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

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ITA/151/1997HC 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 in the Reference were fully covered by the Supreme Court's judgment in Commissioner of Income Tax v. Shri Chhatrapati Sahakari Sakhar Karkhana Ltd. (2004) 270 I.T.R. Page 1, which clearly laid down that, in view of the rules in Maharashtra, non-refundable deposits collected by Co-operative Sugar Factories from their members are not trading receipts and are therefore not liable to be added to income. The Court also noted that the matter was covered by this Court's judgment in Income Tax Appeal No.9 of 1999. Consequently, the Court answered both questions of law in the affirmative, in favour of the Assessee and against the Revenue. The operative direction was to answer the questions in favour of the assessee.

What were the facts?

This case involves an Income Tax Reference filed by the Revenue (Commissioner of Income Tax, Nashik) against the assessee, Jai Bhavani Sahakari Sakhar Karkhana Ltd. The dispute concerns assessment year(s) not explicitly stated but implied to be prior to the ITAT's decision. The Revenue is challenging the Income Tax Appellate Tribunal's (ITAT) deletion of non-refundable deposits amounting to Rs. 4,40,695/-. The ITAT had relied on a Special Bench decision of the ITAT, Pune, in the case of Shri Chhatrapati SSK Ltd. The procedural history involves an order passed by the Assessing Officer (AO) under Section 154, which was subsequently considered by the ITAT. The Revenue is seeking the opinion of the High Court on questions of law arising from the ITAT's order.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the ITAT was right in deleting the non-refundable deposits of Rs. 4,40,695/-, holding that these funds/deposits are not trading receipts of the assessee, by relying on the Special Bench of ITAT Pune's decision in Shri Chhatrapati SSK Ltd. and the Supreme Court's decision in Bazpur Co-op. Sugar Mills Ltd. (172 ITR 321 and 177 ITR 469)? (Question of law) Assessee's Contention: The ITAT was correct in deleting the deposits as they are not trading receipts, relying on the Supreme Court's decision in Bazpur Co-op. Sugar Mills Ltd. Revenue's Contention: The ITAT erred by relying on the Special Bench decision and the Supreme Court's ruling, implying these were not applicable or correctly interpreted. 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 AO cannot be sustained in view of the Supreme Court’s decision in Bazpur Co-op. Sugar Mills Ltd., even though the AO's order was passed before the ITAT Special Bench decision in Shri Chhatrapati SSK Ltd.? (Question of law) Assessee's Contention: The AO's order under Section 154 was correctly held unsustainable by the ITAT based on the Supreme Court's decision. Revenue's Contention: The ITAT erred in quashing the Section 154 order, suggesting its validity despite the timing relative to the ITAT Special Bench decision.

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.151 OF 1997 INCOME TAX APPLICATION NO.151 OF 1997 INCOME TAX APPLICATION NO.151 OF 1997 Commissioner of Income Tax, Nashik ...Applicant V/s. Jai Bhavani Sahakari Sakhar Karkhana Ltd. Godhi, Tal.Georai, Dist.Beed ...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 the 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 non refundable deposits of Rs.4,40,695/- by holding that the various funds/deposits are not trading receipt of the assessee as held by the Supreme Court in the case of Bazpur Co-op. Sugar Mills Ltd. reported in 172 ITR 321 and 177 ITR 469 ?" CNR No : HCBM020043161997 Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 06:20:35

: 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?" 2. Heard the learned counsel for both the parties. In Commissioner of Income Tax v. Shri Chhatrapati Sahakari Sakhar Karkhana Ltd.(2004) 270 I.T.R. Page 1, the Supreme Court has clearly laid down that in view of the rules obtained in Maharashtra, Non-refundable Deposits collected by the Co-operative Sugar Factories from their members are not the trading receipts, and therefore, such deposits are not liable to be added in the income. The questions raised in the present Reference are fully covered by the aforesaid Supreme Court judgment as also judgment of this Court in Income Tax Appeal No.9 of 1999. 3. In the result, we answer the questions of law in affirmative, that is, in Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 06:20:35

: 3 : favour of the Assessee and against the Revenue. (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 06:20:35 Powered by TCPDF (www.tcpdf.org)

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