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TMI Blog2019 (3) TMI 906X X X X Extracts X X X X X X X X Extracts X X X X ..... ning 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). Giving sugar to members at concessional rate - AO made addition of the difference between the market price and the concessional price at which sugar (final product) was given to farmers and cane growers - 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). Restoration to the AO is necessitated because, following the judgment in the case of Tasgaon Taluka S.S.K. Ltd [2019 (3) TMI 321 - SUPREME ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made, we remit the matter to the file of the AO for granting the deduction u/s.80G(iiihf) as per law after allowing a reasonable opportunity of hearing to the assessee. Non-granting of deduction towards payment of Khodki charges - HELD THAT:- It is seen that Khodki charges were incurred as per the directions of the Director of Sugar to compensate for the farmers’ loss for unevenly cutting of cane sugar at the time of harvesting. This issue came up for consideration before the Special Bench of the Tribunal in DCIT Vs. Manjara Shetkari SSK Ltd. [2004 (8) TMI 721 - ITAT MUMBAI] which granted deduction for said expenses. On further appeal by the Revenue to the Hon’ble Bombay High Court [2007 (8) TMI 260 - BOMBAY HIGH COURT], their Lordships in the aforenoted case approved the view taken by the Tribunal allowing deduction for payment of such Khodki charges. 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. Deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2547/PUN/2012, 262/PUN/2011, 129/PUN/2012, 128/PUN/2012, 483/PUN/2014, 1229-31/PUN/2013, 296/PUN/2012, 297/PUN/2012, 573/PUN/2011, 488-90/PUN/2014, 1015/PUN/2013, 1050/PUN/2013, 1051/PUN/2013, 1271/PUN/2012, 325/PUN/2016, 1584/PUN/2014, 1585/PUN/2014, 1666/PUN/2014, 1667/PUN/2014, 2083/PUN/2012, 989/PUN/2013, 2599/PUN/2012, 349/PUN/2011, 2598/PUN/2012, 988/PUN/2014, 989/PUN/2014, 2605/PUN/2012, 2457/PUN/2012, 575/PUN/2011, 96-98/PUN/2012, 2610-11/PUN/2016, 1117/PUN/2012, 90/PUN/2017, 980/PUN/2013, 735/PUN/2016, 1464/PUN/2009, 984/PUN/2013, 1223/PUN/2016, 702/PUN/2012, 1041/PUN/2015, 2145/PUN/2012, 2141/PUN/2012, 205/PUN/2012, 599/PUN/2012, 244-45/PUN/2013, 2526/PUN/2012, 2604/PUN/2012, 831/PUN/2014, 2455/PUN/2012, 903/PUN/2012, 1174/PUN/2016, 2595/PUN/2012, 1499/PUN/2016, 264/PUN/2013, 2597/PUN/2012, 1009/PUN/2013, 1010/PUN/2013, 1024-26/PUN/2013, 1290/PUN/2012, 1291/PUN/2012, CO 3/PUN/2016, 1171/PUN/2014, 1686/PUN/2012, 1688/PUN/2012, 2609/PUN/2012, 1976/PUN/2012, 1694/PUN/2016, 1493/PUN/2011, 514/PUN/2017, 1289/PUN/2011, 1290/PUN/2011, 1143/PUN/2015, 2495/PUN/2012, 2496/PUN/2012, 868/PUN/2014, 2590/PUN/2012, 2591/PUN/2012 Majalgaon Sahakari, Sakhar Karkhana Ltd., Loknete Bal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... garcane price paid to members as well as non-members of the respective assessees. On a representative basis, we are espousing the facts in the case of Majalgaon Sahakari Sakhar Karkhana Limited Vs. ACIT, Circle-3, Aurangabad ITA No.308/PUN/2018 for the assessment year 2013-14. The assessee is engaged in the business of manufacturing of white sugar. During the course of assessment proceedings, the AO observed that the assessee paid excessive cane price, over and above the Fair and remunerative price (FRP) fixed by the Government, to its members as well as non-members. On being called upon to justify such deduction, the assessee gave certain explanation by submitting that such payment was solely and exclusively in connection with the business and the entire amount was deductible u/s.37(1) of the Income-tax Act, 1961 (hereinafter also called `the Act ). Relying on the judgment of Hon ble Supreme Court in the case of DCIT Vs. Shri Satpuda Tapi Parisar S.S.K. Ltd. and others (2010) 326 ITR 402 , the AO opined that the excessive price paid was in the nature of `distribution of profits and hence not deductible. This is how, he computed the excessive cane price paid both to the membe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce at the end of the season on 50:50 profit sharing basis between the growers and factories, to be worked out in accordance with the Second Schedule to the Control Order, 1966. Their Lordships noted that at the time when additional purchase price is determined/fixed under clause 5A, the accounts are settled and the particulars are provided by the concerned Co-operative Society as to what will be the expenditure and what will be the profit etc. Considering the fact that Statutory Minimum Price (SMP), determined under clause 3 of the Control Order, 1966, which is paid at the beginning of the season, is deductible in the entirety and the difference between SMP determined under clause 3 and SAP/additional purchase price determined under clause 5A, has an element of distribution of profit which cannot be allowed as deduction, the Hon ble Supreme Court remitted the matter to the file of the AO for considering the modalities and manner in which SAP/additional purchase price/final price is decided. He has been directed to carry out an exercise of considering accounts/balance sheet and the material supplied to the State Government for the purpose of deciding/fixing the final price/additiona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following the precedent, we setaside 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 the aforenoted judgment. The AO would allow deduction for the price paid under clause 3 of the Sugar Cane (Control) Order, 1966 and then determine the component of distribution of profit embedded in the price paid under clause 5A, by considering the statement of accounts, balance sheet and other relevant material supplied to the State Government for the purpose of deciding/fixing the final price/additional purchase price/SAP under this clause. