TMI Blog2023 (7) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 1957/PUN/2018 - - - Dated:- 28-6-2023 - Shri Partha Sarathi Chaudhury, Judicial Member And Shri G.D. Padmahshali, Accountant Member For the Assessee : Shri Prasanna L. Joshi, CA For the Revenue : Shri Prakash Mane, DR ORDER PER PARTHA SARATHI CHAUDHURY, JM: This appeal preferred by the assessee emanates from the order of Commissioner of Income Tax (Appeals)-7, Pune, dated 05.09.2018 for A.Y.2014-15 as per the grounds of appeal on record. 2. At the very outset, ld. counsel for the assessee submitted that ground Nos. 2 4 are covered by the judgment of the Hon'ble Supreme Court in the case of CIT Vs. Tasgaon Taluka S.S.K. Ltd . (2019) 103 taxmann.com 57 (SC). 3. Heard both the parties and perused the material available on record. We note that the assessee is in the business of manufacturing and sale of sugar. At the outset both the parties submitted that the issue with respect of disallowance out of sugarcane purchases has already been considered and adjudicated by the Co-ordinate Bench of Tribunal in batch of appeals vide order dated 14-03-2019 out of which the lead case being Majalgaon Sahakari Sakhar Karkhana Ltd. Vs. ACIT in ITA No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re 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 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 and thereafter determine as to what amount would form part of the distribution of profit and the other as deductible expenditure. The relevant findings of the Hon ble Apex Court are reproduced as under:- 9.4. ..... Therefore, to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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. Needless to say, the assessee will be allowed a reasonable opportunity of hearing by the AO in such fresh determination of the issue. 7. It is noted that in some of the appeals, the assessees have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 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 appeals, 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 ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice 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 judgment in A. Raman CO, 67 ITR 11 (SC) was relied upon. However, the CIT(A)s has 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 he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons 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 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; ( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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