. In view of the fact that Khodki charges have been held as deductible by the Hon ble jurisdictional High Court and the recent judgment of Hon ble Supreme Court in Tasgaon Taluka Sahakari Sakhar Karkhana Ltd. (supra) does not cover Khodki charges, we hold that this issue needs to be decided in favour of the assessee. 35. Following the same parity of reasoning, we allow this claim of assessee of Khodki charges. 36. Similarly, deduction claimed under section 80P(2)(d) of the Act on account of interest and dividend needs to be allowed in favour of assessee as allowed by the Tribunal in Majalgaon Sahakari Sakhar Kark ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laid down by Hon'ble Supreme Court in CIT v. Alom Extrusions Limited (supra) and the Tribunal in Majalgaon Sahakari Sakhar Karkhana Ltd. Vs. ACIT (supra) vide paras 14 to 16 has directed the Assessing Officer to allow the same. The relevant findings of Tribunal are as under:- 15. We have heard the rival submissions and perused the relevant material on record. It is found that the issue raised herein is no more res integra. The Hon ble Apex Court in the case of CIT v. Alom Extrusions Limited (2009) 319 ITR 306 (SC) has held that the amendment to first proviso and omission of the second proviso to section 43B by the Finance Act, 2003, is retrospective. The Hon ble Delhi High Court in the case of CIT v. Aimil Limited (2010) 321 ITR 508 (Delhi) has allowed deduction in respect of employees share when the amount was paid before the due date. When we consider these two judgments, it is manifested that both the employer s and employees contribution are allowable as deduction if these are deposited albeit belatedly under the respective Acts, but before the due date of filing of return u/s 139(1) of the Act. 16. It is seen as an admitted position that the assessees in such cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view of the settled terms of agreement, the assessee in order to protect its supply of cane, had entered into such an agreement with cane suppliers and the same being incurred during the course of carrying on of its business, is to be allowed as business expenditure. The ground of appeal No.3 raised by assessee is thus, allowed. 43. The grounds of appeal No.4 and 5 are not pressed and hence, the same are dismissed as not pressed. 44. The last issue raised vide ground of appeal No.6 is against addition on account of value of closing molassis in process of ₹ 3,68,850/-. The claim of assessee was that there was neither opening molassis in process nor closing molassis in process. The learned Authorized Representative for the assessee pointed out that molassis, if any, were not valued and the said principle has been followed consistently, whereas the Assessing Officer made the addition in the hands of assessee in the present year. Because of recognized practice which has been consistently followed by the assessee, there is no merit in the orders of authorities below in assessing the value of molassis in process, as closing stock in the hands of assessee. We direct deletion o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in the paras hereinabove, the appeals filed by assessee and Revenue are allowed. ITA No.2768/PUN/2016 53. The issue in ground of appeal No.1a is Excess Cane Price. The said issue has been decided by us in the paras hereinabove and has been set aside to the file of Assessing Officer to follow the guidelines issued by the Apex Court in CIT Vs. Tasgaon Taluka S.S.K. Ltd. and others (supra). Following the same parity of reasoning, this issue is set aside to the file of Assessing Officer. 54. The grounds of appeal No.1b and 1c are not pressed, hence the same are dismissed as not pressed. The ground of appeal No.2 raised by assessee is consequential and hence, the same is dismissed. ITA Nos.1497/PUN/2012 1541/PUN/2012 55. Now, coming to cross appeals in the case of Shri Chhatrapati Sahakari Sakhar Karkhana Ltd., wherein the ground of appeal No.1 in assessee‟s appeal is against deduction on account of Excess Cane Price. We have already set aside the issue to the file of Assessing Officer and following the same parity of reasoning, this issue is set aside to the file of Assessing Officer to decide the same in line with our directions in Sidheshwar Sahakari Sakhar K ..... X X X X Extracts X X X X X X X X Extracts X X X X
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