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TMI Blog1988 (12) TMI 151X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee on 15-2-1981 to reconsider the purchase rate. Similar letter was received from Khandivaram Milk Producers on 14-6-1981. 2. The assessee being a co-operative society, their accounts have approved and audited by the Registrar. The accounts were not yet completed or audited when the assessee received from the Andhra Pradesh Dairy Development Co-operative Federation Ltd., a circular dated 1-3-1982. As per this circular, all the milk supply unions were informed to adopt revised purchase rates from 1-3-1982. The purchase rates to be adopted were given in an annexure to the circular. We had enquired from the learned counsel Sree Rama Rao as to the relationship between the Andhra Pradesh Dairy Development Co-operative Federation Ltd. and the assessee which is a co-operative milk producers' union. He was not able to enlighten the exact relationship but agreed that the assessee and the similarly placed societies were carrying out the suggestions and directions of this A.P.D.D.F.L as well as its predecessor. 3. On 10-10-1982, the governing body of the assessee-society had a meeting in which one of the items in agenda was the increased price for the purchase of milk. For the explana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be purchased by the assessee was already fixed by a pre-existing contract. No doubt, the milk producers were not satisfied with the purchase price and had been requesting the assessee to allow a high purchase rate. These requests were considered much later, i.e., long after the accounting year was over. In the resolution passed on 10-10-1982 by the Board, they had considered these appeals by the milk producers in conjunction with the circular issued by the Andhra Pradesh Dairy Co-operative Federation and on 7-11-1983 decided to pay the extra amounts. Therefore, according to him, the liability to pay arose only on 7-11-1983 which fell outside the accounting year. He submitted that the Commissioner (Appeals) drew erroneous analogy from the case of Mysore Electrical Industries Ltd. That was a case of an appropriation out of the profits. In this case, we are concerned with the purchase price which was already finalised by a contract with the primary milk producers. Therefore, according to him, that decision would not apply. He then referred to section 30 of the Co-operative Societies Act which gives the ultimate power in deciding these matters to the General Body. So, till the G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le 29 also was referred to point out that the assessee's union was part of the programme committee which decided all these matters. 10. According to Sri Sree Rama Rao, such matters are not without precedent and he referred to the decision of Allahabad High Court in the case of Motilal Padampat Sugar Mills v. CIT [1977] 106 ITR 988 and the decision of the Calcutta High Court in the case of CIT v. Swadeshi Mining Mfg. Co. Ltd. [1978] 112 ITR 276. Both these cases dealt with additional purchase price paid by Sugar Mills wherein the decision to pay such additional price was taken long after the end of the accounting year. He also referred to the decision of the Andhra Pradesh High Court in the case of CIT v. Sarvaraya Sugars Ltd. [1987] 163 ITR 429 where also according to him, the facts were identical. 11. We have considered the submissions. The first issue to be decided is whether the purchase price for the accounting year was a tentative figure to be reviewed and decided later or whether a final price had been fixed. This is a very crucial issue and for deciding this issue most of subjective arguments would become irrelevant. We were told that there was no contract between the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nded by the Union at the time of the finalisation of the financial accounts at the end of the year. It was this resolution of the Board which was accepted by the General Body in their meeting held on 7-11-1983. Thus, it would be seen that the effect of the resolution was to convert the final price into a tentative price which enabled them to increase the purchase price to benefit the primary producers. Therefore, it follows during the accounting year the price was final. It was not tentative. 12. The arguments of the assessee to hold that it was only a tentative price have been considered by us. Although it was argued that no final price had been fixed during the accounting year such a submission is contrary to the express words found in the resolutions before the Board. One of the evidences relied on for this purpose is the letters of the primary milk producers. In the English translation of the letters from Gowripatnam Milk Procurement Centre, the expression used is the present price " offered " by the Dairy. Much emphasis laid on the word 'offered' to show it was only tentative. But, we these are only translations. When we went to the original, we found that it was not properl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . These two figures were claimed as a deduction but was not allowed by the Tribunal. The High Court pointed out that under the Sugar Cane Control Order, the liability in respect of the additional cane price accrued as soon as the sugar cane was purchased and the minimum price therefore had been fixed. So, the liability was incurred at the time of purchase and it was not contingent. In the case of Swadeshi Mining Mfg. Co. Ltd., the Court was dealing with the same Sugar Cane Control Order, 1955 and had come to the same decision. They pointed out that the additional amount claimed formed part of the price of sugar cane purchased by the company in the accounting year and the company had already incurred the liability to Pay the additional price. The Andhra Pradesh High Court's decision in the case of Sarvaraya Sugars Ltd. also dealt with an identical situation as the other two cases. This was also a case of purchase of sugar cane where the minimum price payable had been fixed by a Government order. But that order was made available to the assessee only after the accounting year was over. The accounting period ended on 30th Sept., 1972 and the assessee-company by a resolution dated 12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nov., 1967 subject to the approval by the Registrar. In its accounts, the assessee debited a sum of Rs. 1,60,654 as the amount payable to the growers. This was claimed as a deduction. But the claim was rejected by the authorities. The High Court held that the assessee was entitled to the deduction. At pages 576 and 577, the High Court pointed out as follows : " When the society was asked to carry out such a policy decision, it had incurred the liability when it had adopted the resolution to pay 50 per cent of the net profits earned by it. Incurring of the liability was not subject to any necessary preconditions. The accounting year of the assessee ended on June 30, 1968. The general body's resolution was on November 22, 1967, much earlier to the ending of the accounting year. By passing the resolution the society had incurred the liability and a corresponding right had accrued to the grower to demand payment in terms of the resolution. In the light of the law laid down by the Supreme Court in Shahzada Nand Sons v. CIT [1977] 108 ITR 358, it is not necessary for the assessee to incur the liability by virtue of any contract or statute. As held by the Allahabad High Court in Symon ..... X X X X Extracts X X X X X X X X Extracts X X X X
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