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

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ITA/162/1997HC 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 issue of non-refundable deposits and interest on these deposits is squarely covered by the Supreme Court's judgment in Commissioner of Income Tax v. Shri Chhatrapati Sahakari Sakhar Karkhana Ltd. (2004) 270 Income Tax Reports 1, which is an alias judgment of the High Court in Income Tax Appeal No. 9 of 1999. The Supreme Court had distinguished the rules in Maharashtra and Uttar Pradesh. In light of these authorities, the Court found it clear that deductions on account of non-refundable deposits cannot be added to the income. Furthermore, 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. Consequently, 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 application filed by the Revenue (Commissioner of Income Tax, Nashik) against the assessee, Shetkari Sahakari Sakhar Karkhana Ltd. The assessment years are not explicitly stated. The challenge is to the order of the Income Tax Appellate Tribunal (ITAT) which deleted additions made by the Assessing Officer (AO). The additions pertained to non-refundable deposits collected by the assessee from sugarcane growers and interest earned on these deposits. The AO had treated these as trading receipts. The ITAT, relying on a Special Bench decision of the ITAT Pune in the case of Shri Chhatrapati SSK Ltd., deleted these additions, holding them not to be trading receipts, citing Supreme Court decisions in Bazpur Co-op. Sugar Mills Ltd. The procedural history involves the AO's order, the ITAT's decision, and the subsequent reference to the High Court.

What were the issues?

The Tribunal had to decide the following questions of law: 1. Whether the ITAT was right in deleting the additions of Rs. 9,79,365/- on account of non-refundable deposits and Rs. 3,82,500/- on account of interest on these deposits, by holding them as not trading receipts, relying on the Supreme Court decision in Bazpur Co-op. Sugar Mills Ltd. and the ITAT Special Bench decision in Shri Chhatrapati SSK Ltd. (198 ITR 78-AT)? 2. Whether the ITAT was right in holding that an order under Section 154 passed by the AO could not be sustained in view of the Supreme Court's decision in Bazpur Co-op. Sugar Mills Ltd., even though it was passed before the ITAT Special Bench decision in Shri Chhatrapati SSK Ltd.? 3. Whether the ITAT was right in holding the issue to be debatable despite the Supreme Court's decision in Bazpur Co-op. Sugar Mills Ltd.? Assessee's Contentions: The assessee relied on the Supreme Court decision in Bazpur Co-op. Sugar Mills Ltd. and the ITAT Special Bench decision in Shri Chhatrapati SSK Ltd. (198 ITR 78-AT). The judgment does not explicitly record arguments made by the assessee, but their reliance on these authorities is evident. Revenue's Contentions: The Revenue questioned the ITAT's reliance on the Special Bench decision and the Supreme Court decision in Bazpur Co-op. Sugar Mills Ltd. for deleting the additions and for holding the Section 154 order unsustainable. They also questioned the finding that the issue was debatable.

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.162 OF 1997 INCOME TAX APPLICATION NO.162 OF 1997 INCOME TAX APPLICATION NO.162 OF 1997 Commissioner of Income Tax, Nashik ...Applicant V/s. Shetkari Sahakari Sakhar Karkhana Ltd. Killari, Taluka Ausa, Dist.Latur ...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 : HCBM020045161997 Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 06:20:36

: 2 : 1.Non refundable deposits Rs. 9,79,365/- 2.Interest on NRD Rs. 3,82,500/- 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 ?" 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 alias judgment of this Court in Income Tax Appeal No.9 of 1999. The Supreme Court has distinguished the rules in Maharashtra and U.P. In view of these two authorities, it is clear that the deductions on account of Non-refundable deposits cannot be added in the income and provisions for interest on Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 06:20:36

: 3 : Non-refundable Deposits are 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 06:20:36 Powered by TCPDF (www.tcpdf.org)

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