ECO CANE SUGAR ENERGY LIMITED,KOLHAPUR vs. ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE - 2, KOLHAPUR

आदेश / ORDER आदेश आदेश आदेश

PER R.S.SYAL, VP :

This appeal by the assessee is arising out of order passed by the CIT(A)-2, Kolhapur, dated 01-09-2017 in relation to the A.Y. 2011-12.

Public Limited Company engaged in the business of production of

white crystal sugar. The assessee filed the return declaring loss of

Rs.4.43 crore (rounded off) as against the gross turnover of Rs.61.21

crore (rounded off). The AO observed during the course of

assessment proceedings that the assessee crushed 219106 MT of

sugarcane for the sugar season during the year under consideration.

The sugarcane was purchased @ Rs.1800/- per MT. The AO found

Fair & Remunerative Price (FRP) per MT of sugarcane at Rs.1744.52.

In addition, the assessee incurred sugarcane Harvesting and

Transportation expenses during the year at Rs.10.98 crore and odd,

which translated into a sum of Rs.501.25 per MT. The AO opined

that such amount of Harvesting and Transportation was liable to be

reduced from the FRP. He, therefore, worked out FRP minus

Harvesting and Transportation expenses at Rs.1243.27 per MT. The

difference between the two prices namely, the actual price paid and

FRP (after adjustment of Harvesting and Transportation expenses) of

cane at Rs.55.48/- per MT was multiplied with total quantity of cane

crushed during the year at 219106 per MT to find out the alleged

excess cane price paid by the assessee at Rs.12,16,96,081/-. On

being called upon to explain as to why the excess price be not

disallowed, the assessee submitted that it was following a

transparent procedure for payment of sugarcane purchase price

which was directly going into the bank account of the farmers. The

assessee furnished the details of sugarcane purchases. Not

convinced with the assessee’s submission and relying on an order

by Department of Food and Public Distribution, Ministry of

Consumer Affairs, Food and Public Distribution, the AO made an

addition of Rs.12,16,96,081/-. The Ld. CIT(A) got convinced with the assessee’s contention that the amount of Harvesting and

Transportation expenses incurred by the assessee was eligible for

separate deduction, but he did not accept the actual price as

genuine and went the FRP. That is how, he sustained addition of

Rs.1,21,56,000/- being the difference between FRP at Rs.1744.52

per MT and the actual purchase price of sugarcane at Rs.1800/- per

MT. The assessee is aggrieved by the confirmation of addition of

Rs.1,21,56,000/-.

relevant material on record. It is noted that the ld. CIT(A) reduced

the addition. The ld. Departmental Representative has not brought

to my notice the factum of the Revenue having filed any appeal

against the relief allowed in the first appeal. The only controversy

which, thus, survives is against the difference in cane price paid by

the assessee at Rs.1800/- per MT and FRP of Rs.1744.52 per MT.

The AO held that the assessee ought to have purchased sugarcane

from farmers @ Rs.1744.52 per MT. The assessee submitted that

FRP fixed by the Government is the minimum price and there is no

embargo on paying a higher price to the cane growers. In this

connection, the ld. DR has drawn my attention towards the

Sugarcane (Control) Order 1966, dated 16-07-1966 issued by

Ministry of Agricultural & Irrigation, Department of Food. Para 3 of

such order defines “Fair and Remunerative Price of sugar cane

payable by purchase of sugar cane”. Sub-para 2 of the para No.3

provides that “no person shall sell or agree to sell sugarcane to a

producer of sugar or his agent and no such producer or agent shall

purchase or agree to purchase sugarcane, at a price lower than that

fixed under the sub-clause (1)”. It, ergo, transpires that the FRP fixed under the Sugarcane (Control) Order is the minimum price and

there is no impediment in paying a price higher than the FRP, if

commercial expediency so warrants.

assessee categorically stated before the AO that it was situated in a

remote place, because of which it had to pay a little higher price to

the farmers. Not only this, the amount was going directly to the

bank account of farmers. The assessee furnished payment details of

sugarcane purchased during the period 19-11-2010 to 30-11-2010

and also gave bank-wise list of total sugar cane payments. Thus, it

is crystal clear that though the assessee made purchases of

sugarcane at a price little higher than the FRP, but it was a genuine

payment made for purchase of sugarcane which was going directly

to the bank accounts of the farmers. Despite the submission of

details to the AO, no irregularity has been pointed out from such

details in the assessment or the impugned order. In the given

circumstances, I am satisfied that the assessee made purchases of

sugarcane at a genuine price of Rs.1800/- per MT which ought not

to have been disturbed by the authorities below. I, therefore,

overturn the impugned order and direct to delete the addition of

Rs.1,21,56,000/-.

Order pronounced in the Open Court on 08th November, 2018. Sd/- (R.S.SYAL) उपा�य�/ VICE PRESIDENT उपा�य� उपा�य� उपा�य� पुणे Pune; �दनांक Dated : 08th November, 2018 सतीश

आदेश आदेश क� आदेश आदेश क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order is forwarded to : अ�ेिषत

अपीलाथ� / The Appellant; 1. ��यथ� / The Respondent; 2. आयकर आयु�(अपील) / The CIT (Appeals)-2, Kolhapur 3. आयकर आयु� / The Pr. CIT-2, Kolhapur 4. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे “SMC” / DR 5. ‘SMC’, ITAT, Pune; गाड� फाईल / Guard file. 6.

// True copy // आदेशानुसार आदेशानुसार आदेशानुसार/ BY ORDER, आदेशानुसार

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Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune *