THE COMMISSIONER OF INCOME TAX-I vs. ASHOK SAHAKARI SAKHAR KARKHANA LTD

JUDGMENT (Per R.M.Borde, J.): 1 Heard Mr.Alok Sharma, Assistant Solicitor General for the appellant.  None appears for the Respondent, though served. 2 Admit. 3 The   Respondent   is   a   society   registered   under   the

{2} ta5810.odt Maharashtra Co­operative Societies Act, 1960. The Society  deals in   manufacturing   and   sell   of   sugar.     The   Co­operative   Society purchases sugarcane both from members and non members.  The Society, during the relevant period, sold sugar at concessional rate to its members and non members.  While passing the assessment order   for   the   assessment   year   2006­2007,   the   Deputy Commissioner   of   Income   Tax,   Ahmednagar   Circle,   Ahmednagar, disallowed the claim in respect of excess purchase price.   At the same   time,   the   Assessment   Officer   directed   that   the   excess sugarcane price worked at Rs.9,86,08,069/­, thus, needs to be added to the income of the assessee.  That, so far as quantity of sugar sold at concessional rate to the members and non members is   concerned,   the   Assessing   Officer   disallowed   the   excess concession given, which is quantified at Rs.56,96,792/­. 4 The   order   passed   by   the   Deputy   Commissioner   of Income Tax, Ahmednagar Circle, Ahmednagar, was subjected to challenge in an appeal preferred to the Commissioner of Income Tax (Appeals), Pune.   The appellate authority allowed the appeal and held that the sugarcane purchase price paid to the members as   well   as   non   members   cannot   be   disallowed   by   invoking provisions of Section 40A (2) and 37(1) of the Income Tax Act, 1961. The appellate authority, thus, directed to delete addition made to the tune of Rs.9,86,08,069/­.  That, so far as the issue of selling the sugar at concessional rate to the members and non members

{3} ta5810.odt is concerned, the appellate authority directed that the addition made to the tune of Rs.56,96,792/­ also deserves to be deleted. 5 consideration in the matter is: Whether   the   payments   made   by   the   Co­operative society   to   its   members   or   non   members   towards purchase price of sugarcane supplied, in excess of the price as  fixed by the Commissioner of Sugar (Registrar of   Co­operative   Societies   representing   the   State)   i.e. State advised price), is liable to be disallowed under

{4} ta5810.odt Section 40A(2) and 37(1) of the Income Tax Act, 1961 and computed as taxable income of the assessee? 8 difference? 10 wherein the Supreme Court has observed thus:

{5} ta5810.odt “The   question   whether   the   above difference between the fair market price and the concessional   price   should   or   should   not   be added to the total income of the assessee (s) Society, needs to be re­looked by Commissioner of Income Tax (Appeals) [for short, ‘CIT (A)’]. Apart from the afore­stated question, CIT (A) would take into account, whether the above­ mentioned   practice   of   selling   sugar   at concessional rate has become the practice or custom   in   the   Co­operative   Sugar   Industry?; and whether any Resolution has been passed by   the   State   Government   supporting   the practice?   The CIT (A) would also consider on what basis the quantity of the final product, i.e. sugar, is being fixed for sale to farmers/cane growers/Members   each   year   on   month­to­ month basis, apart from Diwali? These   are   some   of   the   questions which   have   not   been   addressed   by   the Authorities below in the impugned orders.  The CIT   (A)   would   be   entitled   to   look   into   the Accounts and verify the basis for sale of sugar at concessional price on month­to­month basis. We,   therefore,   keep   all   questions   of   law   and facts open.” 11 {6} ta5810.odt Ltd., decided by the Supreme Court on September 25, 2012. 12 The appeal is, thus, allowed.  The judgment and order passed by the CIT (Appeals), Pune, on 03.02.2009 and confirmed by   the   Income   Tax   Appellate   Tribunal,   Pune   Bench,   Pune,   on 27.10.2009, is quashed and set aside and the matter is remitted back to CIT (Appeals), Pune for consideration of the questions set out above, in the light of the judgments of the Supreme Court, cited supra.   In the facts and circumstances of this case, there shall be no order as to costs.

U.D.SALVI R.M.BORDE JUDGE JUDGE adb/ta5810