2012 (11) TMI 669 - SC - Income Tax

Sale of Sugar at concessional price to its Members on monthly basis - difference between the fair market price and the concessional price taxable or not - held that - CIT(A) would be entitled to look into the Accounts and verify the basis for sale of sugar at concessional price on month-to-month basis - CIT(A) would give liberty to both sides to produce relevant documents - remit the cases to CIT(A) to de-novo consider the matter - civil appeals filed by the Department are disposed of with no order as to costs.

Summary

Issues:
1. Taxation of the difference between fair market price and concessional price of sugar sold by a Co-operative Society.
2. Whether selling sugar at a concessional rate is a common practice in the Co-operative Sugar Industry.
3. Verification of the basis for sale of sugar at a concessional price on a month-to-month basis.
4. Lack of consideration of certain questions by the Authorities in the impugned orders.

Analysis:
1. The Supreme Court addressed the issue of taxation concerning the difference between the fair market price and the concessional price at which a Co-operative Society sells sugar to its Members. The Department sought to tax this difference under the Head 'Appropriation of Profit.' The Court directed the Commissioner of Income Tax (Appeals) [CIT(A)] to re-examine whether this difference should be added to the total income of the Co-operative Society.

2. The Court highlighted the need for the CIT(A) to investigate whether selling sugar at a concessional rate is a common practice or custom in the Co-operative Sugar Industry. Additionally, the CIT(A) was instructed to determine if any Resolution has been passed by the State Government supporting this practice. These aspects were deemed crucial and had not been adequately addressed in the previous orders.

3. Another significant issue raised was the lack of consideration by the Authorities regarding the basis for fixing the quantity of sugar sold at a concessional price on a month-to-month basis. The Court emphasized the importance of verifying this basis and directed the CIT(A) to thoroughly examine the accounts in this regard.

4. The Court concluded by remitting the cases to the CIT(A) for a fresh consideration of the matter. It was emphasized that all questions of law and facts should remain open for examination, and both parties were granted the liberty to produce relevant documents. The civil appeals filed by the Department were disposed of with no order as to costs, indicating a need for a comprehensive reevaluation of the issues at hand.