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TMI Blog2019 (6) TMI 1399X X X X Extracts X X X X X X X X Extracts X X X X ..... ve assessees, in accordance with law. Thus, the issue of excess cane price paid to sugarcane suppliers is allowed for statistical purposes in the aforesaid terms. Taxability of Concessional Sugar Price qua the levy price and the manner of giving effect to the directions of the Hon ble Apex Court in the case of CIT vs. Krishna SSK [ 2004 (9) TMI 6 - SUPREME COURT] - HELD THAT:- We find there is merit in the submissions of the AR. In all these appeals, the CIT(A) has failed to decide the appeals of the assessees in consonance with the above discussed direction of Hon‟ble Apex Court in the case of Krishna SSK Ltd. (supra). Accordingly, in these bunch of appeals the issue of sale of sugar at concessional price to the members should be ideally remanded to the file of Assessing Officer for fresh consideration and adjudication of the issue on merits and law. In fact, the Hon‟ble Supreme Court remanded the issue to the file of the CIT(A) for complying its direction in the case of Krishna SSK Ltd. (supra). However, in order to avoid multiplicity of the proceeding before different officers, and to be in tune with our findings given in para 7 of this order, we find, remand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose. Sale of bio-compost at concessional rate - HELD THAT:- We observe that this addition is akin to one of the core issues i.e. sale of sugar at concessional rate to the members. Since, we have restored the said issue to the file of Assessing Officer, we deem it appropriate to restore this issue as well to the file of Assessing Officer for deciding it afresh by applying the same principle. Accordingly, this ground of appeal by the assessee is allowed for statistical purpose. Disallowance of advertisement expenditure - HELD THAT:- With respect to nature of expenditure and have also perused the decision on which the ld. AR has placed reliance. The Tribunal in the case of Commissioner of Income Tax Vs. Shri Panchganga S.S.K. Ltd.had allowed the advertisement expenditure on account of Subhechcha greetings holding that the expenditure was necessary to maintain cordial relations with the members. The Department assailed the findings of Tribunal before the Hon‟ble High Court. The Hon‟ble High Court upheld the findings of Tribunal by following the earlier decision rendered in the case of Commissioner of Income Tax Vs. Shri Panchganga S.S.K. Ltd. [ 2001 (6) TM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on account of contribution towards Chief Minister relief fund - HELD THAT:- We find that this issue has been considered by Co-ordinate Bench in the case of Majalgaon Sahakari Sakhar Karkhana Ltd. Vs. ACIT [ 2019 (3) TMI 906 - ITAT PUNE] there is no dispute that the assessee did make contribution to the Chief Minister Relief Fund. As against the assessee claiming the entire amount as deduction in its Profit and loss account, the AO opined that the said contribution was eligible for deduction u/s. 80G(iiihf) of the Act at the rate of 50% along with other qualifying sums. The ld. CIT(A) sustained the entire 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 Loan refund - HELD THAT:- A perusal of the assessment order reveal that the Managing Director of the assessee Sahakari Sakhar Karkhana had agreed for the additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -03-2009. In view of the fact that Khodki charges have been held as deductible by the Hon‟ble Jurisdictional High Court, this issue has to be decided in favour of the assessee. We hold and direct accordingly. Disallowance of contribution towards Area Development Fund - HELD THAT:- Contention of the assessee in para 45 that the realisations made towards the Area Development Fund were impressed with the specific legal obligation to spend the money for specified purposes which were unrelated to the business of the sugar factory and hence, could not be treated as income of the assessee. Eventually, the Hon‟ble Supreme Court remitted the matter back for fresh determination. It is noticed that in the appeals under consideration, the ld. CITs(A) have not considered the impact of the judgment of the Hon‟ble Supreme Court in Siddheshwar Sahakari Sakhar Karkhana Limited [ 2004 (9) TMI 6 - SUPREME COURT] and decided the issue without taking note of the factors directed to be considered in the aforenoted case. In view of the above decision of Hon‟ble Supreme Court, we set-aside such impugned orders and remit the matter to the file of the respective AOs for decidin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Karkhana ltd., The Malegaon Sahakari Sakhar Karkhana Ltd., Raosahebdada Pawar Ghadganga Sahakari Sakhar Karkhana Ltd., Ajinkyatara Sahakari Sakhar Karkhana Ltd., Ajinkyatara Sahakari Sakhar Karkhana Ltd., Shree Adinath Sahakari Sakhar Karkhana Ltd., Sahakar Maharshi Bhausaheb Thorat Sahakari Sakhar Karkhana Ltd., Shri Pandurang Sahakari Sakhar Karkhana Ltd., The Shrigonda Sahakari Sakhar Karkhana Ltd. Versus ACIT, DCIT, ITO, Pune. For the Appellant : Shri Pramod Shingte, Shri Prasanna Joshi, Shri K. Srinivasan, Shri Pratik Sandbhor For the Respondent : Smt. Nandita Kanchan, Shri Pankaj Garg, Shri Sudhendu Das ORDER PER BENCH : These bunch of 44 appeals by the assessee and the Revenue for assessment years mentioned in the caption against the names of the assessees, are directed against the orders of Commissioner of Income Tax (Appeals), in the respective cases. All the assessees, in the present set of appeals are running co-operative sugar factories. They purchase sugarcane from the farmers and sale white sugar after manufacturing the same. The core issues raised in these bunch of appeals are as under:- i. Taxability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee paid to members and non-members a final price which was in excess of that payable under clause 3 and 5A of the Sugarcane (Control) Order, 1966. The Assessing Officer took a view that the difference between the price paid by the assessees and in terms of clause 3 of the Order, determined by the Central Government, and the price determined by the State Government under clause 5A of the Order (and consequently paid by the assessee to the cane growers) was a distribution of profits and not deductible as expenditure. Alternatively, the Assessing Officer also held that the excess cane price paid to the cane growers over the statutory minimum price was disallowable under section 40A(2)(a) as excessive and unreasonable. The CIT(A) held that the price actually paid for the procurement of sugarcane was to be allowed as business expenditure, and that the excess payment of cane price as fixed by the State Government over and above the statutory minimum price for sugarcane to members and non-members could not be disallowed under section 40A(2)(b) of the Act, despite the fact that profit was one of the components in the price. 4. Referring to the facts and issues, the Ld. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eductible as expenditure. 6. Both the sides are unanimously agreeable that the extant issue of deduction for payment of excessive price for purchase of sugarcane, raised in most of the appeals under consideration, is squarely covered by the aforesaid judgment of the Hon‟ble Supreme Court. Respectfully following the precedent, we set-aside 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, whil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court. The ld. AR further pointed that the Co-ordinate Bench of Tribunal in the case of bunch of appeals lead case being Siddheshwar Sahakari Sakhar Karkhana Ltd. Vs. DCIT in ITAT No. 1210/PUN/1997 decided on 01-05-2019 has dealt with this issue. We have considered the submissions of ld. AR, the appeals are restored back to the file of Assessing Officer leaving the question open for consideration and examination by the Assessing Officer. The assessees are at liberty to raise all their contentions before Assessing Officer. 8. Thus, in view of the assertions made by both the sides that the facts in the present set of appeals being identical to the issue relating to excess sugarcane price paid by the assessee the issue is restored to the file of Assessing Officer with similar directions as above in the cases of M/s. Vasant Rao Dada Patil SSK Ltd. (supra) and also consider the contentions of assessee with respect to SMP vis-a-vis FRP regime, where ever raised. The Assessing Officer shall decide the issue, after affording reasonable opportunity of hearing to the respective assessees, in accordance with law. Thus, the issue of excess cane price paid to sugarcane suppli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India. Thus, the includibility of such concessional sugar price in the total income of the assessee assumes great significance and the same is conspicuously missing in the impugned orders of the respective CIT(A). 11. In the light of above, the ld. AR for the assessee furnished following written submissions raising the issues for consideration of the CIT(A) in respective cases :- 1. Hon‟ble ITAT, Pune, in Chh. Shahu SSK ITA No. 1924-26/PN/90 vide order dated 8/8/1996, at paras 32-39, following ratio of A. Raman CO, 67 ITR 11 (SC), held that no income accrued to the assessee on sale of sugar at concession rate to its members. 2. Hon‟ble Bombay High Court, in CIT v. Terna SSSK, 301 ITR 222, has noted that Counsel for the Dept, in view of Circular No. 117 dt. 22/8/1973 did not press this ground in appeal. 3. Hon‟ble Supreme Court, in CIT v. Krishna SSK, (2012) 211 Taxman 109 (SC), has not referred to Dept, not pressing this issue in High Court. Hon‟ble Supreme Court has given following directions to the CIT(A) to decide the issue: a) Whether the difference between market price and the concessional price of sugar s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d custom of the industry. CIT(A)s have noted that State Govt. has now brought strict uniformity in this practice by issuing an order dt. 1/3/2006 u/s 79A of MCS Act, stating the eligibility for society to sell such sugar, its price and monthly quantum. d) Most CIT(A)s, having noted the aforesaid order dt. 1/3/2006, held that sugar sold at prices lower than levy sugar as provided of in the said order, would be taxable in assessee‟s hands at the difference between levy price and concessional price charged for