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2025 (3) TMI 801 - AT - Income TaxAddition on account of sale of sugar on concessional rate - Whether practice of selling sugar at concessional rate is a custom in the Co-operative Sugar Industry? - CIT(A) deleted addition - HELD THAT - We have observed that indeed it is a customary practice among all sugar factoriesin this belt to sale sugar at concessional rate to Farmers. However nowhere the exact number of members to whom sugar has been sold at concessional rate is mentioned by the Assessee. The said fact has not been mentioned by the Assessee even in the paper book filed before us. Also Assessee has not mentioned to how many non-members sugar was sold at concessional rate and how concessional sugar was provided to non-members when the resolution dated 14.02.1990 only allows concessional sugar to members. The Sugar Commissioner Maharashtra Government gave the directions to all sugar factories as per Section 79(A) of Maharashtra Co-operative Societies Act 1960. The Sugar Commissioner gave the direction that Sugar Factories shall sale maximum 5 kgs of sugar per month at concessional rate to its members only. The rate shall be @ levy sugar ( ) excise duty. The sale of sugar at concessional rate shall be applicable only to those members who have supplied their Sugar Cane to the factory. The Hon ble Supreme Court in the case of Krishna SSK Ltd. 2012 (11) TMI 669 - SUPREME COURT had set-aside the issue with specific direction. Commissioner of Sugar had issued Circular dated 01.03.2006 in public interest. One arm of the Law cannot be used to defeat purpose of another arm of the Law. In this case the Assessing Officer has not analysed and brought on record all the above details which was mandatory in the light of decision of Hon ble Supreme Court in the case of Krishna SSK Ltd.(supra). Thus we set-aside the order of ld.CIT(A) qua sale of sugar at concessional rate to the ld.CIT(A) for denovo adjudication. The ld.CIT(A) shall bring on record the specific facts mentioned by us in earlier paragraphs. Ld.CIT(A) shall also bring on record the specific facts mentioned by Hon ble Supreme Court in the Krishna SSK Ltd., (supra). Appeal of the Revenue allowed for statistical purpose.
ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment are:
ISSUE-WISE DETAILED ANALYSIS 1. Sale of Sugar at Concessional Rates Relevant Legal Framework and Precedents: The legal framework involves the Income Tax Act, 1961, and the Maharashtra Co-operative Societies Act, 1960. The relevant precedents include the Supreme Court's decision in CIT Vs. Krishna SSK and the ITAT Pune's decisions in related cases. Court's Interpretation and Reasoning: The Tribunal noted that the practice of selling sugar at concessional rates is prevalent among cooperative sugar factories and is regulated by the State Government through the Sugar Commissioner. The Tribunal also considered the Supreme Court's directions to verify whether this practice is customary and supported by a State Government resolution. Key Evidence and Findings: The Tribunal observed that the assessee had passed a resolution to sell sugar at concessional rates to its members and that this practice is customary in the cooperative sugar industry. However, the Tribunal found that the Assessing Officer failed to verify compliance with the directions issued by the Supreme Court and the Sugar Commissioner. Application of Law to Facts: The Tribunal applied the Supreme Court's directions and the Sugar Commissioner's circular to evaluate the appropriateness of the concessional sales. It found that the Assessing Officer did not adequately address whether the sales were in line with the prescribed guidelines. Treatment of Competing Arguments: The Tribunal considered the Revenue's argument that the sales should be added to the income as an appropriation of profit. It also considered the assessee's argument that the practice is customary and supported by a State Government resolution. The Tribunal found that further factual verification was needed. Conclusions: The Tribunal concluded that the matter should be remitted back to the CIT(A) for a de novo consideration, ensuring compliance with the Supreme Court's directions and the Sugar Commissioner's guidelines. 2. Compliance with Directions of the Sugar Commissioner Relevant Legal Framework and Precedents: Section 79(A) of the Maharashtra Co-operative Societies Act, 1960, empowers the State Government to issue directions to cooperative societies in the public interest. Court's Interpretation and Reasoning: The Tribunal emphasized the importance of compliance with the Sugar Commissioner's circular, which outlines the conditions under which sugar can be sold at concessional rates. Key Evidence and Findings: The Tribunal noted that the Assessing Officer did not verify whether the assessee complied with the circular's conditions, such as the maximum quantity of sugar that can be sold at concessional rates and the eligibility criteria for members. Application of Law to Facts: The Tribunal found that the Assessing Officer failed to apply the circular's conditions to the facts of the case, leading to an incomplete assessment. Treatment of Competing Arguments: The Tribunal considered both the Revenue's and the assessee's arguments regarding compliance with the circular. It found that the Revenue did not adequately address the circular's requirements. Conclusions: The Tribunal remitted the case to the CIT(A) for a detailed examination of compliance with the Sugar Commissioner's circular. SIGNIFICANT HOLDINGS Preserve Verbatim Quotes of Crucial Legal Reasoning: The Tribunal quoted the Supreme Court's directions in CIT Vs. Krishna SSK, emphasizing the need for a re-examination of the practice of selling sugar at concessional rates. Core Principles Established: The Tribunal reinforced the principle that compliance with State Government regulations and Supreme Court directions is essential in determining the appropriateness of concessional sales. Final Determinations on Each Issue: The Tribunal set aside the CIT(A)'s order and remitted the case for a de novo examination to ensure compliance with the relevant legal framework and precedents.
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