TMI Blog2020 (12) TMI 1068X X X X Extracts X X X X X X X X Extracts X X X X ..... ffect to the directions of Hon ble Apex Court in proper perspective. The Assessing Officer shall grant reasonable opportunity of hearing to the assessee, in accordance with law. Beneficiary Membership Capital C Class membership capital - HELD THAT:- The issue relates to the C-class membership fee is required to be remanded to the file of the Assessing Officer for fresh adjudication. The Assessing Officer shall grant reasonable opportunity of being heard to the assessee and pass a speaking order. - ITA No. 2054/PUN/2017 - - - Dated:- 22-12-2020 - Shri R.S. Syal, VP And Shri Partha Sarathi Chaudhury, JM For the Assessee : Shri Mihir M. Bapat For the Revenue : Shri S.P. Walimbe ORDER PER PARTHA SARATHI CHAUDHURY, JM: This appeal preferred by the assessee emanates from the order of the Ld. CIT(Appeals)-2, Pune dated 08.05.2017 for the assessment year 2014-15 as per the grounds of appeal on record. 2. Though the assessee has raised multiple grounds of appeal, Ground Nos.1 to 14 pertains to Excess sugarcane price paid to the members non members , Ground No.15 pertains to Sale of Sugar at Concessional rate to members and Ground Nos.16 17 pert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gava Commission for payment of an additional price for sugarcane purchased on or after October 1, 1974 (in addition to the minimum sugarcane price fixed under clause 3) at the end of the sugarcane season on a 50:50 profit-sharing basis between growers and factories, to be worked out in accordance with the Second Schedule to the Order. The additional price is determined under clause 5A at the end of the season. The assessees purchase sugarcane from growers who are their members, as well as from non-members and use the same for manufacturing of sugar. For the purchase of sugarcane, the assessee paid to members and non-members a final price which was in excess of that payable under clause 3 and 5A of the Sugarcane (Control) Order, 1966. The Assessing Officer took a view that the difference between the price paid by the assessees and in terms of clause 3 of the Order, determined by the Central Government, and the price determined by the State Government under clause 5A of the Order (and consequently paid by the assessee to the cane growers) was a distribution of profits and not deductible as expenditure. Alternatively, the Assessing Officer also held that the excess cane price pai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 as non-members. When the matter finally came up before the Hon ble Apex Court, it noted that clause 5A was inserted in the year 1974 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 conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l 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 agreeable that the extant issue of deduction for payment of excessive price for purchase of sugarcane, raised in most of the appeals under 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 (C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basis of Fair and Remunerative Price (FRP). The ld. AR further explained the purpose of fixing FRP and sought directions that the issue relating to payment to cane growers by the assessee towards purchase of sugarcane post October, 2009 should be made independent of the directions in the case of CIT Vs. Tasgaon Taluka S.S.K. Ltd. (supra). The ld. AR contended that in the changed scenario, w.e.f. assessment year 2009-10 it would be difficult to give effect to the decision of Hon ble Apex Court. The ld. AR further pointed that the Co-ordinate Bench of Tribunal in the case of bunch of appeals lead case being Siddheshwar Sahakari Sakhar Karkhana Ltd. Vs. DCIT in ITAT No. 1210/PUN/1997 decided on 01-05-2019 has dealt with this issue. We have considered the submissions of ld. AR, the appeals are restored back to the file of Assessing Officer leaving the question open for consideration and examination by the Assessing Officer. The assessees are at liberty to raise all their contentions before Assessing Officer. 8. Thus, in view of the assertions made by both the sides that the facts in the present set of appeals being identical to the issue relating to excess sugarcane price ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ventually travelled to the Hon ble Supreme Court in the case of Krishna SSK Ltd. (supra). After due consideration, the Hon ble Supreme Court gave certain directions to the Income Tax Authorities and remanded the matter to the file of the CIT(A) for complying with the said directions before taxing any such concessional sugar price to the farmers. The details of these directions are discussed in the succeeding paragraphs of this order. 10. In all these bunch of appals, respective CIT(A) passed their orders after considering the said judgment by the Apex Court. However, while giving effect to the said directions, the CIT(A) failed to comply with the directions strictly. For example, the direction relating to income nature of the said concession in sale price and includibility of the concessional sugar price in the total income of the assessee stands unattended by the CIT(A) while passing the order. The adjudication on this crucial direction is essential. In the absence of the decision of the lower authorities on these crucial issues, it is not possible for the Tribunal to adjudicate the issues under consideration raised by the appellants/department. In the above background, both, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t all accrued to it. In of the some of the submissions to C1T(A), this issue was specifically raised and ratio of Hon ble Supreme Court s judgement in A. Raman CO, 67 ITR 11 (SC) was relied upon. However, the CIT(A)s have not dealt with the same. It has been submitted to the Hon ble ITAT that assessee society has not made secret profits nor has received this difference in price back from the members and as such fictional income which is not received by the assessee cannot be taxed in its hands as held by Hon ble Supreme Court in CIT v. Calcutta Discount Co. Ltd, 91 ITR 8 (SC). b) In some appeals before CIT(A), assessee has relied upon the CBDT Circular No. 117 for the proposition that rebate given by Co-op. Society to its members was not disallowable in Society s hands and therefore the discount given to members in the price of sugar should not be taxed in the hands of the Co-op. Society. In some appeals the CIT(A), after noting the directions in Krishna SSK, has held that relying on the Circular, the said concession given by assessee is not taxable in its hands. c) In most of the appeals, CIT(A)s have held that supplying sugar at a concession price to members and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... then the matter stands concluded and no further findings are required. 7. If however, revenue authorities hold that it is the difference between levy price of sugar plus excise duty (as directed in order dt. 1/3/2006) and the price charged to members / cane suppliers which is to be taxed in the hands of assessee society, they may record their findings and reasons for their decision considering assessee societies contentions that they have not received this difference and hence it is not their income. 8. In the event of aforesaid difference (in 6 or in 7 above) is taxed as income in the hands of the assessee society, the quantity of sugar sold to members / cane growers which is being taxed be specified by the revenue authorities with their findings and reasons for the same. In arriving at the above findings and reasons, as directed by the Hon ble Supreme Court in Krishna SSK, the authorities would be required to consider: (a) impact of custom and trade practice; (b) the State s policy; (c) basis for monthly sales; and (d) sales during Diwali 12. In the light of the above, it is the submissions of AR for the assessee and the ld. DR that all these b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh the contents of para 7 to 7.2 of the order of the CIT(A) as well as para 7 to 7.2 of the assessment order, we find the Assessing Officer erroneously assumed that the same, being collected by the assessee, is of revenue nature. Whereas the assessee holds the same is capital nature. Without deciding the nature of the receipt, the ld. CIT(A) confirmed the addition made by the Assessing Officer. 12. Considering the same, in our view, the said issue is required to be remitted to the file of the Assessing Officer for one more round of adjudication. Accordingly, the Assessing Officer is directed to examine the precedents on this issue and conduct of the assessee in treating the same as capital nature in the earlier/later assessment year. Therefore, we are of the opinion that this issue relates to the C-class membership fee is required to be remanded to the file of the Assessing Officer for fresh adjudication. The Assessing Officer shall grant reasonable opportunity of being heard to the assessee and pass a speaking order. Accordingly, the relevant grounds raised by the assessee on this issue are allowed for statistical purposes. Respectfully, following the same pari ..... X X X X Extracts X X X X X X X X Extracts X X X X
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