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Income Tax Appellate Tribunal, “C” BENCH, PUNE
Before: SHRI R.S.SYAL, VP & SHRI PARTHA SARATHI CHAUDHURY, JM
आदेश / ORDER
PER PARTHA SARATHI CHAUDHURY, JM :
These bunch of appeals preferred by the assessees and the Revenue for the various assessment years mentioned in the caption are directed against the orders of the Ld. Commissioner of Income Tax (Appeals) as per the grounds of appeal on record.
These cases were heard together. Since issues common, facts are similar these cases are being disposed of vide this consolidated order. For the sake of convenience, we would first take up ITA No.959/PUN/2013 and ITA No.988/PUN/2013 for adjudication as lead case.
3 Six SSK Group of cases. A.Ys.2006-07, 2008-09 & 2009-10,
ITA No.959/PUN/2013 ( By Revenue) A.Y. 2009-10
Ground No.1 is general in nature and hence, requires no adjudication.
Ground No. 2 to 5 relates to the “additional payment on account of cane price under Clause 5A of the Sugar Control Order”.
That both the parties herein at the outset submitted that the issue raised in the present set of appeals by the assessee and the Revenue have already considered and adjudicated by the Co-ordinate Bench of the Tribunal, Pune in respect of the other SSK matters ITA No.50/PUN/2012 & Others. That with regard to „Excess Cane Price paid to Sugarcane Suppliers, the Co- ordinate Bench of the Tribunal has held as follows:
“Excess Cane Price Paid to Sugarcane Suppliers 4. The Co-ordinate Bench after considering the judgment of Hon’ble Supreme Court of India in the case of CIT Vs. Tasgaon Taluka S.S.K. Ltd. reported as 103 taxmann.com 57 has decided this issue as under : “5. We have heard both the sides and gone through the relevant material on record. There is consensus ad idem between the rival parties that the issue of payment of excessive price on purchase of sugarcane by the assesses is no more res integra in view of the recent judgment of Hon’ble Supreme Court in CIT Vs. Tasgaon Taluka S.S.K. Ltd. (2019) 103 taxmann.com 57 (SC). The Hon’ble Apex Court, vide its judgment dated 05-03-2019, has elaborately dealt with this issue. It recorded the factual matrix that the assessee in that case purchased and crushed sugarcane and paid price for the purchase during crushing seasons 1996-97 and 1997- 98, firstly, at the time of purchase of sugarcane and then, later, as per the Mantri Committee advice. It further noted that the production of sugar is covered by the Essential Commodities Act, 1955 and the Government issued Sugar Cane (Control) Order, 1966, which deals with all aspects of production of sugarcane and sales thereof including the price to be paid to the cane growers. Clause 3 of the Sugar Cane (Control) Order, 1966 authorizes the Government to fix minimum sugarcane price. In addition, the additional sugarcane price is also payable as per clause 5A of the Control Order, 1966. The AO in that case concluded that the difference between the price paid as per clause 3 of the Control Order, 1966 determined by the Central Government and the price
4 Six SSK Group of cases. A.Ys.2006-07, 2008-09 & 2009-10,
determined by the State Government under clause 5A of the Control Order, 1966, was in the nature of `distribution of profits’ and hence not deductible as expenditure. He, therefore, made an addition for such sum paid to members as well as non-members. When the matter finally came up before the Hon’ble Apex Court, it noted that clause 5A was inserted in the year 1974 on the basis of the recommendations made by the Bhargava Commission, which recommended payment of additional price at the end of the season on 50:50 profit sharing basis between the growers and factories, to be worked out in accordance with the Second Schedule to the Control Order, 1966. Their Lordships noted that at the time when additional purchase price is determined/fixed under clause 5A, the accounts are settled and the particulars are provided by the concerned Co-operative Society as to what will be the expenditure and what will be the profit etc. Considering the fact that Statutory Minimum Price (SMP), determined under clause 3 of the Control Order, 1966, which is paid at the beginning of the season, is deductible in the entirety and the difference between SMP determined under clause 3 and SAP/additional purchase price determined under clause 5A, has an element of distribution of profit which cannot be allowed as deduction, the Hon’ble Supreme Court remitted the matter to the file of the AO for considering the modalities and manner in which SAP/additional purchase price/final price is decided. He has been directed to carry out an exercise of considering accounts/balance sheet and the material supplied to the State Government for the purpose of deciding/fixing the final price/additional purchase price/SAP under clause 5A of the Control Order, 1966 and thereafter determine