infringement of the order. e) Some CIT(A)s held that concession sugar sold in excess of quantum permitted by order dt. 1/3/2006, would be taxable in the hands of the assessee society for infringement of the order. f) Some CIT(A)s held that concession sugar sold to cane growers who were not members was not permitted by order dt. 1/3/2006 and as such was its infringement and therefore, the concession given was taxable in the hands of the assessee society. g) Some assessee societies have not sold concessional sugar every month but only during Diwali or Gudi Padwa. If such sales were less than 5 kgs per month for the year, CIT(A)s have accep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee and the ld. DR that all these bunch of appeals need to be remanded to the file of Assessing Officer for fresh adjudication for the purpose of giving effect to the directions of Hon‟ble Apex Court in proper perspective. 13. On hearing both the sides, we find there is merit in the submissions of the AR. In all these appeals, the CIT(A) has failed to decide the appeals of the assessees in consonance with the above discussed direction of Hon‟ble Apex Court in the case of Krishna SSK Ltd. (supra). Accordingly, in these bunch of appeals the issue of sale of sugar at concessional price to the members should be ideally remanded to the file of Assessing Officer for fresh consideration and adjudication of the issue on merits and law. In fact, the Hon‟ble Supreme Court remanded the issue to the file of the CIT(A) for complying its direction in the case of Krishna SSK Ltd. (supra). However, in order to avoid multiplicity of the proceeding before different officers, and to be in tune with our findings given in para 7 of this order, we find, remanding to the file of the Assessing Officer is appropriate. Thus, we order accordingly. The Assessing Officer shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard business loss was also raised in some of the other appeals mentioned in the title. We find that this issue is consequential to the core issues of excessive cane price and sale of sugar at concessional rate. The outcome of the findings on the core issues will have bearing on the allowability of unabsorbed depreciation and carried forward business loss. Consequently, we deem it appropriate to restore this issue back to the file of Assessing Officer for reconsideration along with the core issues mentioned above. Accordingly, the ground of appeal relating to allowability of unabsorbed depreciation and carried forward business loss raised in the appeals is allowed for statistical purpose. Provision for Vasantdada Sugar Institute (VSI) Contribution. 17. The ld. AR submitted that the issue of provision for VSI contribution has been decided by the Tribunal while adjudicating bunch of SSK appeals in Majalgaon SSK Ltd. Vs. ACIT in ITA No. 308/PUN/2018 for assessment year 2013-14 decided on 14-03-2019. The Co-ordinate Bench followed the decision rendered in the case of Bhima S.S.K. Ltd. in ITA No. 1414/PUN/2000. The ld. DR fairly admitted that this issue has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period expenditure. 19. The ld. AR of the assessee submitted that in ITA No. 1726/PUN/2016 for the assessment year 2006-07 (at Sr. No. 28) prior period expenditure has been wrongly mentioned as ₹ 1,97,575/- in the grounds of appeal as against ₹ 24,294/-. The Commissioner of Income Tax (Appeals) disallowed prior period expenditure on the ground that the assessee has failed to show the period to which these expenses pertain. The ld. AR submitted that if an opportunity is granted, the assessee would furnish necessary documents before the Commissioner of Income Tax (Appeals) in support of his contentions. In view of the prayer made by the assessee, this ground of appeal is restored to the file of Assessing Officer. The assessee shall furnish relevant documentary evidence to support its contentions and the Assessing Officer after considering the same shall decide this issue afresh after affording reasonable opportunity of hearing to the assessee, in accordance with law. Consequently, this ground is allowed for statistical purpose. Sale of bio-compost at concessional rate. 20. The issue of sale of bio-compost at concessional rate emerges from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ince, the issue has already been decided in favour of the assessee by the Hon‟ble Jurisdictional High Court, on similar set of facts, the addition upheld by the Commissioner of Income Tax (Appeals) in the present appeals is deleted. Thus, this issue is decided in favour of the assessee. Disallowance of Sabha Samarambh expenses. 