2021 (7) TMI 286 - AT - Income Tax

Excess cane price paid to sugarcane supplier - HELD THAT - In the present appeal are identical, the issue relating to excess sugarcane price paid by the assessee is restored to the file of Assessing Officer with similar directions as above in the case of Majalgaon Sahakari Sakhar Karkhana Ltd. Vs. ACIT 2019 (3) TMI 906 - ITAT PUNE . The Assessing Officer shall decide the issue after affording reasonable opportunity of hearing to the respective assessee, in accordance with law. Ground No.1 raised in appeal by the assessee is allowed for statistical purposes. Sale of sugar at Concessional Rate - HELD THAT - We find that the issue of sale of sugar at concessional rates has also been considered by the Co-ordinate Bench in the case of Majalgaon Sahakari Sakhar Karkhana Ltd. Vs. ACIT 2019 (3) TMI 906 - ITAT PUNE and in the case of ACIT Vs. Shri Shankar SSK Ltd. 88 2019 (6) TMI 1399 - ITAT PUNE . In view of the above order by Co-ordinate Bench of the Tribunal this issue is restored back to the file of Assessing Officer for de-novo adjudication in similar terms. Provision for Vasantdada Sugar Institute (VSI) Contribution - HELD THAT - As provision for VSI contribution has been decided by the Tribunal while adjudicating bunch of SSK appeals in Majalgaon SSK Ltd. Vs. ACIT 2019 (3) TMI 906 - ITAT PUNE . We observe that the Co-ordinate Bench has decided this issue in favour of assessee. Disallowance on account of Chief Minister Relief Fund - CIT(Appeals) on this issue held that this amount was not incurred for the purpose of business and hence, not allowable u/s.37 of the Act and the same is allowable u/s.80G - HELD THAT - As the amount has not been paid in the previous year as donation to the Chief Minister Relief Fund, the same was not allowable, as the requirement of law is that it should be paid. The action of the AO was upheld - once it is decided that the amount is allowable u/s.80G of the Act as donation to the Chief Minister Relief Fund, therefore, deduction allowed has to be calculated according to the provisions of the Act and also it has to be verified whether the said donation was made in the previous year or not, relevant to the assessment year. This exercise has to be done by the Assessing Officer. DR conceded to this observation of the Bench. In view thereof, we set aside the order of the Ld. CIT(Appeals) on this issue and remand the matter back to the file of the Assessing Officer for adjudication as per law while complying with the principles of natural justice. Ground raised in appeal by the assessee is allowed for statistical purposes.

Summary

Issues Involved:

1. Disallowance and addition of ?63,25,58,221/- on account of excess cane price paid to sugarcane suppliers.
2. Disallowance and addition of ?1,12,38,600/- on account of sale of sugar at concessional rates.
3. Disallowance and addition of ?12,61,374/- on account of VSI contribution.
4. Disallowance and addition of ?12,37,350/- on account of Chief Minister Relief Fund.

Detailed Analysis:

1. Excess Cane Price Paid to Sugarcane Suppliers:

The issue pertains to the disallowance of ?63,25,58,221/- for excessive cane price paid to members and non-members. The Tribunal referred to the judgment of the Hon'ble Supreme Court in CIT Vs. Tasgaon Taluka S.S.K. Ltd., which dealt with the statutory minimum price (SMP) and the additional price under clause 5A of the Sugar Cane (Control) Order, 1966. The Supreme Court directed that the difference between the SMP and the State Advised Price (SAP) should be scrutinized to determine the profit component, which is not deductible. The Tribunal remitted the matter to the Assessing Officer (AO) to distinguish between deductible expenditure and profit distribution by examining the accounts and materials provided to the State Government. The AO must allow a reasonable opportunity of hearing to the assessee.

2. Sale of Sugar at Concessional Rates:

The disallowance of ?1,12,38,600/- related to the sale of sugar at concessional rates was also addressed. The Tribunal cited the Supreme Court's decision in CIT Vs. Krishna Sahakari Sakhar Karkhana Limited, which required an examination of whether the concessional sale was a customary practice in the cooperative sugar industry and supported by State Government resolutions. The Tribunal remitted the issue back to the AO for fresh consideration to determine if the concessional sale constituted an appropriation of profit. The AO must consider the relevant factors and provide a reasonable opportunity of hearing to the assessee.

3. VSI Contribution:

The disallowance of ?12,61,374/- for VSI contribution was resolved in favor of the assessee. The Tribunal referenced its decision in Majalgaon SSK Ltd. Vs. ACIT and Bhima S.S.K. Ltd., where it was held that such contributions are allowable. The Tribunal found no evidence of reversal or modification of this precedent by the High Court and thus allowed the deduction.

4. Chief Minister Relief Fund:

The disallowance of ?12,37,350/- for the Chief Minister Relief Fund was contested. The AO disallowed the amount as it was not paid during the year under consideration. The assessee argued that the payment was mandated by the Government of Maharashtra and was for business purposes. The Tribunal noted that if the donation is allowable under section 80G, the deduction must be calculated accordingly, and the payment's timing must be verified. The Tribunal remanded the issue back to the AO for verification and compliance with natural justice principles.

Conclusion:

The appeal was partly allowed for statistical purposes. The Tribunal remanded the issues of excess cane price and concessional sugar sale to the AO for fresh adjudication, allowed the VSI contribution, and remanded the Chief Minister Relief Fund issue for verification. The AO is directed to provide a reasonable opportunity of hearing to the assessee in all matters.