as to what amount would form part of the distribution of profit and the other as deductible expenditure. The relevant findings of the Hon’ble Apex Court are reproduced as under:- “9.4. ..... Therefore, to the extent of the component of profit which will be a part of the final determination of SAP and/or the final price/additional purchase price fixed under Clause 5A would certainly be and/or said to be an appropriation of profit. However, at the same time, the entire/whole amount of difference between the SMP and the SAP per se cannot be said to be an appropriation of profit. As observed hereinabove, only that part/component of profit, while determining the final price worked out/SAP/additional purchase price would be and/or can be said to be an appropriation of profit and for that an exercise is to be done by the assessing officer by calling upon the assessee to produce the statement of accounts, balance sheet and the material supplied to the State Government for the purpose of deciding/fixing the final price/additional purchase price/SAP under Clause 5A of the Control Order, 1966. Merely because the higher price is paid to both, members and non-members, qua the members, still the question would remain with respect to the distribution of profit/sharing of the profit. So far as the non-members are
5 Six SSK Group of cases. A.Ys.2006-07, 2008-09 & 2009-10,
concerned, the same can be dealt with and/or considered applying Section 40A (2) of the Act, i.e., the assessing officer on the material on record has to determine whether the amount paid is excessive or unreasonable or not........ 9.5 Therefore, the assessing officer will have to take into account the manner in which the business works, the modalities and manner in which SAP/additional purchase price/final price are decided and to determine what amount would form part of the profit and after undertaking such an exercise whatever is the profit component is to be considered as sharing of profit/distribution of profit and the rest of the amount is to be considered as deductible as expenditure.”
Both the sides are unanimously agreeable that the extant issue of deduction for payment of excessive price for purchase of sugarcane, raised in most of the appeals under consideration, is squarely covered by the aforesaid judgment of the Hon’ble Supreme Court. Respectfully following the precedent, we set-aside the impugned orders on this score and remit the matter to the file of the respective A.Os. for deciding it afresh as per law in consonance with the articulation of law by the Hon’ble Supreme Court in the aforenoted judgment. The AO would allow deduction for the price paid under clause 3 of the Sugar Cane (Control) Order, 1966 and then determine the component of distribution of profit embedded in the price paid under clause 5A, by considering the statement of accounts, balance sheet and other relevant material supplied to the State Government for the purpose of deciding/fixing the final price/additional purchase price/SAP under this clause. The amount relatable to the profit component or sharing of profit/distribution of profit paid by the assessee, which would be appropriation of income, will not be allowed as deduction, while the remaining amount, being a charge against the income, will be considered as deductible expenditure. At this stage, it is made clear that the distribution of profits can only be qua the payments made to the members. In so far as the non-members are concerned, the case will be considered afresh by the AO by applying the provisions of section 40A(2) of the Act, as has been held by the Hon’ble Supreme Court supra. Needless to say, the assessee will be allowed a reasonable opportunity of hearing by the AO in such fresh determination of the issue. 7. It is noted that in some of the appeals, the assessees have raised an alternate ground for allowing deduction u/s.80P in respect of the addition.
The ld. ARs, in some of the cases, which were represented by them, were fair enough not to press such ground as it is only an alternate ground and having become infructuous in view of the restoration of the matter to the AO. No argument was advanced in support of such ground in other cases, even where the ld. ARs
6 Six SSK Group of cases. A.Ys.2006-07, 2008-09 & 2009-10,
participated in proceedings before the Tribunal. Therefore, the said alternate ground in all such cases is dismissed.” 5. Thus, in view of the statement made by both the sides that the facts in the present set of appeals are identical, the issue relating to excess sugarcane price paid by the assessee is restored to the file of Assessing Officer with similar directions as above in the case of Majalgaon Sahakari Sakhar Karkhana Ltd. Vs. ACIT (supra). The Assessing Officer shall decide the issue after affording reasonable opportunity of hearing to the respective assessees, in accordance with law.”
