THE COMMISIONER OF INCOME TAX-I vs. DNYANESHWAR SAHAKARI SAKHAR KARKHANA LTD

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TA/36/2010HC BombayHCBM03013103201025 July 2012Author: HON'BLE SHRI JUSTICE B.P. DHARMADHIKARI,HON'BLE SHRI JUSTICE SUNIL P. DESHMUKH3 pages
AI SummaryPartly Allowed

What did the High Court hold?

Regarding Question 'A' concerning the disallowance of the difference between State Advised Price and Statutory Minimum Price paid to farmers, the High Court, by referring to its judgment in Tax Appeal No. 29/2008 and connected appeals, quashed and set aside the orders of the CIT(Appeals) and ITAT. The matter was remitted back to the respective CIT for further directions as contained in paragraph 6 of the aforementioned judgment. This decision is subject to the adjudication of the applicability of Section 40-A(2) of the Act to Cooperative Sugar Factories by the Hon'ble Apex Court and its impact. Regarding Question 'B', concerning the supply of sugar at a concessional rate to sugarcane growers, the High Court answered in the negative, vide its judgment in Tax Appeal No. 99/2008 and connected appeals. The Tax Appeal was accordingly partly allowed.

What were the facts?

The appeal is filed by the Commissioner of Income Tax - I, Pune, against the order of the Income Tax Appellate Tribunal (ITAT). The assessee is Dnyaneshwar Sahakari Sakhar Karkhana Ltd., a cooperative sugar factory. The assessment year(s) are not explicitly stated. The appeal challenges the concurrent setting aside of disallowance made by the Assessing Officer regarding the difference between State Advised Price and Statutory Minimum Price paid to sugarcane farmers. It also challenges the addition to the assessee's income of the difference between market price and concessional price of sugar sold to its sugarcane producer members. The procedural history involves appeals to the CIT(Appeals) and then to the ITAT, whose orders are now under challenge before the High Court.

What were the issues?

The Tribunal had to decide two questions of law: 1. Whether the disallowance of the difference between the State Advised Price and Statutory Minimum Price paid by the assessee cooperative society to sugarcane farmers was correctly set aside by the appellate authorities under the Income Tax Act, 1961, in the facts and circumstances of the case? 2. Whether the difference between the market price of sugar and the price at which a small quantity of sugar was sold by the assessee (a sugar factory) to its sugarcane producer members at a concessional rate, can be added to the income of the assessee under Section 40A of the Income Tax Act, 1961? The appellant (Revenue) contended that the disallowance in question should not have been set aside. The respondent (Assessee) argued that the disallowance was incorrect. Regarding the second issue, the Revenue argued for the addition of the difference in sugar prices to the assessee's income. The Assessee argued against this addition.

Which sections of the Income-tax Act were involved?

Section 40A

AI-generated summary — verify with the full judgment below

(1) Tax Appeal No. 36 of 2010 IN THE HIGH COURT OF JUDICATURE AT BOMBAY, AURANGABAD BENCH, AT AURANGABAD.

Tax Appeal No. 36 of 2010

The Commissioner of Income Tax - I, Aaykar Bhavan, PMT Building, B Wing, Shankar Seth Road, Swargate, Pune 411 037. .. Appellant. versus Dnyaneshwar Sahakari Sakhar Karkhana Ltd., At Post : Dnyaneshwar Factory, Bhende, Taluka : Newasa, Dist. : Ahmednagar. .. Respondent. ....................... Mr. Alok Sharma, Assistant Solicitor General, for the appellant. Mr. R.R. Chandak, Advocate, for the respondent. ........................ CORAM : B.P. DHARMADHIKARI & SUNIL P. DESHMUKH, JJ.

(2) Tax Appeal No. 36 of 2010 Date of reserving the judgment : 9th July 2012. Date of pronouncing the judgment : 25th July 2012. JUDGMENT (Per B.P. Dharmadhikari, J.) : 1. Heard learned ASGI Mr. Alok Sharma for the appellant. 2. In the present Tax Appeal, following two questions are involved. (A) Whether the dis-allowance of difference between State Advised Price & Statutory Minimum Price paid by assessee Cooperative Societies to sugar cane farmers by the Assessing Officer has been correctly set aside concurrently by the Appellate Authorities under the Income Tax Act, 1961 in the facts & circumstances of the case ? (B) Whether the difference between the market price of sale of sugar and price of the sale of a small quantity of sugar made by the assessee ( a sugar factory ) to it's sugarcane producer members at a concessional rate, can be added in the income of an assessee under Section 40A of the Income Tax Act, 1961 ?

(3) Tax Appeal No. 36 of 2010 3. As regards Question "A", the same is answered vide judgment and order dated 10th July 2012, in Tax Appeal No. 29/2008 and connected appeals. We propose to pass same orders. Subject to adjudication of the applicability of S. 40-A(2) of the Act to Cooperative Sugar Factories by the Hon. Apex Court & its impact on these matters, we quash & set aside the orders in appeal passed by the CIT (appeals) & I.T.A.T. impugned in the present Appeal. We remit the matter back to the respective CIT as per directions contained in paragraph 6 of the judgment delivered in Tax Appeal No. 29/2008 and connected appeals. 4. As regards Question "B", relating to supply of sugar at concessional rate to sugarcane growers is concerned, the same is answered in negative vide judgment and order delivered in Tax Appeal No. 99/2008 and connected appeals. Tax Appeal is accordingly partly allowed.

(SUNIL P. DESHMUKH) (B.P. DHARMADHIKARI) JUDGE JUDGE ......................... bgp/36ta

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