THE COMMISSIONER OF INCOME TAX-I, NASHIK-2 vs. NIPHAD SAHAKARI SAKHAR KARKHANA LTD.

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ITXA/221/2007HC Bombay17 September 2007Bench: HON'BLE SHRI JUSTICE F.I. REBELLO, HON'BLE SHRI JUSTICE J.P. DEVADHAR3 pages
AI SummaryAllowed

What did the High Court hold?

The High Court held that all the questions of law were covered by its previous decision in CIT v. Manjara Shetkari Sahakari Sakhar Karkhana Ltd., which was decided in favour of the assessee. Consequently, all three questions were answered in favour of the assessee and against the revenue. The reasoning would have been that the Manjara Shetkari case likely established that Section 40A(2)(a) is not applicable to co-operative societies in the context of payments to members, and that additional payments over SMP for sugarcane, when made to members, are considered cane price and allowable as business expenditure under Section 37(1), and not a bonus or diversion of profit. The appeal was disposed of accordingly, with no order as to costs.

What were the facts?

The Commissioner of Income-tax-1, Nashik (the Revenue) filed an appeal under Section 260A of the Income Tax Act, 1961, against an order of the Income Tax Appellate Tribunal (ITAT) dated December 2, 2004. The appeal pertains to Assessment Year 1996-97 and concerns the assessee, Niphad Sahakari Sakhar Karkhana Ltd. The dispute involves the allowability of certain payments made by the co-operative society. The High Court admitted the appeal on specific questions of law. Both parties agreed that these questions were covered by a previous decision of the High Court in the case of CIT v. Manjara Shetkari Sahakari Sakhar Karkhana Ltd.

What were the issues?

The Tribunal had to decide three questions of law: 1. Whether Section 40A(2)(a) of the Income Tax Act, 1961, is applicable to a co-operative society. 2. Whether additional payments over the statutory minimum price (SMP) for sugarcane were cane price and thus allowable as business expenditure under Section 37(1), or a diversion of profit. 3. Whether cane price/Khodki charges paid by the assessee constituted "Bonus" under Section 2(4) of the Maharashtra Co-operative Societies Act, 1960, or were allowable as business expenditure. The assessee contended that Section 40A(2)(a) was not applicable to co-operative societies and that the additional payments were indeed cane price, allowable as business expenditure. The revenue argued for the applicability of Section 40A(2)(a) and that the additional payments were a diversion of profit, not deductible business expenditure. Both sides agreed that the matter was covered by the High Court's decision in CIT v. Manjara Shetkari Sahakari Sakhar Karkhana Ltd.

Which sections of the Income-tax Act were involved?

Section 260A,Section 40A(2)(a),Section 37(1),Section 2(4)

AI-generated summary — verify with the full judgment below

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 ORDINARY ORDINARY ORIGINAL CIVIL JURISDICTION ORIGINAL CIVIL JURISDICTION ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.221 OF 2007 INCOME TAX APPEAL NO.221 OF 2007 INCOME TAX APPEAL NO.221 OF 2007 The Commissioner of Income-tax-1, Kendrya Rajaswa Bhawan, 2nd floor, Gadkari Chowk, Old Agra Road, Nashik - 2. ..Appellant. V/s. Niphad Sahakari Sakhar Karkhana Ltd. Bhausaheb Nagar, Tal. Niphad, Dist. Nashik. ..Respondent. Mr.B.M.Chatterjee with Mrs.P.P.Bhosale for appellant. Mr.S.N.Inamdar with A.K.Jasani for respondent. CORAM : F.I.REBELLO CORAM : F.I.REBELLO CORAM : F.I.REBELLO AND AND AND J.P.DEVADHAR, JJ. J.P.DEVADHAR, JJ. J.P.DEVADHAR, JJ. DATED : 17TH SEPTEMBER, 2007. DATED : 17TH SEPTEMBER, 2007. DATED : 17TH SEPTEMBER, 2007.

ORAL JUDGMENT (PER J.P.DEVADHAR, J.) ORAL JUDGMENT (PER J.P.DEVADHAR, J.) ORAL JUDGMENT (PER J.P.DEVADHAR, J.) 1. Matter not on board. The appeal is taken up for admission by consent of parties. 2. This appeal is filed by Commissioner of Income Tax under section 260 A of the Income Tax Act, 1961 against the order of the ITAT dated 2/12/2004 relating to the assessment year 1996-97. 3. Appeal is admitted on the following questions of law:- CNR No : HCBM020109632005 Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 06:02:18

-= : 2 : =- 1. Whether the Appellate Tribunal was right in law in holding that provisions of Section 40A(2) (a) are not applicable to a co-operative Society ? 2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the additional payment over and above the statutory minimum price (SMP) was cane price and not diversion of profit and as such allowable as business expenditure under section 37(1) of the Income Tax Act, 1961 ? 3. Whether on the facts and in the circumstances of the case cane price / Khodki charges paid by the assessee was not "Bonus" within the meaning of 2(4) of the Maharashtra Co-op. Societies Act, 1960 and it was allowable as business expenditure ? 4. Counsel on both the sides agree that the aforesaid questions of law are covered by the decision of this Court in the case of C.I.T. V/s. Manjara Shetkari Sahakari Sakhar Karkhana Ltd. in Income Tax Appeal No.318 of 2007 decided on 14th August, 2007 in favour of the assessee and against the revenue. 5. Accordingly, all the questions are answered in favour of the assessee and against the revenue. 6. Appeal disposed of accordingly with no order as to costs. (F.I.REBELLO, J.) (F.I.REBELLO, J.) (F.I.REBELLO, J.) (J.P.DEVADHAR, J.) (J.P.DEVADHAR, J.) (J.P.DEVADHAR, J.) Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 06:02:18

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