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2022 (5) TMI 600 - AT - Income TaxExcess sugar cane price paid to the Members and Non-members - sale of sugar cane at concessional rate to the Members - HELD THAT - As relying on KARMAVEER SHANKARRAO KALE SAHAKARI SAKHAR KARKHANA LTD. VERSUS THE ASSISTANT COMMISSIONER OF INCOME TAX AHMEDNAGAR CIRCLE AHMEDNAGAR. 2020 (12) TMI 1330 - ITAT PUNE both the issues i.e. 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 2019 (3) TMI 321 - 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. The grounds of appeal raised by the assessee in both these appeals are therefore allowed for statistical purposes.
Issues Involved:
1. Excess sugar cane price paid to Members and Non-members. 2. Sale of sugar at concessional rate to Members. Detailed Analysis: Issue 1: Excess Sugar Cane Price Paid to Members and Non-members The core issue pertains to the "Excess Sugarcane Price" paid by the assessee to both members and non-members, which was deemed excessive and unreasonable by the Assessing Officer (AO). The AO argued that the excess price paid over the statutory minimum price fixed under clause 3 and the additional price under clause 5A of the Sugarcane (Control) Order, 1966, constituted a distribution of profits rather than a deductible business expenditure. The CIT(A) disagreed, allowing the price as a business expenditure. The Tribunal referenced the judgment in the case of CIT Vs. Tasgaon Taluka S.S.K. Ltd., where the Supreme Court held that the price paid under clause 3 is fully deductible, but the excess price under clause 5A, which includes a profit component, is not. The matter was remitted to the AO to determine the profit component, which is not deductible, and the remaining amount, which is a deductible business expenditure. The Tribunal directed the AO to follow the Supreme Court's guidelines and allow the assessee a reasonable opportunity of hearing. The Tribunal also noted that the Statutory Minimum Price (SMP) regime ended on 22-10-2009, and the Fair and Remunerative Price (FRP) regime began. The AO was directed to consider the implications of this change when reassessing the issue. Issue 2: Sale of Sugar at Concessional Rate to Members The second issue involves the sale of sugar at concessional rates to members, which the AO deemed as income. The Tribunal referenced the Supreme Court's directions in CIT vs. Krishna SSK Ltd., which required the CIT(A) to consider several factors, including whether the practice of selling sugar at concessional rates is customary in the cooperative sugar industry and if there is a supporting resolution from the State Government. The Tribunal found that the CIT(A) had not fully complied with these directions, failing to address whether the difference between the market price and the concessional price should be added to the total income of the assessee. The Tribunal remanded the issue to the AO for fresh adjudication, emphasizing the need to consider the custom and trade practices, State policy, and the basis for monthly sales, including sales during Diwali. Conclusion: Both issues were remanded to the AO for fresh adjudication, with directions to follow the Supreme Court's guidelines and provide the assessee a reasonable opportunity of hearing. The appeals were allowed for statistical purposes, ensuring compliance with the principles of natural justice and proper application of the law.
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