Ganpati Zilla Krishi Audyogik Sarv Seva Sahakari Society Ltd,, Sangli v. Assistant Commissioner of Income-tax, Circle - 1,, Sangli

ITA 581/PUN/2018 | 2012-2013
Pronouncement Date: 24-05-2021 | Result: Allowed

Appeal Details

RSA Number 58124514 RSA 2018
Assessee PAN AAAAS3624B
Bench Pune
Appeal Number ITA 581/PUN/2018
Duration Of Justice 3 year(s) 1 month(s) 22 day(s)
Appellant Ganpati Zilla Krishi Audyogik Sarv Seva Sahakari Society Ltd,, Sangli
Respondent Assistant Commissioner of Income-tax, Circle - 1,, Sangli
Appeal Type Income Tax Appeal
Pronouncement Date 24-05-2021
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 24-05-2021
Date Of Final Hearing 18-05-2021
Next Hearing Date 18-05-2021
Last Hearing Date 06-04-2021
First Hearing Date 06-04-2021
Assessment Year 2012-2013
Appeal Filed On 02-04-2018
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B PUNE VIRTUAL COURT BEFORE SHRI R.S. SYAL VICE PRESIDENT AND SHRI S.S.VISWANETHRA RAVI JUDICIAL MEMBER . / ITA NO S . 579 TO 582 /PUN/201 8 / ASSESSMENT YEAR S : 201 0 - 1 1 TO 201 3 - 14 SHRI GANPATI ZILLA KRISHI AUDYOGIK SAR SEVA SAHAKARI SOCIETY LTD. PLOT NO.350 VASANT MARKET YARD DIST. SANGLI PAN : AA AAS3624B VS. ITO WARD 1( 3 ) SANGLI (APPELLANT) (RESPONDENT) / ORDER TH ESE FOUR APPEAL S BY THE ASSESSEE ARISE OUT OF TWO ORDER S PASSED BY THE CIT(A) - 1 KOLHAPUR ON 14 - 0 9 - 201 7 AND 09 - 02 - 2017 FIRST IN RELATION TO THE ASSESSMENT YEAR S 2010 - 11 & 2011 - 12 AND SECOND IN RELATION TO ASSESSMENT YEARS 2012 - 13 & 2013 - 14 . SINCE COMMON ISSUE IS RAISED IN THESE APPEALS WE THEREFORE PROCEEDING TO DISPOSE THEM OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE . APPELLANT BY SHRI M.K. KULKARNI RESPONDENT BY SHRI DEEPAK GARG DATE OF HEARING 18 - 05 - 20 21 DATE OF PRONOUNCEMENT 24 - 05 - 20 2 1 ITA NO S . 579 TO 582 /PUN/201 8 GANPATI ZILLA KRISHI AUDHOGIK SSS LTD. 2 2. THE ASSESSEE IS A CO - OPERATIVE SOCIETY ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF SUGAR AN D ITS BY - PRODUCTS. ALL THE APPEALS ROTATE AROUND THE CONFIRMATION OF ADDITION ON ACCOUNT OF EXCESSIVE CANE PRICE PAID TO THE MEMBERS/NON - MEMBERS. 3. WE HAVE HEARD BOTH THE SIDES THROUGH VIRTUAL COURT AND GONE THROUGH THE RELEVANT MATERIAL ON RECORD . IT IS SEEN THAT SIMILAR ISSUE CAME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN A BATCH OF 75 APPEALS LED BY MANGANGA SAHAKARI SAKHAR KARKHANA LTD. VS. ACIT IN ITA NO.344/PUN/2017 AND OTHERS. VIDE ORDER DATED 01 - 10 - 2019 THE TRIBUNAL HELD ON THIS ISSUE AS UNDER : 4. A COMMON ISSUE INVOLVED IN ALMOST ALL THE APPEALS IS AGAINST THE ADDITION MADE BY THE ASSESSING OFFICER (AO) TOWARDS OF EXCESSIVE SUGARCANE PRICE PAID TO MEMBERS AS WELL AS NON - MEMBERS OF THE RESPECTIVE ASSESSEES. THE FACTS COMMON TO ALMOST A LL THE APPEALS ARE THAT THE ASSESSES ARE ENGAGED IN THE BUSINESS OF MANUFACTURING OF WHITE SUGAR. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO OBSERVED THAT THE ASSESSEE PAID EXCESSIVE CANE PRICE OVER AND ABOVE THE FAIR AND REMUNERATIVE PRICE (FR P) FIXED BY THE GOVERNMENT TO ITS MEMBERS AS WELL AS NON - MEMBERS. ON BEING CALLED UPON TO JUSTIFY SUCH DEDUCTION THE ASSESSEE GAVE CERTAIN EXPLANATION BY SUBMITTING THAT SUCH PAYMENT WAS SOLELY AND EXCLUSIVELY IN CONNECTION WITH THE BUSINESS AND THE ENT IRE AMOUNT WAS DEDUCTIBLE U/S.37(1) OF THE INCOME - TAX ACT 1961 (HEREINAFTER ALSO CALLED `THE ACT). RELYING ON THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF DCIT VS. SHRI SATPUDA TAPI PARISAR S.S.K. LTD. AND OTHERS (2010) 326 ITR 402 THE AO OPIN ED THAT THE EXCESSIVE PRICE PAID WAS IN THE NATURE OF `DISTRIBUTION OF PROFITS AND HENCE NOT DEDUCTIBLE. THIS IS HOW HE COMPUTED THE EXCESSIVE CANE PRICE PAID BOTH TO THE MEMBERS AND NON - MEMBERS AND MADE ADDITION FOR THE SAID SUM. THE LD. CIT(A) IN SOM E CASES DELETED THE ADDITION FULLY OR PARTLY WHILST IN OTHERS THE ADDITION GOT SUSTAINED. THIS LED TO FILING OF THE CROSS APPEALS BOTH BY THE ASSESSEE AS WELL AS THE REVENUE BEFORE THE TRIBUNAL. ITA NO S . 