THE COMMISSIONER OF INCOME TAX vs. SHRI VRIDHESHAR SAHAKARI SAKHAR KARKHANA LTD

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TA/2/2011HC BombayHCBM03044099201002 March 2012Author: HON'BLE SHRI JUSTICE S.B.DESHMUKH,HON'BLE SHRI JUSTICE D. G. KARNIK2 pages
AI SummaryRemanded

What did the High Court hold?

The High Court addressed two issues. For the second issue, concerning the addition to income for sugar sold at a concessional rate, the Court held that it was covered by its prior decision in Tax Appeal No. 25 of 2008 (The Commissioner of Income Tax Vs Shetkari Sahakari Sakhar Karkhana Ltd.), wherein the decision was in favour of the assessee and against the revenue. Therefore, the impugned order on this issue was set aside and the matter was remanded to the Commissioner of Income Tax (Appeals) for fresh decision. For the first issue, regarding the deductibility of payments in excess of SMP, the Court noted a similar issue had been decided by the Supreme Court in Deputy Commissioner of Income-Tax Vs. Shri Satpuda Tapi Prarisar SSK Ltd. and others, where the matter was remanded to the Commissioner of Income Tax (Appeals) for a fresh decision. Accordingly, the High Court remanded the first issue to the Commissioner of Income Tax (Appeals) for deciding it afresh in light of the Supreme Court's observations. The operative direction was to remand both issues to the CIT(A).

What were the facts?

This case involves an appeal by the Commissioner of Income Tax (Revenue) against an order of the Income Tax Appellate Tribunal (Tribunal) concerning assessment year(s) not specified. The appeal challenges the Tribunal's decision regarding the deductibility of payments made by the assessee, Shri Vridheshar Sahakari Sakhar Karkhana Ltd. (assessee), a sugar factory, in excess of the Statutory Minimum Price (SMP) for sugarcane. It also concerns the addition to the assessee's income of the difference between market price and sale price for sugar sold to supplier members at a concessional rate. The High Court heard arguments from both sides and noted that issue No. 2 was covered by a previous decision, while issue No. 1 required a fresh consideration.

What were the issues?

The High Court was asked to decide two questions of law: 1. Whether, on the facts and circumstances, the Tribunal was justified in holding that payments made by the respondent sugar factory in excess of the Statutory Minimum Price (SMP) were unreasonable and not deductible under Sections 40A(2) and 37(1) of the Income Tax Act, 1961? 2. Whether 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 the assessee under Section 40A(2) of the Income Tax Act, 1961? Contentions: Assessee: Not recorded. Revenue: Argued that payments exceeding SMP were unreasonable and not deductible, and that the difference in sugar sale price should be added to income under Section 40A(2). The Revenue relied on Sections 40A(2) and 37(1) for the first issue and Section 40A(2) for the second issue.

Which sections of the Income-tax Act were involved?

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

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF JUDICATURE OF BOMBAY BENCH AT AURANGABAD TAX APPEAL NO. 2 OF 2011 THE COMMISSIONER OF INCOME TAX VERSUS SHRI VRIDHESHAR SAHAKARI SAKHAR KARKHANA LTD ASG for Appellant : Shri Alok Sharma AGP for Respondent: Shri Gulab Rajale CORAM : D. G. KARNIK & S. B. DESHMUKH, JJ. Dated: March 02, 2012 PER COURT :- 1. Heard Shri Alok Sharma, learned ASG for the appellant and Shri Rajale, learned Advocate for the respondent. By consent, the appeal is taken up for final disposal. 2. Two issues, which have been pressed by learned ASG Shri Sharma before us are:- "(1) Whether on the facts and circumstances of the case and in law, the Tribunal was justified in holding that the payments made by the respondent - sugar factory in excess of SMP (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 ? (2) Whether the difference in the market price and the sale price of a small quantity of sugar sold by the respondent sugar factory to it's supplier members at concessional rate, can be added in the income of an assessee under Section 40A(2) of the Income Tax Act, 1961 ?". akl

IN THE HIGH COURT OF JUDICATURE OF BOMBAY BENCH AT AURANGABAD

TAX APPEAL NO. 2 OF 2011 3. So far as the issue No.2 is concerned, it is covered by our decision in Tax Appeal No.25 of 2008 (The Commissioner of Income Tax Vs Shetkari Sahakari Sakhar Karkhana Ltd.) dated 10.2.2012, wherein, we have held in favour of an assessee and against the revenue. 4. So far as the first issue is concerned, similar issue has been decided by the Supreme Court in the case of Deputy Commissioner of Income-Tax Vs. Shri Satpuda Tapi Prarisar SSK Ltd. and others [(2010) 231 CTS (SC) 224], wherein, the Supreme Court has remanded the matter back to the Commissioner of Income Tax (Appeals) for deciding it afresh in the light of the observations of the Supreme Court. In view thereof, it would be appropriate to remand the matter to Commissioner of Income Tax (Appeals) for deciding it afresh in the light of the observations of the Supreme Court in the case of Deputy Commissioner of Income-Tax Vs. Shri Satpuda Tapi Prarisar SSK Ltd. and others (supra).

5.

In the result, so far issue No.2 is concerned, the impugned order is set aside and the matter is remanded back to the Commissioner of Income Tax (Appeals) for deciding it afresh in the light of the decision of the Supreme Court in the case of Deputy Commissioner of Income-Tax Vs. Shri Satpuda Tapi Prarisar SSK

Ltd.

and

others (supra). ( S. B. DESHMUKH, J. ) ( D. G. KARNIK, J. ) akl

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