2019 (8) TMI 1326 - AT - Income Tax

Additional payment on account of cane price under Clause 5A of the Sugar Control Order - HELD THAT - Issue relating to excess sugarcane price paid by the assessee is restored to the file of Assessing Officer with similar directions as above in the case of Majalgaon Sahakari Sakhar Karkhana Ltd. Vs. ACIT 2019 (3) TMI 906 - ITAT PUNE . The Assessing Officer shall decide the issue after affording reasonable opportunity of hearing to the respective assessees, in accordance with law. Addition made in the assessment on account of sale of sugar to members and non members - HELD THAT - It would be just and fair if the impugned orders on this score are set aside and the matter is restored to the file of AOs, instead of to the CITs(A), for fresh consideration as to whether the difference between the average price of sugar sold in the market and that sold to members at concessional rate is appropriation of profit or not, in the light of the directions given by the Hon ble Supreme Court in the case of Krishna Sahakari Sakhar Karkhana Limited 2012 (11) TMI 669 - SUPREME COURT Addition made on account of Khodki charges - HELD THAT - As decided in 2019 (3) TMI 906 - ITAT PUNE Khodki charges have been held as deductible by the Hon ble jurisdictional High Court and the recent judgment of Hon ble Supreme Court in Tasgaon Taluka Sahakari Sakhar Karkhana Ltd. 2019 (3) TMI 321 - SUPREME COURT does not cover Khodki charges, we hold that this issue needs to be decided in favour of the assessee. Addition made on account of VSI contribution - HELD THAT - As in respect of the other SSK matters in 2019 (3) TMI 906 - ITAT PUNE CIT(A) has determined this issue in favour of the assessee. No material has been placed on record to show that this order of the Tribunal has been reversed or modified in any manner by the Hon ble High Court. Respectfully following the precedent, we decide this issue in favour of the assessee.

Issues Involved:
1. Additional payment on account of cane price under Clause 5A of the Sugar Control Order.
2. Addition made on account of sale of sugar to members and non-members.
3. Addition made on account of Khodki charges.
4. Addition made on account of VSI contribution.

Detailed Analysis:

1. Additional Payment on Account of Cane Price under Clause 5A of the Sugar Control Order:
The primary issue relates to the "Excess Cane Price paid to Sugarcane Suppliers." The Tribunal referred to the Hon'ble Supreme Court's judgment in CIT Vs. Tasgaon Taluka S.S.K. Ltd. (2019) 103 taxmann.com 57 (SC). The Supreme Court elaborated that the Statutory Minimum Price (SMP) determined under Clause 3 of the Sugar Cane (Control) Order, 1966, is deductible in its entirety. However, the additional price determined under Clause 5A, which includes an element of profit distribution, cannot be entirely deductible. The matter was remitted to the Assessing Officer (AO) to determine the component of distribution of profit embedded in the price paid under Clause 5A. The AO is directed to consider the accounts, balance sheet, and material supplied to the State Government for fixing the final price/additional purchase price/SAP under Clause 5A. The Tribunal restored this issue to the AO for fresh determination in line with the Supreme Court's directions.

2. Addition Made on Account of Sale of Sugar to Members and Non-Members:
The issue of selling sugar at concessional rates was addressed by the Hon'ble Supreme Court in CIT Vs. Krishna Sahakari Sakhar Karkhana Limited (2012) 27 taxmann.com 162 (SC). The Supreme Court remitted the matter to the CIT(A) to consider whether selling sugar at concessional rates had become a customary practice in the cooperative sugar industry and whether it was supported by a State Government resolution. The Tribunal restored this issue to the AO for fresh consideration, following the Supreme Court's directions. The AO is to determine if the difference between the market price and the concessional price is an appropriation of profit.

3. Addition Made on Account of Khodki Charges:
The issue of Khodki charges was considered and adjudicated by the Tribunal in ITA No.308/PUN/2018 & Others. The Tribunal noted that Khodki charges were paid to compensate farmers for the loss in weight due to uneven cutting of cane sugar during harvesting, as directed by the Director of Sugar. The Hon'ble Bombay High Court in CIT Vs. Manjara Shetkari SSK Ltd. (2008) 301 ITR 191 (Bom.) upheld the deduction for such charges. The Tribunal decided this issue in favor of the assessee, allowing the deduction for Khodki charges.

4. Addition Made on Account of VSI Contribution:
The issue of VSI contribution was considered by the Tribunal in ITA No.308/PUN/2018 & Others. The AO had disallowed the provision for VSI contribution, as it was not paid to the institute and was only a provision. The Tribunal, following the precedent set in the case of Bhima S.S.K. Ltd. (ITA No.1414/PUN/2000), allowed the deduction for VSI contribution. The Tribunal decided this issue in favor of the assessee, allowing the deduction for VSI contribution.

Conclusion:
The Tribunal's consolidated order restored the issues of excess cane price and sale of sugar at concessional rates to the AO for fresh determination, following the Supreme Court's directions. The issues of Khodki charges and VSI contribution were decided in favor of the assessee, allowing the respective deductions. The appeals were allowed partly for statistical purposes, with specific directions for the AO to re-examine the issues based on the provided guidelines and precedents.

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