P.K.D.N.N. HUTATMA KISAN AHIR SAHAKARI SAKHAR KARKHANA LIMITED,,SANGLI vs. ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE -1,, SANGLI

Assessee by Shri M.K. Kulkarni Revenue by Shri Saradar Singh Meena Date of hearing 17-08-2022 Date of pronouncement 25-08-2022 आदेश / ORDER PER S.S. GODARA, JM : These assessee‟s twin appeals for assessment years 2013-14 and 2015-16 arise against the CIT(A)-1, Kolhapur‟s separate orders dated 26-04-2017 and 17-07-2018 in case Nos. SLI/54/16- 17 and SLI/10235/17-18, respectively, in proceedings under Section 143(3) of the Income Tax Act, 1961, in short „the Act‟

Heard both the parties. Case files perused.

3. The assessee pleads the following identical substantive grounds in both these appeals:- 1) On the facts and in the circumstances of the case and in law the Ld. CIT(A) was not justified in confirming the addition made by the A.O. to the extent of Rs.21,59,81,530/- net of H & T Expenses being sugarcane price paid over and above the FRP as held by the A.O. In view of grounds of appeal raised hereto before the correct position of law in view of Central Govt. Intention in evolving the FRP mechanism no disallowance of Rs.21,59,81,530/- is sustainable. The addition sustained be deleted. 2) On the facts and in the circumstances of the case and in law the Ld. CIT(A) was not justified in sustaining the addition of Rs.2,04,82,209/- with directions made by the A.O. on account of sale of sugar at concessional rates. This is also a part of payment of reasonable margins to the canegrowers/Farmers in consonance with the policy of the Central Government to all out development of the farmers. The addition be deleted. 3) On the facts and in the circumstances of the case and in law the Ld. CIT (A) was not justified in passing the appeal order in the case of this appellant as the similar and identical substantial questions of law are sub-judice before the Larger Bench of the Supreme Court and are going to be heard in the immediate near future. The verdict of the Hon'ble Supreme Court would have put full stop to the ongoing litigation. 4) On the facts and in the circumstances of the case and in law and without prejudice to ground No 1 above and since the verdict of the larger Bench of the Hon'ble Supreme Court is yet to be pronounced then the Hon'ble Jurisdictional High Court judgment in the case of Tasgaon Taluka SSK Ltd. (Supra) remains as a binding precedent till it is set aside by the higher judicial forum i.e. Supreme Court or the law is changed with the retrospective effect. The Ld. CIT(A) ought to have considered this enunciation of law. 5) On the facts and in the circumstances of the case and in law the Ld. CIT(A) failed to properly appreciate the legal position after the replacement of SMP (Statutory Minimum Price) with Fair Remunerative Price (FRP). This change was incorporated to put an end to the extensive exploitation of Farming Community as a whole and one of the important guidelines incorporated was “reasonable margins for the growers of sugarcanes on account of risks and profits." The FRP was not blocked in the straight jacket formula. The reasonable margins change according to situational and market circumstances but it should be fair remunerative price. The farming community should not suffer any losses and that was the crux of the matter. The Ld. CIT(A) failed to appreciate this intention of the Central Government while fixing the FRP. 6) On the facts and in the circumstances of the case and in law the Ld. CIT(A) was not justified in confirming the decision of the A.O. that sugar cane price paid over and above FRP constitutes distribution of profits. The Ld. CIT(A) holding thus negated the recommendations of CASP that the cane growers were entitled to reasonable margins on account of risks and profits. That confirming the view of the A.O. the Ld. CIT(A) has resultantly denied the reasonable margins to the cane growers by denying the expenditure u/s 37(1) to the appellant sugar factory and increased the taxable income of the appellant. It is a discouragement for allowing the reasonable margins to the cane growers. 7) On the facts and in the circumstances of the case and in law the Ld. CIT(A) was not justified in upholding the approach of the A.O. that cane price paid over and above FRP was nothing but distribution of profits reducing the taxable income of the appellant but at the same time ignoring the fact of policy of the Central Government that the payment of reasonable margins to cane growers/Farmers was towards their all out development which could not take place hereto before. It is in opposition to the benevolent policy of the Central Govt. towards the farmers of the Country. It be held accordingly. 8) On the facts and in the circumstances of the case and in law the Ld. CIT(A) when the matters were restored to his file by Hon'ble Supreme Court for fresh consideration of the complicated issues ought to have considered the position of the appellant that by making the addition of cane price paid over and above FRP reduced the operative profits but cannot be said that the appellant does not have the sufficient profit". In that position it cannot be said that the purchase of sugarcane by paying over and above FRP would constitute distribution of profits in order to sustain the addition made by the A.O. The Ld. CIT(A) upheld the disallowance without appreciating the intention of the Govt. in fixing the FRP which was for providing the marginal returns to the farmers. In view of this the Ld. CIT(A) ought not have confirmed the addition made by the A.O. 9) On the facts and in the circumstances of the case and in law the Ld. CIT(A) was not justified in upholding the disallowance made by the A.O. also holding that payment of price of purchase of sugarcane over and above FRP was application of income. It is not correct to say that it was an application of income. It be held accordingly. 10) On the facts and in the circumstances of the case and in law the Ld. CIT(A) was not justified in relying upon the judgment of the Hon'ble Karnataka High Court in Nagarbail Salt Owners Co. Op. Society Ltd. (2016) 68 Taxmann.com 149 (Karnataka)