THE COMMISSIONR OF INCOME TAX I PUNE vs. SANGAMNER BHAG SAHAKARI SAKHAR KARKHANA LTD AHMEDNGAR

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ITA/42/2015HC BombayHCBM03001750201118 December 2017Bench: HON'BLE SHRI JUSTICE PRASANNA B. VARALE,HON'BLE SHRI JUSTICE SUNIL K. KOTWAL5 pages
AI SummaryRemanded

What did the High Court hold?

The High Court observed that the second issue concerning the difference between the market price and sale price of sugar sold at a concessional rate had been decided in favour of the assessee by a Division Bench of the High Court in Tax Appeal No. 25 of 2008. However, it was also noted that the Supreme Court had subsequently considered this issue and held that such differences could be added to the income of an assessee. In light of the Supreme Court's judgment in Commissioner of Income Tax, Bombay vs. Krishna Sahakari Sakhar Karkhana Ltd. {(2010) 13 SCC 527}, and a subsequent High Court order in Tax Appeal No. 58 of 2010, the Court found it appropriate to remit the matter back to the Commissioner of Income Tax (Appeals) for fresh consideration. The Court noted that the Supreme Court had kept all questions of law and fact open and allowed the authorities to look into the accounts and verify the basis for the concessional sale of sugar. Therefore, the order of the CIT(A) and the confirmation by the ITAT were quashed and set aside. The matter was remitted back to the CIT(A) for denovo consideration in light of the Apex Court's judgment. The first issue regarding payments in excess of the Statutory Minimum Price was also remitted back for fresh consideration in light of the Supreme Court's observations in Deputy Commissioner of Income Tax vs. Shri Satpuda Tapi Parisar SSK Ltd. and others {(2010) 231 CTS (SC) 224}.

What were the facts?

The appellant, Commissioner of Income Tax, is before the High Court challenging an order that was passed by the Income Tax Appellate Tribunal. The Tribunal had dismissed an appeal filed by the assessee, Sangamner Bhag Sahakari Sakhar Karkhana Ltd., against an order of the Commissioner of Income Tax (Appeals). The CIT(A) had partly allowed the assessee's appeal against an assessment order. The High Court notes that the issues in this appeal are identical to those in a previous case, Tax Appeal No. 13 of 2011, decided by a Division Bench of the same court. The previous case involved two issues: the deductibility of payments made in excess of the Statutory Minimum Price under Sections 40A(2) and 37(1) of the Income Tax Act, 1961, and the addition to income of the difference between market price and sale price of sugar sold to supplier members at a concessional rate under Section 40A(2).

What were the issues?

1. Whether, on the facts and in law, the Tribunal was justified in holding that payments made by the respondent-sugar factory in excess of the Statutory Minimum Price were unreasonable and could not be allowed as a deduction under Sections 40A(2) and 37(1) of the Income Tax Act, 1961? (Question of law and fact) 2. Whether, on the facts and in law, the difference between the market price and the sale price of a small quantity of sugar sold by the respondent-sugar factory to its supplier members at a concessional rate can be added to the income of an assessee under Section 40A(2) of the Income Tax Act, 1961? (Question of law and fact) Assessee's Contentions: The assessee argued that the second issue was covered by a previous Division Bench decision of the High Court in CIT vs. Shetkari Sahakari Sakhar Karkhana Ltd. (Tax Appeal No. 25 of 2008), which was decided in favour of the assessee. Further, the assessee pointed out that the Supreme Court had also considered the issue of the difference in market price and sale price of sugar sold at a concessional rate and held that it could be added to the income of an assessee. The assessee also referred to a High Court decision in Tax Appeal No. 58 of 2010, which, in light of the Supreme Court's judgment, remitted the matter back to the CIT(A) for reconsideration. Revenue's Contentions: No specific contentions were recorded for the revenue on these issues, other than their aggrieved stance leading to the appeal.

Which sections of the Income-tax Act were involved?

Section 40A(2),Section 37(1)

AI-generated summary — verify with the full judgment below

1 Income Tax Appeal 42-2015 IN THE HIGH COURT OF JUDICATURE AT BOMBAY, BENCH AT AURANGABAD INCOME TAX  APPEAL NO. 42 of 2015 The  Commissioner of Income Tax – I, Aaykar Bhavan, PMT Bldg., B Wing, Shankar Seth road, Swargate, Pune ­ 411037         ...APPELLANT VERSUS Sangamner Bhag Sahakari Sakhar Karkhana Ltd., at post Amrutnagar Taluka Sangamner Dist. Ahmednagar. ...RESPONDENT Mr Alok M.Sharma,  Advocate for appellant. Mr V.R. Dhorde, Advocate for respondent. CORAM :  PRASANNA B. VARALE,  AND SUNIL K. KOTWAL, JJ. DATE     :  18th December  2017 ORAL ORDER  : Heard Mr Alok Sharma, learned Counsel appearing for the appellant and Mr V.R. Dhorde, learned Senior Counsel appearing for the respondent/sugar factory, against the order passed by the Assessment Officer seeking demand. 2. An appeal was filed before the Commissioner of Income Tax.  Commissioner, Income Tax, by order dated 30th January 2009 allowed the appeal partly.

