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Facts
The assessee, a cooperative society engaged in manufacturing sugar, filed its return declaring a loss. The Assessing Officer (AO) made additions on account of excess sugarcane payment to farmers and sale of sugar at concessional rates. The CIT(A) partly allowed the appeal regarding the sugar sale but restored the excess cane price issue to the AO.
Held
The Tribunal restored both issues (excess cane price and sale of sugar at concessional rate) back to the Assessing Officer for fresh adjudication. For the excess cane price, it directed consideration in light of Section 155(19) of the Income Tax Act. For the sugar sale, it directed the AO to consider specific documents, the State Government's GR, and calculate differences based on levy price instead of market price.
Key Issues
Whether additions made by the AO on account of excess cane price paid to farmers and sale of sugar at concessional rates are justified, and whether the AO correctly calculated the difference based on market price.
Sections Cited
143(3), 154, 40A(2), 155(19)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PUNE BENCH “A”, PUNE
Before: SHRI R. K. PANDA & MS. ASTHA CHANDRA
This appeal filed by the assessee is directed against the order dated 25.10.2024 of the Ld. CIT(A) / NFAC, relating to assessment year 2011-12.
Facts of the case, in brief, are that the assessee is a cooperative society engaged in the business of manufacturing and sale of white sugar, compost and its by-product. The assessee society filed its return of income on 27.09.2011 declaring a net loss of Rs.3,33,44,202/- after claiming set-off of unabsorbed loss. The Assessing Officer vide order u/s 143(3) of the Act completed the assessment for the year under consideration by reducing the loss of the company from Rs.3,33,44,202/- to income of Rs.9,66,93,983/- which was then rectified u/s 154 of the Act by re-assessing the income at Rs.10,35,48,661/-.
Against the order of the Assessing Officer, the assessee filed appeal before CIT(A) and thereafter before the Tribunal. Accordingly, the Tribunal vide order dated 09.09.2019 remitted back the issue to the Assessing Officer with similar direction in the case of Majalgaon Sahakari Sakhar Karkhana Ltd Vs ACIT. Accordingly, the Tribunal has remitted the issue to the file of Assessing Officer after considering the judgement of the Hon'ble Supreme Court of India in the case of CIT, Bombay Vs. Tasgaon Taluka S.S.K. Ltd. in Civil Appeal No.8890 of 2012 dated 05/03/2019 and directed the Assessing Officer to complete the assessment accordingly. In view of the same, the Assessing Officer after considering the submissions of the assessee completed the assessment u/s 143(3) r.w.s 254 on 30.09.2021 by making an addition on account of excess sugarcane payment of Rs.12,62,40,328/- to the farmers during the year and also made an addition of sale of sugar at concessional rate to its members amounting to Rs.37,97,857/- during the year.
So far as the issue relating to excess cane price paid to the members is concerned, the Ld. CIT(A) / NFAC restored the issue to the file of the Assessing Officer for fresh adjudication in the light of the decision of the Tribunal in the case of Krantiagrani Dr G D Bapu Lad Sahakari Sakhar Karkhana Ltd. vs. ACIT vide 68 & 78/PUN/2024, order dated 16.05.2024 and the provisions of section 155(19) of the Income Tax Act, 1961.
So far as the sugar sale at concessional rate is concerned, the Ld. CIT(A) / NFAC partly allowed the claim of the assessee by observing as under: “4.2.5 The above submission of the appellant on this issue has been carefully considered. Accordingly, I am of the considered view that the AO has taken entire quantum of the sugar (9278.00 Quintals) issued on concessional rate to its members for the disallowance u/s. 40A(2) of the Act, instead of the actual excess quantum of sugar issued 1722.80 Quintals (9278.00 (-) 7,555.20) at concessional rate to its members. 4.2.6 In view of the above, the AO is directed to quantify and disallow only the quantum of the excess sale of sugar at concessional rates to its members by applying the prevalent market rate during the relevant FY 2010-11. In this regard, reliance is also placed on the decision of the Honb'le ITAT, Pune in the case of Karmaveer Shankarrao Kale Sahakari Sakhar Karkhana Ltd vide order dated 22.10.2020 for the AY 2014-15. Thus, the grounds of appeal filed by the appellant on this issue is partly allowed.”
Aggrieved with such order of the Ld. CIT(A) / NFAC, the assessee is in appeal before the Tribunal by raising the following grounds:
1. On the fact and in the circumstance of the case and in law of the learned NFAC Commissioner of Income Tax (Appeals) Delhi, has erred in disallowing and adding back an amount of Rs.12,62,40,328/- on account of Excess Cane price paid to members.
