2025 (3) TMI 27 - AT - Income Tax

Addition on account of sale of sugar on concessional rate - HELD THAT - Sugar Commissioner Maharashtra Government gave the directions to all sugar factories as per Section 79(A) of Maharashtra Co-operative Societies Act 1960. The Sugar Commissioner gave the direction that Sugar Factories shall sale maximum 5 kgs of sugar per month at concessional rate to its members only. The rate shall be @ levy sugar ( ) excise duty. The sale of sugar at concessional rate shall be applicable only to those members who have supplied their Sugar Cane to the factory. We set-aside the order of ld.CIT(A) qua sale of sugar at concessional rate to the CIT(A) for denovo adjudication. The ld.CIT(A) shall bring on record the specific facts mentioned by us in earlier paragraphs. Ld.CIT(A) shall also bring on record the specific facts mentioned in the Krishna SSK Ltd. 2012 (11) TMI 669 - SUPREME COURT . The Assessee shall file all necessary details before the CIT(A). Accordingly grounds of appeal raised by the Revenue are allowed for statistical purpose.

ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment include:

Whether the addition made by the Assessing Officer (AO) on account of the sale of sugar at a concessional rate to members and non-members should be deleted.
Whether the practice of selling sugar at concessional rates is a customary practice in the Cooperative Sugar Industry and if it has been endorsed by any resolution from the State Government.
Whether the Circular issued by the Sugar Commissioner under Section 79(A) of the Maharashtra Co-operative Societies Act, 1960, which regulates the sale of sugar at concessional rates, should be considered in the assessment of the case.
Whether the decision of the Hon'ble Supreme Court in the case of CIT Vs. Krishna SSK Ltd. and the subsequent directions given therein have been adequately considered by the lower authorities.

ISSUE-WISE DETAILED ANALYSIS

1. Addition on Account of Sale of Sugar at Concessional Rate

Relevant Legal Framework and Precedents: The legal framework involves the provisions of the Income Tax Act, 1961, particularly regarding the assessment of income and the Maharashtra Co-operative Societies Act, 1960, specifically Section 79(A) which empowers the State Government to issue directions to cooperative societies.

Court's Interpretation and Reasoning: The Tribunal noted that the AO made an addition based on the difference between the market price and the concessional rate at which sugar was sold to members. The CIT(A) had deleted this addition, relying on precedents that recognized the sale of sugar at concessional rates as a customary practice.

Key Evidence and Findings: The Tribunal considered the resolution passed by the assessee allowing the sale of sugar at concessional rates to members, the practices followed by other sugar factories, and the circular issued by the Sugar Commissioner.

Application of Law to Facts: The Tribunal applied the legal framework and precedents to the facts, considering the customary practice and the regulatory framework provided by the State Government.

Treatment of Competing Arguments: The Tribunal evaluated the Revenue's argument that the case should be set aside for reconsideration, as similar cases had been remitted for denovo adjudication following the Supreme Court's directions in Krishna SSK Ltd.

Conclusions: The Tribunal concluded that the CIT(A) failed to consider the directions of the Supreme Court and the circular issued by the Sugar Commissioner, necessitating a remand for denovo adjudication.

2. Customary Practice and State Government Resolution

Relevant Legal Framework and Precedents: The Tribunal referenced the Supreme Court's decision in Krishna SSK Ltd., which emphasized examining whether the concessional sale of sugar is a customary practice and whether it is supported by any State Government resolution.

Court's Interpretation and Reasoning: The Tribunal noted that the CIT(A) did not adequately address whether the practice was customary or supported by a State Government resolution.

Key Evidence and Findings: The Tribunal considered the circular from the Sugar Commissioner, which provided guidelines for concessional sales under Section 79(A) of the Maharashtra Co-operative Societies Act, 1960.

Application of Law to Facts: The Tribunal applied the Supreme Court's directions to assess whether the practice was customary and supported by State Government resolutions.

Treatment of Competing Arguments: The Tribunal considered the Revenue's reliance on the circular and the Supreme Court's directions, contrasting it with the CIT(A)'s reliance on earlier High Court decisions.

Conclusions: The Tribunal determined that the CIT(A) failed to consider the Supreme Court's directions and the circular, necessitating a remand for further examination.

SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: The Tribunal quoted the Supreme Court's directions in Krishna SSK Ltd., emphasizing the need to examine the customary nature of the practice and any supporting resolutions.

Core Principles Established: The Tribunal reinforced the principle that the assessment of concessional sales must consider customary practices and regulatory frameworks established by the State Government.

Final Determinations on Each Issue: The Tribunal set aside the CIT(A)'s order and remanded the case for denovo adjudication, directing the CIT(A) to consider the Supreme Court's directions and the circular from the Sugar Commissioner.

In conclusion, the Tribunal allowed the Revenue's appeals for statistical purposes, requiring the CIT(A) to conduct a thorough examination of the issues in light of the Supreme Court's directions and the regulatory framework established by the State Government. The Tribunal emphasized the need for a detailed assessment of the customary nature of concessional sales and any resolutions supporting such practices.

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