2 Income Tax Appeal 42-2015 3. Being   aggrieved   by   the   same,   appeal   was   preferred before the Income Tax Appellate Tribunal, Pune Bench “A”, Pune. The Appellate Tribunal dismissed the appeal. 4. Being aggrieved by the order of the Appellate Tribunal, the appellant is before us. 5. Mr   Alok   Sharma,   learned   Counsel   for   the   appellant, submitted that the issues involved in the present appeal are identical with the issues, which were involved in Tax Appeal No. 13 of 2011, The   Commissioner   of   Income   Tax,   Aurangabad   Vs.   Shetkari Sahakari Sakhar Karkhana Ltd., Latur,   decided by the  Division Bench  of this Court on March 2, 2012.   Mr Sharma invited our attention to the said order of the Division Bench of this Court. Perusal of the order shows that the two issues  call for consideration before this Court, namely, whether on the facts and circumstances of the case   and   in   law,   the   Tribunal   was   justified   in   holding   that   the payments   made   by   the   respondent­sugar   factory   in   excess   of Statutory Minimum Price were unreasonable and cannot be allowed as a deduction in view of the provisions of Section 40A(2) and 37(1) of   the   Income   Tax   Act,   1961.     The   second   issue,   whether   the difference in the market price and the sale price of a small quantity of sugar sold by the respondent­sugar factory to its supplier members at concessional rate, can be added in the income of an assessee under

3 Income Tax Appeal 42-2015 section 40A(2) of the Income Tax Act, 1961.  The Division Bench of this Court in its judgment was pleased to observe that the second issue was already covered by the decision of the Division Bench of this   Court   in  Tax   Appeal   No.   25   of   2008  in   the   matter   of   the Commissioner     of Income Tax Vs. Shetkari Sahakari Sakhar Karkhana Ltd. Dated 10th February 2012.  This Court decided the issue in favour of the assessee and against the revenue. 6. In so far as   the first issue is concerned, the Division Bench of this Court in view of the judgment of the Hon. Apex Court in the   case   of  Deputy   Commissioner   of   Income   Tax   Vs.   Shri Satpuda Tapi Parisar SSK Ltd. and others {(2010) 231 CTS (SC) 224}  remitted the matter back to the Commissioner of Income Tax (Appeals) for deciding it afresh in the light of the observations of the Hon. Apex Court.  Resultantly, the Division Bench in so far as the first issue is concerned, set aside the order and remanded the matter back to the Commissioner of Income Tax for deciding it afresh. 7. Mr.   Alok   Sharma,   learned   Counsel   appearing   for   the appellant, submitted that subsequently,  the second issue, which was covered by the judgment of the Division Bench of this Court, was for the consideration before the Hon. Apex Court.  Thus, he submitted that in bunch of Special Leave Petitions, the Hon. Apex Court also considered the issue of the difference in the market price and sale

4 Income Tax Appeal 42-2015 price   of  small  quantity   of  sugar   sold  by  the  sugar  factory   to  its supplier members at concessional rate and held that it can be added in the income tax of an assessee.  He submitted that in Tax Appeal No.  58 of 2010 the Division Bench of this Court, on the backdrop of the judgment of the Hon. Apex Court dated 25th  September 2012, allowed   the   appeal   and   remitted   the   matter   back   to   the Commissioner of Income Tax (Appeals), Pune, for consideration of the questions set out above, in the light of the judgment of the Hon. Apex Court in the matter of Commissioner of Income Tax, Bombay Vs. Krishna Sahakari Sakhar Karkhana Ltd. {(2010) 13 SCC 527}. Perusal of the order of the Hon. Apex Court dated 25th  September 2012 shows that the Hon. Apex Court considering the questions  and on finding that the issues raised in the proceedings have not been addressed by the Authorities and the Commissioner of Income Tax (Appeals) would be entitled to look into the accounts and verify the basis for sale of sugar at concessional price on month to month basis.  As such, keeping all the questions of law and facts open, the matters  were remitted  back to the  Commissioner  of Income  Tax (Appeals) for denovo consideration. 8. Mr Dhorde, learned Senior Counsel for the respondent, fairly submitted that there cannot be any dispute on the view adopted and taken by the Hon. Apex Court and the Division Bench of this

5 Income Tax Appeal 42-2015 Court in judgment dated March 2, 2012 in  Tax Appeal No. 13 of 2011  as well as in the judgment of the Division Bench of this Court in Tax Appeal No. 58 of 2010 dated 1st February 2013. 9. Resultantly, the appeal deserves to be remitted back to the Commissioner of Income Tax (Appeals), Pune, for considering the issue afresh in view of the judgment of the Hon. Apex Court in the matter  of  Commissioner  of  Income  Tax,  Bombay Vs. Krishna Sahakari Sakhar Karkhana Ltd., (cited supra).   Accordingly, the appeal is allowed. 10. Judgment   and  order  passed  by  the Commissioner  of Income Tax (Appeals), Pune, and   confirmed by the Income Tax Appellate Tribunal, Pune Bench, is quashed and set aside and the matter   is   remitted   back   to   the   Commissioner   of   Income   Tax (Appeals), Pune, for reconsideration, in the light of the judgment of the Apex Court, cited supra. 11. In the facts and circumstances of the case, there shall be no order as to costs. 12. The appeal is disposed of accordingly. ( SUNIL K. KOTWAL ) ( PRASANNA B. VARALE ) JUDGE. JUDGE. Madkar

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