2. On the fact and in the circumstance of the case and in law of the learned NFAC Commissioner of Income Tax (Appeals) Delhi, has erred in disallowing and adding back an amount of Rs.37,97,857/- on account of Sugar Sold at concessional rate.
3. The appellant craves for the leave, add, alter, amend, modify and delete any or all the above grounds of appeals before or at the time of the hearing.
The Ld. Counsel for the assessee at the outset filed the following synopsis in respect of both the grounds and submitted that the matter may be restored to the file of the Assessing Officer for fresh adjudication:
“SYNOPSIS Excess Cane Price Paid Prayer:- In Union Budget 2023, Hon. Finance Minister proposed to provide an opportunity to sugar cooperatives to claim payments made to sugarcane farmers for the period prior to the AY 2016-17 as expenditure Accordingly, Section 155(19) inserted in the Income Tax Act, 1961 which is read as follows” (19) Where any deduction in respect of any expenditure incurred for the purchase of sugarcane has been claimed by an assessee, being a co- operative society engaged in the business of manufacture of sugar, and such deduction has been disallowed wholly or portly in any previous year commencing on or before the 1st day of April, 2014, the Assessing Officer shall, on the basis of an application made by such assessee in this regard, recompute the total income of the assessee for such previous year after allowing deduction to the extent such expenditure is incurred at a price which is equal to or less than the price fixed or approved by the Government for that previous year, and the provisions of section 154 shall, so far as may be, apply thereto, and the period of four years specified in sub section (7) of that section shall be reckoned from the end of previous year commencing on the 1st day of April, 2022. Accordingly, Assessee had made Application before AO and the same is pending. Therefore, this issue is required to be set aside to AO for re-examination of facts in light of Section 155(19) of the Income Tax Act, 1961. Sale of Sugar at Concessional Rate Prayer:- Hon. ITAT, A Bench, Pune (Case NO. ITA/2580/PUN/2024 dated 09.09.2019) set aside the case to AO with direction that AO is required to follow all the directives of Hon. Supreme Court which are mentioned below: Directives br. Hon'ble Supreme Conti in Krishna SSK (2017) In light of above, following questions are required to be answered. A- 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 assesse(s) Society, needs to be re-looked by Commissioner of Income Tax (Appeals) (for short, "CIT (A)) B- Apart from the afore-stated question, CIT (A) would take into account
(a) impact of custom and trade practice: whether the above mentioned practice of selling sugar at concessional rate has become the practice or with Co-operative Sugar Industry? (b) The State's policy: whether any Resolution has been passed by the State Government supporting the practice (c) Basis for monthly sales and (d) sales during Diwali” 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 Diwali? In consideration of above, as all the documents required to decide the case are submitted before Hon ITAT Bench. The documents are required to be verified by Assessing Officer in depth so as to come at exact disallowance on account of Sale of Sugar at Concessional Rate. Hon. Bench are kindly requested to set aside the case to AO While doing so, Hon. Bench are requested to give the first & important directive to AO regarding taxability in the hands of cooperative society. AO is required to mention facts and findings by quoting relevant section, rule, etc. about how the transaction is taxable in the hands of cooperative society? And if it is taxable, then at the time of following State Government GR dated 01.03.2006 (Reference - Paper Book - Page 33 to 42), AO is required to calculate the difference between Levy Price and Concessional Price instead of Market Price and Concessional Price. Therefore, this issue is required to be set aside to AO for re-examination of facts in light of directives given by Hon. Supreme Court.”
The Ld. DR submitted that the issue relating to excess cane price has already been restored by the Ld. CIT(A) / NFAC to the file of the Assessing Officer.
So far as the issue of sale of sugar at concessional rate is concerned, he submitted that he has no objection if the matter is restored to the file of the Assessing Officer to verify the various details filed by the assessee and decide the issue in the light of the decision of Hon’ble Supreme Court in the case of Krishna SSK Ltd. (2017).
In view of the above submissions made by both sides and in view of the provisions of section 155(19) of the Act inserted by the Finance Act, 2023 w.e.f. 01.04.2023, we deem it proper to restore the issue of excess cane price paid to the members to the file of the Assessing Officer for fresh adjudication.
So far as the issue of sale of sugar at concessional rate is concerned, we deem it proper to restore the issue to the file of the Assessing Officer with a direction to consider the various documents filed by the assessee and the GR issued by the State Government dt 01.03.2006. The Assessing Officer shall consider the plea of the assessee to calculate the difference between levy price and concessional price instead of market price and concessional price and decide the issue afresh and in accordance with law after providing due opportunity of being heard to the assessee. We hold and direct accordingly. The grounds raised by the assessee are accordingly allowed for statistical purposes.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open Court on 31st July, 2025.