2023 (6) TMI 399 - AT - Income Tax

Disallowance of purchase of sugarcane, as prior period expenses - Fair Market Price of the sugar - CIT(A) while deleting the addition has given a finding that the assessee operates in the agriculture sector and deals in seasonal crop and the price of which is controlled by the Government - HELD THAT - As given a finding that the actual Fair Market Price of the sugar was decided on 05.12.2007 which was much after the completion of sugar season of 2006-07 and the payments made thereafter cannot be considered to be prior period expenses more so when the genuineness of the payments to the farmers has not been doubted by the Revenue. Before us, Revenue has not pointed out to any fallacy in the findings of the CIT(A). In such a situation, we find no reason to interfere with the order of the CIT(A) and thus this ground raised by the Revenue is dismissed. Disallowance of sugarcane advance which was written off as not recoverable and was debited to Profit Loss account - CIT-A deleted the addition - HELD THAT - CIT(A), while deleting the addition, has given a finding that the aforesaid amount represented advances given by the assessee to members but which have never been debited to the Profit Loss account as a charge against the profit in earlier years and therefore it cannot be added as income. Before us, no fallacy in the finding of the CIT(A) have been pointed out by the Revenue. In such a situation, we find no reason to interfere with the order of the CIT(A) and thus this ground of appeal raised by the Revenue is also dismissed.

Summary

Issues involved:
The judgment involves issues related to disallowance of purchase of sugarcane as prior period expenses and disallowance of sugarcane advance written off as not recoverable.

Disallowance of purchase of sugarcane as prior period expenses:
The assessee, a Co-Operative Society engaged in sugar business, filed its return for Assessment Year 2008-09 showing a total loss. The Assessing Officer disallowed an expenditure of Rs. 15,57,41,617 as prior period expenses. The CIT(A) found that the payment for sugarcane was made after the determination of Fair Market Price (FMP) by the Government, hence not prior period expenses. The CIT(A) directed the Assessing Officer to delete the addition, noting that the genuineness of payments to farmers was not doubted. The Tribunal upheld the CIT(A)'s decision, stating that the payments were not prior period expenses as they were made after the FMP was decided, and the Revenue failed to point out any fallacy in the CIT(A)'s findings.

Disallowance of sugarcane advance written off as not recoverable:
The Assessing Officer disallowed an amount of Rs. 9,01,21,084 shown as sugarcane advance in the Balance Sheet. The CIT(A, however, deleted this addition, stating that the advance given to members was never debited to the Profit & Loss account in earlier years and was not claimed as a deduction. The Tribunal upheld the CIT(A)'s decision, finding that the amount represented advances given by the assessee to members and could not be added as income. The Revenue failed to point out any fallacy in the CIT(A)'s findings, leading to the dismissal of the appeal.

Separate Judgement:
No separate judgment was delivered by the judges in this case.