TMI Blog2022 (1) TMI 1063X X X X Extracts X X X X X X X X Extracts X X X X ..... ponent 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 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) of the Act, as has been held by the Hon ble Supreme Court supra. Thus the grounds of appeal raised by assessee are restored back to the file of Assessing Officer to decide the issue afresh in accordance with law to follow the decision of coordinate Bench of this Tribunal in the case of Shree Khedut Sahakarai Khand Udyog Mandli Ltd. vs. Income Tax Officer, (s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact of fixation of final/actual cane price with the approval of the State Government and hence, not justified. As per Sr. No. 1 above 3 On the facts and in the circumstances of the case as well in law, both the lower authorities have overlooked to see and appreciate that while computing profits of appellant society, the price to be allowed as a deduction for sugarcane supplied by farmers is the price fixed by its Board of Directors giving reasons for payment of competitive price, being approved/certified by the State Government authorities and hence, the action of the C.I.T.(Appeals) confirming the inferences of the AO to restrict the claim of sugarcane purchase price to the notified Statutory Minimum Price called FRP, which is a support price, is without jurisdiction, perverse, arbitrary, subjective, conjectural, illegal, invalid, bad in law and therefore, liable to be quashed. As per Sr. No.1 above 4 On the facts and circumstances of the case as well in law, the order of the C.I.T.(Appeals) ought to have held that the price of cane (main raw material) purchased ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n by the Supreme Court in CIT Vs. Excel Industries Ltd. - (2013) 358 ITR 295 holding that Revenue must be consistent and not flip-flop on the same issue in different assessment years. As per Sr. No. 1 above. 8 On the facts and in the circumstances of the case as well in law, both the lower authorities have erred in overlooking and summarily rejecting the detailed various submissions made during the course of assessment/appeal proceedings including the Statutory Audit reports of the Govt. Auditors, the Statement of Accounts, audited Balance Sheet and Manufacturing reports, other relevant materials submitted to the State Government for approval of the final cane price, other State s approve cane price, opportunity cost/cost of cultivation to the farmers per supplying sugarcane to the appellant co.operative society as well as strong agitations by farmers demanding higher prices much more than FRP and hence, the order passed by the C.I.T.(Appeals) confirming the action of the AO making disallowance to the extent of ₹ 1,47,21,71,832/- arbitrarily, capriciously and based on lopsided, imaginary and factually incorrect infer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 37 of the Act. The Assessing Officer accordingly made disallowance of ₹ 147.21 crores being the amount paid over and above the SMP. On further appeal, before the Tribunal the order of Assessing Officer was confirmed. However, the Ld. CIT(A) directed the Assessing Officer to recomputed the Fair and Remunerative Price ( FRP for short) on certain formula as per the order of Ministry of Consumer Affairs, Department of Food and Public Distribution. Further, aggrieved the assessee has filed appeal before this Tribunal. Similarly, the Revenue has also filed cross-appeal before us. 4. We have heard the submission of Ld. Authorized Representative (AR) for the assessee and Ld. CIT-Departmental Representative (DR) for the Revenue. The Ld. AR for the assessee submits that the grounds of appeal raised by assessee is covered by the decision of co-ordinate Bench of this Tribunal in the case of Shree Khedut Sahakarai Khand Udyog Mandli Ltd. Vs. ITO for assessment year 2012-13 in ITA No.1206/AHD/2017 reported viz; (2019) 108 taxmann.com 258 (Surat-Trib.) and in the case of Shree Chalthan Vibhag Khand Udyog Sahkari Mandli Ltd. vs. Income Tax Officer, Ward- 1, Bardoli in ITA No.1205/AHD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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, 1966authorizes 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 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. 9. Both the sides are unanimously agreeable that the extent issue of deduction for payment of excessive price for purchase of sugarcane is squarely covered by the aforesaid judgment of the Hon ble Supreme Court. Respectfully following the precedent, we set-aside the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated to the issue before the Assessing Officer and when called for. In the result, appeal of assessee is allowed for statistical purposes in above terms. 8. Considering the fact that we have restored the assessee s main issue to the file of Assessing Officer for afresh adjudication, therefore, the grounds of appeal raised by Revenue in its cross-appeal in ITA No.68/SRT/2020 have become infructuous and dismissed as such. In the result, Revenue s appeal is dismissed as infructuous. ITA No.73/SRT/2020 A.Y. 2013-14 by assessee 9. As noted above, the assessee has raised appeal in identical grounds of appeal except variation of figure which we have restored back to the file of Assessing Officer for the year under consideration, considering the fact that we have already restored the similar grounds of appeal in assessee s appeal ITA No.72/SRT/2020 for assessment year 2012-13, therefore this appeal is also restored to the file of Assessing Officer with similar direction. This appeal of assessee s appeal is allowed for statistical purposes in above terms. 10. In the result, appeals of assessee in ITA No. 72 73/SRT/2020 are allowed for statistical purposes and Revenue s cross ..... X X X X Extracts X X X X X X X X Extracts X X X X
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