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TMI Blog2019 (5) TMI 780X X X X Extracts X X X X X X X X Extracts X X X X ..... lear 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) of the Act, as has been held by the Hon ble Supreme Court supra. G round allowed for statistical purposes. Giving of sugar to members and non-members at concessional rates - HELD THAT:- It would be just and fair if the impugned order on this score is set aside and the matter is restored to the file of AO, 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 in KRISHNA SAHAKARI SAKHAR KARKHANA LTD. [ 2012 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nment, to its members as well as non-members. On being called upon to justify such deduction, the assessee submitted 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 Ordinance dated 22.10.2009, Sugar Cane Control Order, 1966, the AO opined that the Government of India has notified a FRP payable to farmers for their sugarcane and as this price includes reasonable margins towards their risks and profits, hence any payment in excess of FRP would be in the nature of distribution of profits of the assessee society. Treating FRP as an allowable expense, the AO held that the excessiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Control Order, 1966. The AO in that case concluded that the difference between the price paid as per clause 3 of the Control Order, 1966 determined by the Central Government and the price determined by the State Government under clause 5A of the Control Order, 1966, was in the nature of `distribution of profits and hence not deductible as expenditure. He, therefore, made an addition for such sum paid to members as well as non-members. When the matter finally came up before the Hon ble Apex Court, it noted that clause 5A was inserted in the year 1974 on the basis of the recommendations made by the Bhargava Commission, which recommended payment of additional price at the end of the season on 50:50 profit sharing basis between the growers and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... determination of SAP and/or the final price/additional purchase price fixed under Clause 5A would certainly be and/or said to be an appropriation of profit. However, at the same time, the entire/whole amount of difference between the SMP and the SAP per se cannot be said to be an appropriation of profit. As observed hereinabove, only that part/component of profit, while determining the final price worked out/SAP/additional purchase price would be and/or can be said to be an appropriation of profit and for that an exercise is to be done by the assessing officer by calling upon the assessee to produce the statement of accounts, balance sheet and the material supplied to the State Government for the purpose of decidin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of law by the Hon ble Supreme Court in the aforenoted judgment. 7. At this stage, it is made clear 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) of the Act, as has been held by the Hon ble Supreme Court supra. Needless to say, the assessee will be allowed a reasonable opportunity of hearing by the AO in such fresh determination of the issue. Ergo, this ground is allowed for statistical purposes. 8. The second issue raised in the assessee s appeal vide ground no.5 and the only issue raised in the Revenue s appeal relates to giving of sugar to members and non-members at concessional rates. 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom 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 order on this score is set aside and the matter is restored to the file of AO, 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 (supra) . Restoration to the AO is necessitated because ..... X X X X Extracts X X X X X X X X Extracts X X X X
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