2014 (9) TMI 398 - SC - Income Tax

Issues not addressed by CIT(A) Matter pending before CIT(A) - Held that - The question, whether the difference between the fair market price and the concessional price should or should not be added to the total income of the assessee(s) Society, needs to be re-looked by CIT(A) - There are some of the questions which have not been addressed by the Authorities below in the orders - 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 - the matter is pending before the CIT(A) thus, the matter is liable to be remitted back to the CIT(A) for fresh consideration Decided in favour of revenue.

Summary

Issues:
1. Addition made by Assessing Officer on account of difference between market price and concessional price of sugar.
2. Allowability of cane supply expenses under Section 37(1) of the Income Tax Act.

Analysis:
1. The first issue in this judgment revolves around the addition made by the Assessing Officer on account of the difference between the market price and the concessional price at which sugar was sold. The Commissioner of Income-Tax (Appeals) deleted this addition, which was upheld by the ITAT. The High Court confirmed the ITAT order based on a Circular of Central Board of Direct Taxes. However, the Supreme Court remitted the matter to the Commissioner of Income-Tax (Appeals) for reconsideration. The Court emphasized the need to examine whether the practice of selling sugar at a concessional rate is a common industry practice and if any government resolutions support this practice. The Court directed the Commissioner to look into the accounts and verify the basis for selling sugar at a concessional price on a regular basis.

2. The second issue pertains to the allowability of cane supply expenses under Section 37(1) of the Income Tax Act. The Assessing Officer had made various additions to the assessee's total income, which were partly allowed by the Commissioner of Income-Tax (Appeals-II). The ITAT dismissed the appeal by the appellant-Revenue. The High Court affirmed the ITAT order based on previous decisions and dismissed the appeals. However, the Supreme Court remitted the matter to the Commissioner of Income-Tax (Appeals) for de novo consideration. The Court highlighted the strict requirement of expenses being wholly and exclusively for the purpose of business under Section 37(1) of the Act, emphasizing the need for a thorough examination of the expenses claimed.

In conclusion, the Supreme Court disposed of the special leave petitions and remitted both matters to the Commissioner of Income-Tax (Appeals) for de novo consideration in line with its previous order in a related case. The Court emphasized the need for a detailed examination of industry practices and expenses claimed, ensuring compliance with the provisions of the Income Tax Act.