579 TO 582 /PUN/201 8 GANPATI ZILLA KRISHI AUDHOGIK SSS LTD. 3 5. WE HAVE HEARD BOTH THE SIDES AND GONE THROUGH THE REL EVANT 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 HONBLE SUPREME COURT IN CIT VS TASGAON SSK LTD. (2019) 412 ITR 420 (SC) . THE HONBLE 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 FO R 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 GOVER NMENT 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 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 ADDIT ION FOR SUCH SUM PAID TO MEMBERS AS WELL AS NON - MEMBERS. WHEN THE MATTER FINALLY CAME UP BEFORE THE HONBLE 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 RECOMM ENDED 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 ADD ITIONAL 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 STATUT ORY 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 HONBLE SUPREME COURT REMITTED THE MATTER TO THE FILE OF THE AO FOR CONSIDERING THE MODALITIES AND MANNER IN WHICH SAP/ADDITIONAL PURCHASE PRICE/FINAL PRIC E 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 ITA NO S . 579 TO 582 /PUN/201 8 GANPATI ZILLA KRISHI AUDHOGIK SSS LTD. 4 FINAL PRICE/ADDITIONAL PURCHASE PRICE/SAP UNDER CLAUSE 5A OF THE CON TROL 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 HONBLE APEX COURT ARE REPRODUCED AS UNDER: - 9.4. ..... THEREFORE TO THE EX TENT 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 E NTIRE/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 WO ULD 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 FO R 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 RES PECT TO THE DISTRIBUTION OF PROFIT/SHARING OF THE PROFIT. SO FAR AS THE NON - MEMBERS ARE 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 WHE THER 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 DE DUCTIBLE AS EXPENDITURE. 6. 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 J UDGMENT OF THE HONBLE 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 LA W BY THE ITA NO S . 579 TO 582 /PUN/201 8 GANPATI ZILLA KRISHI AUDHOGIK SSS LTD. 5 HONBLE 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 EXP ENDITURE. 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 40 A(2) OF THE ACT AS HAS BEEN HELD BY THE HONBLE 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. 4. SINCE THE FACTS AND CIRCUMSTANCES OF THE INSTA NT APPEAL S ARE MUTATIS MUTANDIS SIMILAR TO THOSE ALREADY CONSIDERED AND DECIDED BY THE TRIBUNAL IN THE ABOVE BATCH OF APPEALS IN THE GIVEN CIRCUMSTANCES AND FOLLOWING THE PRECEDENT WE SET - ASIDE THE IMPUGNED ORDER S AND REMIT THE MATTER TO THE FILE OF THE AO FOR DECIDING THE CONTROVERSY IN CONFORMITY WITH THE VIEW TAKEN BY THE TRIBUNAL AS EXTRACTED ABOVE. 5. THE CONTENTION OF LD. AR THAT A REVIEW P ETITION HAS BEEN FILED BEFORE THE HON'BLE SUPREME COURT AGAINST THE JUDGMENT IN THE CASE OF CIT VS TASGAON SSK LTD. (2019) 412 ITR 420 (SC) WHICH IS STILL PENDING AND HENCE THE DECISION THEREON S HOULD BE AWAITED IS OF NO CONSEQUENCE. HUNDREDS OF ORDERS HAVE BEEN PASSED BY THE ITA NO S . 579 TO 582 /PUN/201 8 GANPATI ZILLA KRISHI AUDHOGIK SSS LTD. 6 TRIBUNAL ON THIS ISSUE FOLLOWING THE FINAL JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS TASGAON SSK LTD. (SUPRA) . MERE FILING OF REVIEW P ETITION DOES NOT OBLITERATE THE RATIO LAID DOWN IN THE JUDGMENT UNDER R EVIEW . IT IS ONLY WHEN AN ORDER ON REVIEW IS PASSED THAT THE RATIO CAN UNDERGO CHANGE SUBJECT TO THE OUTCOME OF THE REVI EW ORDER . TILL THEN THE RATIO OF THE DECISION OPERATES WITH FORCE AND REMAINS BINDING ON ALL THE SUBORDINATE COURTS IN THE COUNTRY. SINCE THE ISSUE UNDER CONSIDERATION IS ADMITTEDLY FULLY AND DIRECTLY COVERED BY THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS TASGAON SSK LTD. (SUPRA) WE ARE DISINCLINED TO ACCEPT THE ARGUMENT OF THE L D. AR . 6 . IN THE RESULT ALL THE APPEALS ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH MAY 20 2 1 . SD/ - SD/ - ( S.S. VISWANETHRA RAVI ) ( R.S.SYAL ) JUDICIAL MEMBER VICE PRESIDENT PUNE ; DATED : 24 TH MAY 20 2 1 GC VSR ITA NO S . 579 TO 582 /PUN/201 8 GANPATI ZILLA KRISHI AUDHOGIK SSS LTD. 7 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. THE CIT(A) - 1 KOLHAPUR 4. THE PR.CIT - 1 KOLHAPUR 5. DR B ITAT PUNE 6. / GUARD FILE / BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY / ITAT PUNE DATE 1. DRAFT DICTATED ON 18 - 05 - 20 2 1 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 18 - 05 - 20 2 1 SR. PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. DATE OF UPLOADING ORDER SR.PS 8. FILE SENT TO THE BEN CH CLERK SR.PS 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK 10. DATE ON WHICH FILE GOES TO THE A.R. 11. DATE OF DISPATCH OF ORDER. *