Respectfully following the aforesaid decision, the issue is restored to the file of Assessing Officer with similar directions as hereinabove mentioned. Thus, grounds No. 2 to 5 raised in appeal by the Revenue are allowed for statistical purposes.
Ground No.6 is with regard to “confirmation of addition made in the assessment on account of sale of sugar to members and non members”.
We observe that this issue has already been considered and adjudicated by the Co-ordinate Bench of the Tribunal, Pune in respect of the other SSK matters in ITA No.50/PUN/2012 & Others. That with regard to addition made in the assessment on account of sale of sugar to members and non-members, the Co-ordinate Bench of the Tribunal has held as follows:
“Sale of Sugar at Concessional rates to the Members/Shareholders
The Ld. DR submitted that this issue was decided by the Hon’ble Apex Court in the case of CIT Vs. Krishna Sahakari Sakhar Karkhana Limited reported as 27 taxmann.com 162. In the present bunch of appeals where the issue has been raised, either the orders were passed by the Commissioner of Income Tax (Appeals) prior to the date of judgment of Hon’ble Supreme Court of India in the case of CIT Vs. Krishna Sahakari Sakhar Karkhana Limited (supra) i.e. 25-09-2012 and in some cases where the orders have been passed by the Commissioner of Income Tax (Appeals) subsequent to the date of said judgment, the Commissioner of Income Tax (Appeals) has not considered the judgment rendered by the Hon’ble Apex Court on this issue.
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We find that the issue of sale of sugar at concessional rates has also been considered by the Co-ordinate Bench in the case of Majalgaon Sahakari Sakhar Karkhana Ltd. Vs. ACIT (supra) and has held as under : “11. Having heard both the sides and gone through the relevant material on record, it is observed that the AO made addition of the difference between the market price and the concessional price at which sugar (final product) was given to farmers and cane growers. In this regard, it is observed that this issue has been considered by the Hon’ble Supreme Court in the case of CIT Vs. Krishna Sahakari Sakhar Karkhana Limited (2012) 27 taxmann.com 162 (SC). Vide judgment dated 25-09-2012, the Hon’ble Supreme Court noticed that the difference between the average price of sugar sold in the market and the price of sugar sold by the assessee to its members at concessional rate was taxed by the Department under the head “Appropriation of profit”. The Hon’ble Summit Court remitted the matter to the CIT(A) for considering, inter alia,: “whether the abovementioned practice of selling sugar at concessional rate has become the practice or custom in the Co-operative 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 month-to-month basis, apart from others from Diwali?” The issue under consideration can be decided by an appropriate lower authority only on the touchstone of the relevant factors noted in the above judgment. In our considered opinion, it would be just and fair if the impugned orders on this score are set aside and the matter is restored to the file of AOs, instead of to the CITs(A), for fresh consideration as to whether the difference between the average price of sugar sold in the market and that sold to members at concessional rate is appropriation of profit or not, in the light of the directions given by the Hon’ble Supreme Court in the case of Krishna Sahakari Sakhar Karkhana Limited (supra). Restoration to the AO is necessitated because, following the judgment of the Hon’ble Apex Court in the case of Tasgaon Taluka S.S.K. Ltd. (supra), we have remitted the issue of payment of excessive price to the file of AO, and as such, the instant issue cannot be sent to ld. CIT(A) as it would amount to simultaneously sending one part of the same assessment order to the AO and other to the CIT(A), which is not appropriate. We order accordingly.”
Both the sides have stated at the Bar that the issue raised in present set of appeals are identical to the one already decided by the Co-ordinate Bench. Thus, in view of the above order by Co-ordinate Bench this issue is restored back to the file of Assessing Officer for de-novo adjudication in similar terms. The Assessing Officer shall grant reasonable opportunity of hearing to the assessee, in accordance with law.”
8 Six SSK Group of cases. A.Ys.2006-07, 2008-09 & 2009-10,
Respectfully following our earlier order as mentioned hereinabove, this issue is restored to the file of Assessing Officer for de-novo adjudication in similar terms. Thus, ground No.6 raised in appeal by the Revenue is allowed for statistical purposes.
Ground No.7 and 8 deals with “addition made on account of Khodki charges.”
We observe that this issue has already been considered and adjudicated by the Co-ordinate Bench of the Tribunal, Pune in respect of the other SSK matters in ITA No.308/PUN/2018 & Others. That with regard to addition made in the assessment on account of Khodki Charges, the Co-ordinate Bench of the Tribunal has held as follows:
“VII. KHODKI CHARGES
Another issue raised in some of the appeals is against non-granting of deduction towards payment of Khodki charges. On being called upon to justify such deduction, the assessee submitted that this payment was made as per the order of the Director of Sugar. It was further explained that at the time of harvesting, the harvesting labour cut more part of the upper side of the crop and therefore, to compensate loss in weight to the grower, the said Khodki charges were paid to the farmers. The AO was not satisfied with the explanation tendered on behalf of the assessee. He noted that the Commissioner of Sugar, on behalf of Government of Maharashtra, was issuing directions for payment of Khodki charges only on the basis of proposal sent by the respective assessees. The ld. CIT(A) deleted the addition by relying on the judgment of Hon’ble Bombay High Court in CIT Vs. Manjara Shetkari SSK Ltd. and others (2008) 301 ITR 191 (Bom.), against which the Revenue has come up in appeal before the Tribunal.
We have heard both the sides and gone through the relevant material on record. It is seen that Khodki charges were incurred as per the directions of the Director of Sugar to compensate for the farmers’ loss for unevenly cutting of cane sugar at the time of harvesting. This issue came up for consideration before the Special Bench of the Tribunal in DCIT Vs. Manjara Shetkari SSK Ltd. (2004) 85 TTJ (Mum.)(SB) 369, which granted deduction for said expenses. On further appeal by the Revenue to the Hon’ble Bombay High Court, their Lordships in the aforenoted case approved the view taken by the Tribunal allowing deduction for payment of such Khodki charges. The ld. CIT(A) has recorded that the SLP filed by the Department in the case of Jadamba SSK Ltd., on similar issue, has
9 Six SSK Group of cases. A.Ys.2006-07, 2008-09 & 2009-10,
been dismissed by the Hon’ble Supreme Court on 23-03-2009. In view of the fact that Khodki charges have been held as deductible by the Hon’ble jurisdictional High Court and the recent judgment of Hon’ble Supreme Court in Tasgaon Taluka Sahakari Sakhar Karkhana Ltd. (supra) does not cover Khodki charges, we hold that this issue needs to be decided in favour of the assessee.”
Respectfully following the aforesaid findings, this issue needs to be decided in favour of the assessee and against the Revenue. Hence, ground No.7 and 8 raised in Revenue‟s appeal are dismissed.
Ground No.9 and 10 are general in nature and hence, requires no adjudication.
In the result, appeal of the Revenue is partly allowed for statistical purposes.
ITA No.988/PUN/2013 ( By Assessee) A.Y.2009-10
Ground No.A (containing sub-grounds 1 to 7) of the Assessee‟s appeal deals with the disallowance of Sugarcane purchases. Since, this issue is identical to grounds No.2 to 5 of the Revenue‟s appeal (ITA 959/PUN/2013), our decision rendered in Revenue‟s appeal shall apply mutatis-mutandis to this appeal also. Thus, ground No.A (containing sub-grounds 1 to 7) are allowed for statistical purposes.
Ground No.B (containing sub-grounds 1 to 3) of the Assessee‟s appeal deals with “Concession in Sale of Sugar.” Since this issue is identical to ground No.6 of the Revenue‟s appeal (ITA 959/PUN/2013), our decision rendered in Revenue‟s appeal shall apply mutatis-mutandis to this appeal
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also. Thus, ground No.B (containing sub-grounds 1 to 3) are allowed for statistical purposes.
In the result, appeal of the assessee is allowed for statistical purposes.
