TMI Blog2020 (12) TMI 1330X X X X Extracts X X X X X X X X Extracts X X X X ..... on ble Apex Court KRISHNA SAHAKARI SAKHAR KARKHANA LTD. [ 2012 (11) TMI 669 - SUPREME COURT] in proper perspective. Beneficiary Membership Capital C Class membership capital - HELD THAT:- As relying on KARMAVEER SHANKARRAO KALE SSK LTD. VERSUS ACIT, AHMEDNAGAR [ 2019 (9) TMI 1475 - ITAT PUNE] we are of the considered view 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. 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. Contribution towards Area Development fund - HELD THAT:- As relying on SHRI SHANKAR SSK LTD [ 2019 (6) TMI 1399 - ITAT PUNE] we are of the considered view that the issue relates to the contribution towards Area Development Fund 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 on this issue. Accordingly, the relevant grounds raised by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns as it may deem fit, by notification in the Official Gazette, from time to time, fix the minimum price of sugarcane to be paid by producers of sugar or their agents for the sugarcane purchased by them. This is the statutory minimum price and no such producer or agent shall purchase or agree to purchase sugarcane, at a price lower than that fixed under clause 3. While fixing the statutory minimum price, the Central Government is required to consider the cost of production of sugarcane, the return to the grower from alternative crops and the general trend of prices of agricultural commodities, the availability of sugar to the consumer at a fair price, the price at which sugar produced from sugarcane is sold by producers of sugar, and, the recovery of sugar from sugarcane. Clause 5A was inserted in the order in the year 1974 on the basis of the recommendations made by the Bhargava 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, vide its judgment dated 05-03-2019, 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. 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 de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation 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 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 determ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground in other cases, even where the ld. ARs participated in proceedings before the Tribunal. Therefore, the said alternate ground in all such cases is dismissed. 6. From the above, it is evident that, following the judgement in the case of Tasgaon Taluka SSK Ltd. (supra), the Tribunal remitted the issue to the file of the Assessing Officer with the direction to determine what constitutes taxable profits and what constitutes an allowable deduction. 7. Shri Prasanna Joshi representing the assessees submitted that in these bunch of appeals there is segment of appeals wherein the ratio laid down by the Hon ble Apex Court in the case of CIT Vs. Tasgaon Taluka S.S.K. Ltd. (supra) does not apply. The ld. AR submitted that the Statutory Minimum Price (SMP) regime came to an end on 22-10-2009. Thereafter, the cane price paid to farmers from Financial Year 2009-10 was on 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. Tas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effect to the directions of the Hon ble Apex Court in the case of CIT vs. Krishna SSK, (2012) 211 taxmann.com 109 (SC) 9. Taxability of sale of sugar at concessional rates to the members/shareholders. The facts relevant to this issue are that the assessees are engaged in the business of purchase of sugarcane, manufacturing of sugar in their mills and are selling sugar to the members and non-members. All these SSK sell sugar at concessional price to the farmers, who are the members of Sahakari Sakhar Karkhana (SSK). These members supply sugarcane to the SSK manufactures. The concessional rate of sugar is lower than the price set by the Government (levy sugar). The said concession i.e. the differences between the levy price set by the Government and the sale price to members, was deemed by the Assessing Officer in the scrutiny assessments as income of the assessee. This issue eventually 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 suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of selling sugar at concessional rate to its members / farmers / cane growers, has become a practice or custom in co-operative sugar industry? c) Whether any resolution has been passed by State Govt. supporting the practice? d) CIT(A) will also consider on what basis the quantity of sugar is sold on month to month basis, apart from Diwali. 4. After above judgement of Hon ble Supreme Court was pronounced, in various appeals decided by different CIT(A)s, they have taken differing approaches, wherein: a) CIT(A)s have not decided the issue that was directed by the Hon ble Supreme Court as to whether difference between market price and concessional price of sugar sold should or should not be added to total income of the assessee society . (emphasis ours) This issue revolves round whether the income sought to be assessed in the hands of the assessee society had at 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 asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bers / cane growers were found acceptable by the Hon ble Court. 5. It is in the above back ground that the concession given in sugar sold by assessee societies to members or cane growers is required to be adjudicated. On perusal of assessment orders and appellate orders of the CIT(A)s it is seen that the very first issue to be decided, i.e. whether difference between market price and concessional price of sugar sold should or should not be added to total income of the assessee society has not been adjudicated by the lower authorities. This issue goes to the root of the matter and it is necessary for the revenue authorities to consider the same, record their findings and reasons for their decision. 6. In the event revenue authorities hold that the difference between market price and concessional price of sugar is not at all to be taxed in the hands of the assessee society, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resh adjudication for the purpose of giving effect to the directions of Hon ble Apex Court in proper perspective. The Assessing Officer shall grant reasonable opportunity of hearing to the assessees, in accordance with law. Thus, Ground Nos.15 to 18 raised in appeal by the assessee is allowed for statistical purposes. Ground Nos.19 20 pertains to Beneficiary Membership Capital C Class membership capital 7. The Ld. AR of the assessee submitted that this issue is covered by the decision of in the case of Karmaveer Shankarrao Kale SSK Ltd. Vs. ACIT, ITA No.1273/PUN/2017 dated 04.09.2019 wherein the Co ordinate Bench of the Tribunal on this issue has held as follows: 11. Regarding the third issue of nature of C-class membership fee, it is the case of the assessee that the fee received by the assessee constitutes a capital receipt and the same is not taxable. After going through 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss of the sugar factory and hence, could not be treated as income of the assessee. Eventually, the Hon ble Supreme Court remitted the matter back for fresh determination. It is noticed that in the appeals under consideration, the ld. CITs(A) have not considered the impact of the judgment of the Hon ble Supreme Court in Siddheshwar Sahakari Sakhar Karkhana Limited (supra) and decided the issue without taking note of the factors directed to be considered in the aforenoted case. In view of the above decision of Hon ble Supreme Court, we set-aside such impugned orders and remit the matter to the file of the respective AOs for deciding the issue afresh in conformity with the guidelines laid down by the Hon ble Apex Court in the above judgment. 30.1 Both sides are unanimous in stating that the issue of disallowance of Area Development Fund in present set of appeals is identical to the one already decided by the Co-ordinate Bench. In the light of directions of Co-ordinate Bench on the issue in hand, the same is restored back to the file of Assessing Officer. The Assessing Officer shall grant reasonable opportunity of hearing to the assessee, in accordance with law. Respectfully ..... 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