22. The expenditure claimed by the assessees under the head Sabha Samarambh are in nature of vehicle charges. The ld. AR submitted that the expenditure is incurred on transportation of numerous SSK shareholders to the events organised by SSK. The expenditure is incurred for spreading goodwill among shareholders and to make shareholders aware of latest development in cultivation of sugarcane. The Assessing Officer has made adhoc disallowance of 10% of such expenditure and the Commissioner of Income Tax (Appeals) has confirmed the same. 22.1 We have examined the impugned order. The assessee in First Appellate proceedings has placed reliance on the decision rendered in the case of Shankar SSK Ltd. Vs. DCIT wherein such expenditure is allowed to the extent of 75%. In the instant case the authorities below in the absence of co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or fee should flow from the statute. Any other payments payable or paid to the Government which do not fall within the realm of any enactment would not partake the character of tax, duty, cess or fee as envisaged u/s. 43B of the Act. 24.1 In the present case payments made by the assessees on account of Government Guarantee Fee to the Maharashtra Government are in respect of pre seasonal loans. It is neither emanating from the records, nor the Revenue has brought before us any material to show that the assessee is under obligation to pay Government Guarantee Fee on account of statutory requirement as revenue‟ to the State. The Hon‟ble Rajasthan High Court in the case of Commissioner of Income Tax Vs. Udaipur Distillery Co. Ltd. reported as 268 ITR 305 has held that tax‟, duty‟, cess‟ or fee‟ constituting a class, denotes various kinds of imposts by State in its sovereign power of taxation to raise revenue for the State. Within the expression of each specie each expression denotes different kind of impost depending on the purpose for which they are levied. The Hon‟ble High Court further clarified that merely levy of charge as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition. Thereafter, the assessee assailed the said addition before the Commissioner of Income Tax (Appeals). In First Appellate proceedings again the Counsel for the assessee made statement that the assessee does not wish to press this ground of appeal. Once, the ground has not been contested before the First Appellate Authority and the addition has been made on the basis of concession made before the Assessing Officer, the assessee cannot be granted liberty to assail the same addition before the Second Appellate Authority. It is not the case of assessee that the concession was wrongly recorded. We find no reason to interfere with the findings of lower authorities. Accordingly, the addition made on account of loan refund fund is upheld. Disallowance of unpaid professional tax u/s. 43B. 27. One of the ground raised by the Department in its appeal ITA No. 1667/PUN/2016 (at Sr. No. 32) is against deleting of disallowance made by the Assessing Officer in respect of Unpaid Professional Tax u/s. 43B of the Act. A perusal of impugned order shows that the Commissioner of Income Tax (Appeals) has granted relief to the assessee on the ground that the assessee has not cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Manjara Shetkari SSK Ltd. and others reported as 301 ITR 191 (Bom.). Against the findings of Commissioner of Income Tax (Appeals), the Revenue is in appeal before the Tribunal. 29.1 We have heard both the sides and have examined relevant material available on record. It is seen that Khodki charges were paid by the assessees as per the directions of Director of Sugar to compensate the farmers for loss caused by uneven cutting of sugar cane at the time of harvesting. This issue had came up for consideration before the Special Bench of Tribunal in DCIT Vs. Manjara Shetkari SSK Ltd. (2004) 85 TTJ (Mum.)(SB) 369. The Special Bench granted deduction for the aforesaid expenses. On further appeal by the Revenue, the Hon‟ble Bombay High Court approved the view taken by the Tribunal in allowing deduction for payment of Khodki Charges. The ld. CIT(A) has recorded that the SLP filed by the Department in the case of Jadamba SSK Ltd., on similar issue, has been dismissed by the Hon‟ble Supreme Court on 23-03-2009. In view of the fact that Khodki charges have been held as deductible by the Hon‟ble Jurisdictional High Court, this issue has to be decided in favour of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contentions of the assessee is that Maharashtra Sakhar Sangh is a federal body of all the sugar factories. The Sangh is rendering various services to all sugar factories such as acting as intermediary for purchase of Gunny bags, making available to sugar factories imported sulphar and other such items required by various sugar factories. The contentions of the assessee is that the contribution to Sakhar Sangh is not voluntary but are in accordance with the instructions issued by Commissioner of Sugar, Maharashtra State. The Assessing Officer disallowed assessee‟s claim of deduction u/s. 35(1) in respect of contribution made to Sakhar Sangh. The Commissioner of Income Tax (Appeals) in appellate proceedings restored the issue back to the file of Assessing Officer to verify whether the deduction claimed by the assessee u/s. 35(1) is by virtue of any notification by Central Government, if so the same should be allowed to the assessee. We do not find any infirmity in the directions given by the Commissioner of Income Tax (Appeals) in allowing the claim of assessee u/s. 35(1) subject to verification. We further observe that in view of directions given by the Commissioner o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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