ITA No.1022/PUN/2013 ( By Revenue) A.Y.2006-07
Grounds No.1 to 3 of the Revenue‟s appeal deals with „Excess Cane Price paid to Sugarcane Suppliers‟. Since this issue is identical to grounds No. 2 to 5 of Revenue‟s appeal (ITA 959/PUN/2013) and we have adjudicated the issue in preceding paragraphs. Following the same, we restore this issue back to the file of Assessing Officer with similar directions as mentioned hereinabove. Thus, ground No.1 to 3 raised by the Revenue are allowed for statistical purposes.
Ground No.4 of the Revenue‟s appeal is with regard to “Sale of sugar at concessional rate.” Since this issue is identical to grounds No. 6 of Revenue‟s appeal (ITA 959/PUN/2013) and we have adjudicated the issue in preceding paragraphs. Following the same, we restore this issue back to the file of Assessing Officer with similar directions as mentioned hereinabove. Thus, ground No.4 raised by the Revenue are allowed for statistical purposes.
Ground No.5 is with regard to “addition made on account of VSI contribution.”
We observe that this issue has already been considered and adjudicated by the Co-ordinate Bench of the Tribunal, Pune in respect of the other SSK matters in ITA No.308/PUN/2018 & Others. That with regard to addition
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made on account of provision for VSI contribution, the Co-ordinate Bench of the Tribunal has held as follows:
“V. PROVISION FOR VASANTDADA SUGAR INSTITUTE (VSI) CONTRIBUTION :
Another issue raised in some of the appeals is against the confirmation of disallowance of contribution to Vasantdada Sugar Institute (VSI). The AO observed that the assessee made provision for Vasantdada Sugar Institute (VSI) contribution and claimed weighted deduction at 125% u/s.35(1)(ii) of the Act. The said amount was not paid to the institute. The same being only in the nature of provision, the AO did not allow deduction u/s.35(1)(ii). The ld. CIT(A) decided this issue in favour of the assessee by following an order passed by the Pune Benches of the Tribunal in the case of Bhima S.S.K. Ltd. (ITA No.1414/PUN/2000).
We have heard both the sides and gone through the relevant material on record. It is found that the ld. CIT(A) has determined this issue in favour of the assessee by following the order passed by the Pune Benches of the Tribunal in the case of Bhima S.S.K. Ltd. (supra). No material has been placed on record to show that this order of the Tribunal has been reversed or modified in any manner by the Hon’ble High Court. Respectfully following the precedent, we decide this issue in favour of the assessee.”
Respectfully following the aforesaid decision, this issue is decided in favour of the assessee and against the Revenue. Thus, ground No.5 raised in appeal by the Revenue is dismissed.
Ground No.6 and 7 are general in nature and hence, requires no adjudication.
In the result, appeal of the Revenue is partly allowed for statistical purposes.
ITA No.1296/PUN/2013 ( By Assessee) A.Y. 2006-07
At the outset, we notice that the present appeal is time barred by 21 days. The assessee has filed an affidavit along with condonation of delay petition. We
12 Six SSK Group of cases. A.Ys.2006-07, 2008-09 & 2009-10,
have gone through the condonation petition as well as the affidavit and have found that reasons specified therein are justified and that the delay cannot be attributed to the deliberate conduct of the assessee neither through intention nor through action. The reasons for delay in filing the appeal late were beyond the control of the assessee and even the Ld. DR stated that he has no objection, if the delay is condoned. In view of the matter, we condone the delay and proceed to hear the appeal on merits.
Ground No.1 is with regard to “Excess cane price paid to sugarcane supplier”. Since this issue is identical to grounds No. 2 to 5 of Revenue‟s appeal (ITA 959/PUN/2013) and we have adjudicated the issue in preceding paragraphs. Following the same, we restore this issue back to the file of Assessing Officer with similar directions as mentioned hereinabove. Thus, ground No.1 raised by assessee the is allowed for statistical purposes.
Ground No.2 is with regard to “sugar sold at concessional rate”. Since this issue is identical to grounds No.6 of Revenue‟s appeal (ITA 959/PUN/2013) and we have adjudicated the issue in preceding paragraphs. Following the same, we restore this issue back to the file of Assessing Officer with similar directions as mentioned hereinabove. Thus, ground No.2 raised by the assessee is allowed for statistical purposes.
