THE COMMISSIONER OF INCOME TAX, NASHIK vs. ASHOK SAH. SAKHAR KARKHANA LTD

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ITA/149/1997HC Bombay05 July 2005Bench: HON'BLE SHRI JUSTICE DR. S. RADHAKRISHNAN, HON'BLE SHRI JUSTICE J.H. BHATIA3 pages
AI SummaryAllowed

What did the High Court hold?

The High Court held that the questions raised were squarely covered by the Supreme Court's judgment in Commissioner of Income Tax v. Shri Chhatrapati Sahakari Sakhar Karkhana Ltd. (2004) 270 ITR 1, as well as by its own court's judgment in Income Tax Appeal No.9 of 1999. The Supreme Court had distinguished the rules applicable in Maharashtra from those in Uttar Pradesh. Consequently, the High Court found that deductions on account of non-refundable deposits are not liable to be added to the income, and provisions for interest on non-refundable deposits are liable to be deducted from the income of the society in view of the rules applicable in Maharashtra. The Court answered all the questions in the affirmative, in favour of the Assessee and against the Revenue. The Reference was disposed of accordingly.

What were the facts?

This case involves a reference from the Income Tax Appellate Tribunal (ITAT) to the Bombay High Court concerning assessment years not explicitly stated. The Revenue (Commissioner of Income Tax, Nashik) is challenging the ITAT's decision to delete additions made to the income of Ashok Sahakari Sakhar Karkhana Ltd. The disputed amounts relate to non-refundable deposits collected from sugarcane growers and the interest earned on these deposits. The ITAT had relied on a Special Bench decision of the ITAT Pune in the case of Shri Chhatrapati SSK Ltd., which in turn was based on Supreme Court judgments concerning similar co-operative sugar mills.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the ITAT was right in deleting additions of Rs. 4,88,164/- (non-refundable deposits) and Rs. 13,96,482/- (interest on NRD) by holding that these were not trading receipts, relying on the Supreme Court's decision in Commissioner of Income Tax v. Bazpur Co-op. Sugar Mills Ltd. (1988) 172 ITR 321 and (1989) 177 ITR 469? 2. Whether, on the facts and in the circumstances of the case, the ITAT was right in law in holding that an order under Section 154 passed by the Assessing Officer could not be sustained in view of the Supreme Court's decision in Bazpur Co-op. Sugar Mills Ltd., even though the order was passed before the ITAT Special Bench decision in Shri Chhatrapati SSK Ltd. was received? 3. Whether, on the facts and in the circumstances of the case, the ITAT was right in holding that the issue was debatable despite the Supreme Court's decision in Bazpur Co-op. Sugar Mills Ltd.? Assessee's Contention: The assessee's case, as reflected in the ITAT's decision, is that the funds collected were not trading receipts and that the interest thereon was deductible, citing Supreme Court and High Court judgments. The ITAT relied on the Special Bench decision in Shri Chhatrapati SSK Ltd. and the Supreme Court decision in Bazpur Co-op. Sugar Mills Ltd. Revenue's Contention: The Revenue argues that the ITAT erred in deleting the additions and in its reasoning regarding the Section 154 order and the debatable nature of the issue.

Which sections of the Income-tax Act were involved?

Section 154

AI-generated summary — verify with the full judgment below

: 1 : IN THE HIGH COURT OF JUDICATURE AT BOMBAY IN THE HIGH COURT OF JUDICATURE AT BOMBAY IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION ORDINARY ORIGINAL CIVIL JURISDICTION ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPLICATION NO.149 OF 1997 INCOME TAX APPLICATION NO.149 OF 1997 INCOME TAX APPLICATION NO.149 OF 1997 Commissioner of Income Tax, Nashik ...Applicant V/s. Ashok Sahakari Sakhar Karkhana Ltd. Ashoknagar, Tal.Shrirampur, Dist.Ahmednagar ...Respondents. Mr.Parag Vyas with A.S.Rao for the Applicant. Mr.Pramod Vaidya for the Respondent. CORAM: S.RADHAKRISHNAN & CORAM: S.RADHAKRISHNAN & CORAM: S.RADHAKRISHNAN & J.H.BHATIA, JJ. J.H.BHATIA, JJ. J.H.BHATIA, JJ. DATE : 5th July, 2005. DATE : 5th July, 2005. DATE : 5th July, 2005. ORAL JUDGMENT: ORAL JUDGMENT: ORAL JUDGMENT: (Per J.H.Bhatia,J.) 1. In this Reference, the Revenue has raised the following questions of law for opinion of this Court. "Whether on the facts and in the circumstances of the case, the ITAT relying on the Special Bench of ITAT Pune’s decision in the case of Shri Chhatrapati SSK Ltd. (198 ITR 78-AT), was right in deleting the following additions by holding that the various funds and deposits collected by the assessee society out of the sugarcane purchase price payable to the cane growers are not trading receipts of the assessee as held by the Supreme Court in the case of Bazpur Co-op.Sugar Mills Ltd. 172 ITR 321 and 177 ITR 469 ?" CNR No : HCBM020043141997 Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 06:20:32

: 2 : 1.Non refundable deposits Rs. 4,88,164/- 2.Interest on NRD Rs. 13,96,482/- 2. "Whether on the facts and in the circumstances of the case, the ITAT was right in law in holding that the order u/s 154 passed by the A.O. in view of the Supreme Court’s decision in the case of Bazpur Co-op. Sugar Mills Ltd. 172 ITR 321 cannot be sustained though the same was passed before the ITAT, Special Bench, Pune’s decision in the case of Shri Chhatrapati SSK Ltd. dated 16/1/1992 was received?" 3."Whether on the facts and in the circumstances of the case, the ITAT was right in holding that the issue involved was debatable inspite of Supreme Court’s decision on the issue in the case of Bazpur Co-op.Sugar Mills Ltd. (172 ITR 321)?" 2. The question of Non-refundable deposits and interest on Non-refundable deposits is squarely covered by the judgment of the Supreme Court in Commissioner of Income n Commissioner of Income n Commissioner of Income Tax v. Shri Chhatrapati Sahakari Sakhar Tax v. Shri Chhatrapati Sahakari Sakhar Tax v. Shri Chhatrapati Sahakari Sakhar Karkhana Ltd. (2004) 270 Karkhana Ltd. (2004) 270 Karkhana Ltd. (2004) 270 Income Tax Reports 1 as also in the judgment of this Court in Income Tax Appeal No.9 of 1999. The Supreme Court has distinguished the rules obtained in Maharashtra and U.P. In view of these two authorities, it is clear that the deductions on account of Non-refundable deposits are not liable to be added in the income and Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 06:20:32

: 3 : provisions for interest on Non-refundable Deposits is liable to be deducted from the income of the Society in view of the rules obtained in Maharashtra. 3. In the result, we answer the questions in affirmative, that is in favour of the Assessee and against the Revenue. Accordingly, the Reference is disposed of. (S.RADHAKRISHNAN,J.) (S.RADHAKRISHNAN,J.) (S.RADHAKRISHNAN,J.) (J.H.BHATIA, J.) (J.H.BHATIA, J.) (J.H.BHATIA, J.) Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 06:20:32 Powered by TCPDF (www.tcpdf.org)

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