BHIMA SAHAKARI SAKHAR KARKHANA LTD,,PUNE vs. DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE - 14,, PUNE

This appeal by the assessee against the order dated 25-04-2018 passed by the Commissioner of Income Tax (Appeals)-7, Pune [‘CIT(A)’] for assessment year 2015-16.

We note that the assessee is a Co-operative Society registered under Maharashtra Co-operative Societies Act, 1960 and engaged in the business of manufacture and sale of sugar and its by-products. The issues raised in this appeal are : i. Disallowance of sale of sugar at concessional rate. ii. VSI Contribution.

Heard both the parties and perused the material available on record. The ld. AR, Shri Hanmant Dhavle and ld. DR, Shri M.G. Jasnani submitted that the issues raised in present appeal have already been considered and adjudicated by the Co-ordinate Bench of Tribunal in batch of appeals vide order dated 14-03-2019 out of which the lead case being Majalgaon Sahakari Sakhar Karkhana Ltd. Vs. ACIT in for the assessment year 2013-14 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.”

In the light of above, we find that the issue raised in present appeal is 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.

The ld. AR drew our attention to Page No. 111 of the paper book and argued that the issue is covered in favour of the assessee. The ld. DR submits that the AO disallowed weighted deduction at 125% u/s. 35(1)(ii) of the Act for non-payment to Vasantdada Sugar Institute (VSI). He submits that it is a provision which can be allowed on actual payment. The assessee did not bring on record that contribution was paid to VSI. Therefore, the claim being in the nature of provision the AO and CIT(A) rightly held the same is not allowable. There was no evidence to show that the contribution to VSI was paid by the assessee before us and the ld. AR reported its inability to produce the same, but placed on record the decision of Hon’ble High Court of Bombay in the case of Jai Ambika Sahakari Sakhar Karkhana Ltd. which held, “even a book entry made by the assessee in its books of accounts as a liability for making contribution to VSI, a research institute, would be covered by section 35(1)(ii) of the Act vide order dated 07-02-2012 in Tax Appeal No. 17 of 2008. The Hon’ble High Court was pleased to uphold the order of Tribunal in holding that the assessee is entitled to claim deduction u/s. 35(1)(ii) of the Act.” Therefore, following the decision of Hon’ble High Court of Bombay, we hold that the assessee is entitled for deduction u/s. 35(1)(ii) of the Act. Thus, the ground raised by the assessee is allowed.

In the result, the appeal of assessee is allowed for statistical purpose.