In the result, appeal of the assessee is allowed for statistical purposes.
13 Six SSK Group of cases. A.Ys.2006-07, 2008-09 & 2009-10,
ITA No.1023/PUN/2013 ( By Revenue) A.Y. 2008-09
Ground No. 1 to 3 relates to „Excess Cane Price paid to Sugarcane Suppliers‟. Ground No.4 deals with „sale of sugar at concessional rate‟. Ground No.5 is with regard to „provision for VSI provision‟. Ground No.6 and 7 are general in nature.
We observe that Revenue has raised similar and identical grounds in ITA No.1022/PUN/2013. Hence, the decision rendered in ITA No.1022/PUN/2013 would apply mutatis-mutandis in this appeal (ITA No.1023/PUN/2013) also.
In the result, appeal of the Revenue is partly allowed for statistical purposes.
ITA No.1297/PUN/2013 ( By Assessee) A.Y.2008-09
At the outset, we notice that the present appeal is time barred by 21 days. The assessee has filed an affidavit along with condonation of delay petition. We have gone through the condonation petition as well as the affidavit and have found that reasons specified therein are justified and that the delay cannot be attributed to the deliberate conduct of the assessee neither through intention nor through action. The reasons for delay in filing the appeal late were beyond the control of the assessee and even the Ld. DR stated that he has no objection, if the delay is condoned. In view of the matter, we condone the delay and proceed to hear the appeal on merits.
Ground No.2 is with regard to “sugar sold at concessional rate”. Since this issue is identical to grounds No.6 of Revenue‟s appeal (ITA
14 Six SSK Group of cases. A.Ys.2006-07, 2008-09 & 2009-10,
959/PUN/2013) and we have adjudicated the issue in preceding paragraphs. Following the same, we restore this issue back to the file of Assessing Officer with similar directions as mentioned hereinabove. Thus, ground No.2 raised by the assessee is allowed for statistical purposes.
In the result, appeal of the assessee is allowed for statistical purposes.
In the combined result,
ITA No.959/PUN/2013 Partly allowed for statistical purposes. ITA No.988/PUN/2013 Allowed for statistical purposes. ITA No.1022/PUN/2013 Partly allowed for statistical purposes. ITA No.1296/PUN/2013 Allowed for statistical purposes. ITA No.1023/PUN/2013 Partly allowed for statistical purposes. ITA No.1297/PUN/2013 Allowed for statistical purposes.
Order pronounced on 26th day of August, 2019.
Sd/- Sd/- R.S.SYAL PARTHA SARATHI CHAUDHURY VICE PRESIDENT JUDICIAL MEMBER ऩुणे / Pune; ददनाांक / Dated : 26th August, 2019. SB
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आदेश की प्रतिलऱपप अग्रेपिि / Copy of the Order forwarded to : अऩीऱाथी / The Appellant. 1. प्रत्यथी / The Respondent. 2. 3. The CIT(A) concerned 4. The CIT concerned. , आयकर अऩीऱीय अधधकरण, “सी” बेंच, 5. ववभागीय प्रतततनधध ऩुणे / DR, ITAT, “C” Bench, Pune. गार्ड फ़ाइऱ / Guard File. 6.
// True Copy // आदेशानुसार / BY ORDER,
तनजी सधचव / Private Secretary आयकर अऩीऱीय अधधकरण, ऩुणे / ITAT, Pune.
16 Six SSK Group of cases. A.Ys.2006-07, 2008-09 & 2009-10,
Date 1 Draft dictated on 22.08.2019 Sr.PS/PS 2 Draft placed before author 23.08.2019 Sr.PS/PS 3 Draft proposed and placed JM/AM before the second Member 4 Draft discussed/approved by AM/JM second Member 5 Approved draft comes to the Sr.PS/PS Sr. PS/PS 6 Kept for pronouncement on Sr.PS/PS 7 Date of uploading of order Sr.PS/PS 8 File sent to Bench Clerk Sr.PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order