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TMI Blog2019 (8) TMI 1047X X X X Extracts X X X X X X X X Extracts X X X X ..... der 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1961. ( 3) The CIT (Appeals) failed to appreciate that the total sale price including the above amount of ₹ 242,12,52,595/- was allowable both under section 28 and section 37 and the disallowance thereof results into Department taxing unreal and wrong amount of income. ( 4) The CIT (Appeals) failed to appreciate that on identical facts, in the past in all the assessment years, such price was allowed by various Assessing Officers of the Appellate Authorities, and therefore, there was no justification on the part of The Assessing Officer to decide to the contrary, and thus, offend the law laid down by the Supreme Court in CIT v. Excel Industries Ltd. [2013] 358 ITR 295 (SC) holding that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Accordingly, the AO made addition of ₹ 242,12,52,600/- is on account of excess sugar cane price paid. 5. Being aggrieved, the assessee filed an appeal before the ld. CIT (A). The Ld. CIT (A) has confirmed this addition against which the assessee has come up in appeal before the Tribunal The CIT (A) has confirmed the addition made by the AO. 6. Being, aggrieved the assessee filed this appeal before the Tribunal. The learned counsel for the assessee submitted that the issue under consideration is squarely covered by the recent decision of Hon ble Supreme Court in the case of CIT Vs. Tasgaon Taluka S.S.K. Ltd. [2019] 103 taxmann.com 57 (SC). 7. Per contra, the learned D.R. relied on lower ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 nonmembers. 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 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 pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 deciding/fixing the final price/additional purchase price/SAP under Clause 5A of the Control Order, 1966. Merely because the higher price is paid to both, member ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omponent 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, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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