COMMISSIONER OF INCOME-TAX AAYKAR BHAWAN, KARNAL vs. KARNAL COOPERATIVE SUGAR MILLS LTD.

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ITA/707/2010HC Punjab & HaryanaPHHC01093670201017 December 2010Author: MR. JUSTICE ADARSH KUMAR GOEL,MR. JUSTICE AJAY KUMAR MITTAL2 pages
AI SummaryRemanded

What did the High Court hold?

The High Court noted that the issues raised in the appeal are covered by the judgment of a Full Bench of the High Court in Budhewal Co-op. Sugar Mills Limited Vs. Commissioner of Income-Tax [2009] 315 ITR 351. The Tribunal had followed this Full Bench decision. Therefore, the appeal was disposed of in the same terms as the Full Bench judgment. The specific findings of the ITAT on the eligibility for deduction under Section 80P(2)(a)(iii) and the departure from its earlier decision were implicitly upheld by following the Full Bench ruling. The operative direction is that the appeal is disposed of in terms of the Full Bench judgment.

What were the facts?

The Revenue has appealed against an order dated 9.10.2009 passed by the Income Tax Appellate Tribunal (ITAT), Delhi Bench (D), Delhi, for the assessment year 1999-2000. The appeal concerns the eligibility of the assessee, Karnal Cooperative Sugar Mills Ltd., for deduction under Section 80P(2)(a)(iii) of the Income Tax Act, 1961. The dispute revolves around whether the manufacturing of sugar from sugarcane by the assessee constitutes the marketing of agricultural produce grown by its members. The ITAT had previously ruled in favor of the assessee in an identical case.

What were the issues?

1. Whether, on the facts and circumstances, the ITAT was justified in holding that the manufacturing of sugar from sugarcane by the assessee society is marketing of agricultural produce grown by its members, making it eligible for deduction under Section 80P(2)(a)(iii) of the Income Tax Act, 1961. This is questioned on the grounds that sugar is a new commercial product and the assessee incurred all expenses and marketed the sugar in its own name, implying it did not belong to the members. (Section 80P(2)(a)(iii)) 2. Whether the ITAT was right in departing from its own earlier decision in an identical case of the same assessee, solely on the basis that the earlier judgment wrongly relied on Section 80P(2)(a)(v) (processing agricultural produce with the aid of power), even though this reference was obiter dicta. (Section 80P(2)(a)(iii)) Assessee's contentions: Not recorded. Revenue's contentions: The manufacturing of sugar results in a new commercial product, and the assessee marketed it in its own name, thus it cannot be said that the sugar belonged to its members. The revenue also argued that the ITAT wrongly departed from its own earlier decision.

Which sections of the Income-tax Act were involved?

Section 80P(2)(a)(iii),Section 260A,Section 80P(2)(a)(v)

AI-generated summary — verify with the full judgment below

Income-tax Appeal No.707

of 2010

-1- **** IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Income-tax Appeal No.707

of 2010

Date of decision: 17.12.2010 The Commissioner of Income-Tax, Karnal ...Appellant Versus Karnal Cooperative Sugar Mills Ltd. ...Respondent CORAM: HON'BLE MR.JUSTICE ADARSH KUMAR GOEL HON'BLE MR.JUSTICE AJAY KUMAR MITTAL Present: Mr. Yogesh Putney, Advocate for the appellant.

**** ADARSH KUMAR GOEL, J (

Oral)

.

1.

This appeal has been preferred by the revenue under Section 260A of the Income Tax Act, 1961 against order dated 9.10.2009 passed by the Income Tax Appellate Tribunal, Delhi Bench (D), Delhi in ITA No.1866/Del/2002, for the assessment year 1999- 2000, proposing following substantial questions of law:- “a). Whether on the facts and circumstances of the case, the ITAT was justified in holding that manufacturing of sugar from sugarcane is marketing of agricultural produce grown by members of assessee society and the assessee society is eligible for deduction u/s 80P(2) (a) (iii) of the I.T.Act, 1961 despite the fact that (a) manufacture of sugar from sugarcane resulted in the emergence of totally new substance, which is a commercial

Income-tax Appeal No.707

of 2010

-2- **** produce and (b) in the manufacturing process, in fact, the assessee incurred all the expenditure on its own and marketed the sugar in its own name and as such it cannot be said that the sugar in its own name and as such it cannot be said that the sugar which was sold by the assessee belonged to its members? b) Whether on the facts and in the circumstances of the case, the ld. ITAT was right in departing from its own decision in this case i.e. identical case of the Karnal Cooperative Sugar Mills ltd. (253 ITR 659) solely on the basis of the fact that the earlier judgment had wrongly based itself on the criteria contained in 80P(2)(a)(v) i.e. processing agriculture produce with the aid of power, despite the fact that reference to this provision was merely an obiter dicta in the earlier judgment and not part of the main criteria on which the judgment had been given in favour of the revenue?”.

2.

It is not disputed that issues raised in the appeal are covered by judgment of Full Bench of this Court in Budhewal Co-op. Sugar Mills Limited Vs. Commissioner of Income-Tax [2009] 315 ITR 351 which has been followed by the Tribunal.

3.

Accordingly, this appeal is disposed of in same terms.

(Adarsh Kumar Goel)

Judge December 17,2010 (Ajay Kumar Mittal) Pka

Judge

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