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... try?; and whether any Resolution has been passed by the State Government supporting the practice?; The CIT(A) would also consider on what basis the quantity of the final product, i.e. sugar, is being fixed for sale to farmers/cane growers/Members each year on month-to-month basis, apart from others from Diwali? The issue under consideration can be decided by an appropriate lower authority only on the touchstone of the relevant factors noted in the above judgment. In our considered opinion, 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 (supra). Restoration to the AO is necessitated because, following the judgment of the Hon ble Apex Court in the case of Tasgaon Taluka S.S.K. Ltd. (supra), we have remitted the issue of payment of excessive price to the file of AO, and as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he first appeal. 15. We have heard the rival submissions and perused the relevant material on record. It is found that the issue raised herein is no more res integra. The Hon ble Apex Court in the case of CIT v. Alom Extrusions Limited (2009) 319 ITR 306 (SC) has held that the amendment to first proviso and omission of the second proviso to section 43B by the Finance Act, 2003, is retrospective. The Hon ble Delhi High Court in the case of CIT v. Aimil Limited (2010) 321 ITR 508 (Delhi) has allowed deduction in respect of employees share when the amount was paid before the due date. When we consider these two judgments, it is manifested that both the employer s and employees contribution are allowable as deduction if these are deposited albeit belatedly under the respective Acts, but before the due date of filing of return u/s 139(1) of the Act. 16. It is seen as an admitted position that the assessees in such cases deposited the employees contribution towards EPF and ESIC before the due date u/s 139(1) of the Act. Respectfully following the aforenoted judgment of the Hon ble Delhi High Court, we order for the deletion of the addition sustained in the first appeals on a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntire addition overlooking the fact that deduction u/s.80G(iiihf) was not allowed by the AO on such contribution in the computation of total income. Under these circumstances, we cannot uphold the disallowance of the entire amount claimed as deduction by the assessee in its Profit and loss account. Approving the additions made, we remit the matter to the file of the AO for granting the deduction u/s.80G(iiihf) as per law after allowing a reasonable opportunity of hearing to the assessee. VII. KHODKI CHARGES 22. Another issue raised in some of the appeals is against nongranting of deduction towards payment of Khodki charges. On being called upon to justify such deduction, the assessee submitted that this payment was made as per the order of the Director of Sugar. It was further explained that at the time of harvesting, the harvesting labour cut more part of the upper side of the crop and therefore, to compensate loss in weight to the grower, the said Khodki charges were paid to the farmers. The AO was not satisfied with the explanation tendered on behalf of the assessee. He noted that the Commissioner of Sugar, on behalf of Government of Maharashtra, was issuing direction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fied in sub-section (2), in computing the total income of the assessee. (2) The sums referred to in sub-section (1) shall be the following, namely :- (a) to (c) (d) in respect of any income by way of interest or dividends derived by the cooperative society from its investments with any other cooperative society, the whole of such income; ........ 26. A cursory look of the above provision deciphers that any amount of interest or dividend derived by a Co-operative Society from its investments with any other Co-operative Society, is deductible under clause (d) of section 80P(2) of the Act. The ld. CIT(A) has given a categorical finding that assessee is a Cooperative Society and the Co-operative Bank from which the above-mentioned income was earned, is also a Co-operative Society duly registered under Maharashtra Cooperative Societies Act. This contention has not been controverted by the ld. DR with any cogent material or evidence. Thus, it is seen that the case of the assessee is fully covered u/s.80P(2)(d) of the Act. Reliance of the AO on the provisions of sub-section (4) of section 80P is misplaced. Such provision states that : `The provisions of this section shall ..... X X X X Extracts X X X X X X X X Extracts X X X X
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