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2020 (4) TMI 486 - AT - Income TaxExcess Cane Price Paid to Sugarcane Suppliers - price over and above the Statutory Minimum Price (SMP) fixed by State Government for purchase of cane - HELD THAT - As decided in MAJALGAON SAHAKARI, SAKHAR KARKHANA LTD. VERSUS ACIT, SHRI CHHATRAPATI SHAHU, DCIT, ITO 2019 (3) TMI 906 - ITAT PUNE set aside the impugned orders on this score and remit the matter to the file of the respective A.Os. for deciding it afresh as per law in consonance with the articulation of law by the Hon ble Supreme Court in TASGAON TALUKA S.S.K. LTD. 2019 (3) TMI 321 - SUPREME COURT The amount relatable to the profit component or sharing of profit/distribution of profit paid by the assessee, which would be appropriation of income, will not be allowed as deduction, while the remaining amount, being a charge against the income, will be considered as deductible expenditure. At this stage, it is made clear that the distribution of profits can only be qua the payments made to the members. In so far as the non-members are concerned, the case will be considered afresh by the AO by applying the provisions of section 40A(2). Sale of Sugar at Concessional to the Members/Shareholders - HELD THAT - As decided in MAJALGAON SAHAKARI, SAKHAR KARKHANA LTD. 2019 (3) TMI 906 - ITAT PUNE 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 CIT -(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 Government Guarantee Fees - disallowance u/s. 43B - authorities below have held that Government Guarantee Fee is akin to tax, cess or fee and hence, non-payment of same would result in disallowance u/s. 43B - HELD THAT - In the present case, payments made by the assessees on account of Government Guarantee Fees to the Maharashtra Government are in respect of pre seasonal loans. It is neither emanating from the records, nor the Revenue has brought before us any material to show that the assessee is under obligation to pay Government Guarantee Fee on account of statutory requirement as revenue to the State. In the case of Commissioner of Income Tax Vs. Udaipur Distillery Co. Ltd. 2003 (9) TMI 23 - RAJASTHAN HIGH COURT has held that tax , duty , cess or fee constituting a class, denotes various kinds of imposts by State in its sovereign power of taxation to raise revenue for the State. Within the expression of each specie each expression denotes different kind of impost depending on the purpose for which they are levied - merely levy of charge as tax or fee is not conclusive of its character. It is only if any amount becomes payable by way of tax, duty, cess or fee, it falls within the purview of section 43B - Government Guarantee Fees cannot be put in same bracket as tax, cess or duty and hence, no disallowance u/s. 43B of the Act in respect of non-payment of such fee can be made. Accordingly, this issue is decided in favour of the assessee. Ceremony Expenses Disallowance - HELD THAT - Commissioner of Income Tax (Appeals) has allowed 1/4th of the expenditure by following the order of Tribunal in the case of Shivamrut Maryadit vs. DCIT 1998 (12) TMI 120 - ITAT PUNE and restricted the addition to ₹ 65,627/-. We do not find any infirmity in the findings of Commissioner of Income Tax (Appeals). Accordingly, this issue is dismissed.
Issues Involved:
1. Excess cane price paid by the assessee to sugarcane suppliers. 2. Addition on account of sale of sugar at concessional rates to members/shareholders. 3. Government Guarantee Fees. 4. Ceremony Expenses. Detailed Analysis: A. Excess Cane Price Paid to Sugarcane Suppliers The primary issue pertains to the excess cane price paid by the assessee over and above the Statutory Minimum Price (SMP). The Tribunal referenced the Supreme Court's judgment in CIT Vs. Tasgaon Taluka S.S.K. Ltd., where it was determined that the difference between the SMP and the additional purchase price (SAP) could include a profit distribution element, which is non-deductible. The Supreme Court remitted the matter to the AO to distinguish between deductible expenditure and profit distribution. Following this precedent, the Tribunal remitted the issue back to the AO for fresh determination, emphasizing the need to consider accounts, balance sheets, and other relevant materials provided to the State Government to decide the final price. B. Sale of Sugar at Concessional Rates to Members/Shareholders The second issue involves the addition made due to the sale of sugar at concessional rates to members/shareholders. The Tribunal cited the Supreme Court's judgment in CIT Vs. Krishna Sahakari Sakhar Karkhana Limited, which required examining whether selling sugar at concessional rates is a customary practice in the cooperative sugar industry and supported by any State Government resolution. The Tribunal remitted this issue to the AO for fresh adjudication, ensuring it aligns with the Supreme Court's directives. C. Government Guarantee Fees The third issue concerns the disallowance of Government Guarantee Fees under section 43B of the Act due to non-payment. The Tribunal held that Government Guarantee Fees do not fall within the ambit of "tax, duty, cess, or fee" as per section 43B, referencing the Rajasthan High Court's decision in Commissioner of Income Tax Vs. Udaipur Distillery Co. Ltd. Consequently, the Tribunal ruled in favor of the assessee, stating that such fees are not subject to disallowance under section 43B. D. Ceremony Expenses The final issue pertains to ceremony expenses amounting to ?2,62,511/-. The Commissioner of Income Tax (Appeals) had allowed 1/4th of the expenditure based on a prior Tribunal order, reducing the addition to ?65,627/-. The Tribunal found no fault in this decision and dismissed the issue. Conclusion The appeal was partly allowed for statistical purposes, with the Tribunal remitting the issues of excess cane price and concessional sugar sales back to the AO for fresh adjudication, while ruling in favor of the assessee on the Government Guarantee Fees issue and upholding the CIT(A)'s decision on ceremony expenses.
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