2023 (6) TMI 1143 - SCH - Income Tax

Appropriation of profit or Business Expenditure - amount paid to the respective milk suppliers for the quantity of milk supplied and in terms of the quality supplied - Finding recorded by the ITAT as well as the High Court that the amount was paid may be at the end of the previous year only to the milk suppliers which was for the quantity of milk supplied and in terms of the quality supplied and the amount was not paid to all the shareholders and not paid out of the profits ascertained at the Annual General Meeting both the ITAT as well as the High Court have rightly deleted the addition made by the AO - HELD THAT - In the facts and circumstances of the case the amount paid to the milk suppliers and also to non-members cannot be said to be appropriation of profit. Therefore no error has been committed by the High Court. We are in complete agreement with the view taken by the High Court taking into consideration the finding recorded by the ITAT as well as the High Court and the observations made by the High Court in para 14 of the impugned judgment and order. In view of the above and for the reasons stated above the present Appeal deserves to be dismissed

Summary

Issues involved:
The issue involves the addition made by the Assessing Officer, treating a certain amount as appropriation of profit, which was later deleted by the ITAT and confirmed by the High Court.

Judgment Summary:

Issue 1: Addition made by the Assessing Officer

The Assessing Officer made an addition of Rs. 1,55,81,519/-, considering it as an appropriation of profit. However, the ITAT found that the amount paid was not from profits but was payment to milk suppliers for the quantity and quality of milk supplied. The High Court upheld this finding and deleted the addition.

Issue 2: Appropriation of profit

The ITAT and the High Court determined that the amount paid to milk suppliers and non-members was not an appropriation of profit. It was clarified that the payment was specifically for the milk supplied, not out of the profits ascertained at the Annual General Meeting. Both courts concluded that no error was made in deleting the addition by the Assessing Officer.

Conclusion:

The Supreme Court, after considering the findings of the ITAT and the High Court, agreed that the payment to milk suppliers was not an appropriation of profit. Therefore, the Appeal was dismissed, upholding the decision of the lower courts. No costs were awarded in this matter.