2022 (5) TMI 1561 - AT - Income Tax

Excess sugarcane price paid to the members non-members - HELD THAT - We find that the same issues have been adjudicated in the case of Karmaveer Shankarrao Kale Sahakari Sakhar Karkhana Ltd. 2020 (12) TMI 1330 - ITAT PUNE wherein excess sugar cane price paid to Members and Non-members and the issue of sale of sugar at concessional rate to Members are remanded to the file of the ld. A.O for fresh adjudication for the purpose of giving effect to the directions of the Hon ble Apex Court KRISHNA SAHAKARI SAKHAR KARKHANA LTD. 2012 (11) TMI 669 - SUPREME COURT in its proper perspective. The ld. A.O shall comply with the principles of natural justice and adjudicate the issues as per law.

Summary

Issues Involved:
1. Excess sugarcane price paid to members and non-members.
2. Sale of sugar at a concessional rate to members.

Detailed Analysis:

1. Excess Sugarcane Price Paid to Members and Non-members:

The Tribunal referred to the Pune Bench's decision in the case of Karmaveer Shankarrao Kale Sahakari Sakhar Karkhana Ltd., which dealt with the "Excess sugarcane price" issue. The core issue revolves around the statutory minimum price (SMP) set by the Central Government under the Sugarcane (Control) Order, 1966, and the additional price determined under clause 5A of the same order. The Assessing Officer (AO) had previously disallowed the excess price paid over the statutory minimum price, treating it as a distribution of profits rather than a deductible expenditure. The CIT(A) allowed the price paid for procurement as business expenditure, but the matter was contested further.

The Tribunal noted that the Hon'ble Supreme Court in CIT Vs. Tasgaon Taluka S.S.K. Ltd. clarified that while the SMP is fully deductible, the additional price under clause 5A, which includes a profit component, cannot be fully deducted. The Supreme Court remitted the matter to the AO to determine the profit component in the additional price and disallow it as an appropriation of profit. The Tribunal followed this precedent and remitted the issue to the AO for fresh determination, instructing the AO to distinguish between the deductible expenditure and the profit component.

Additionally, the Tribunal acknowledged the ld. AR's submission that the SMP regime ended in 2009, replaced by the Fair and Remunerative Price (FRP) regime. The Tribunal directed the AO to consider this change and decide the issue accordingly, allowing the assessee to present their contentions.

2. Sale of Sugar at Concessional Rate to Members:

The Tribunal referred to the case of ACIT Vs. Shri Shankar SSK Ltd., which dealt with the taxability of selling sugar at concessional rates to members. The Hon'ble Supreme Court in CIT v. Krishna SSK Ltd. had directed the CIT(A) to determine whether the difference between the market price and the concessional price should be added to the assessee's income. The CIT(A) was also instructed to consider whether this practice was customary in the cooperative sugar industry, supported by state government resolutions, and the basis for monthly sales apart from festive occasions.

The Tribunal observed that the CIT(A) had failed to address these directions adequately. The Tribunal remanded the issue to the AO for fresh adjudication, emphasizing the need for a clear finding on whether the concessional price difference should be included in the assessee's income. The AO was instructed to consider the custom and trade practice, state policy, and the specifics of monthly and festive sales.

Conclusion:

The Tribunal remanded both issues to the AO for fresh adjudication, directing the AO to follow the principles of natural justice and comply with the Hon'ble Supreme Court's directions. The appeal was allowed for statistical purposes, ensuring that the AO grants reasonable opportunities for the assessee to present their case.