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TMI Blog2019 (5) TMI 1776X X X X Extracts X X X X X X X X Extracts X X X X ..... o assessee. Sale of sugar at concessional rate to Members - Tribunal in Majalgaon Sahakari Sakhar Karkhana Ltd. Vs. ACIT [ 2019 (3) TMI 906 - ITAT PUNE] have remitted the issue back to the file of Assessing Officer vide its deliberations of order to apply the ratio laid down in CIT Vs. Krishna Sahakari Sakhar Karkhana Ltd. [ 2012 (11) TMI 669 - SUPREME COURT] and determine whether difference between average price of sugar sold in the market and that sold to the Members at concessional rate was the appropriation of profits or not. Following the same parity of reasoning, this issue is also remitted back to the Assessing Officer to decide in line with same directions. Further in some cases, sugar is given at particular quantity, free of cost, as per Government approval, instead of monthly concessional sugar. Such cases are to be decided independent of Krishna S.S.K. Ltd. ratio. The Assessing Officer is directed to take note of the Government approval in this regard, while deciding the issue. Area Development Fund - HELD THAT:- Assessee is entitled to the claim of Area Development Fund and same is to be allowed in the hands of assessee. See LOKNETE BALASAHEB DESAI SAHAKARI SAKHAR KARKH ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (H T) expenses incurred by Co-operative Sugar Mills for procuring sugarcane from farmers, who are members of Co-operative Sugar Mills. As per the said Circular, it was held that expenses were incurred by Sugar Mills for ensuring an adequate and sustained supply of freshly cut sugarcane, which was an essential input for continuous running of such mills and hence, expenses were for commercial expediency. In view thereof, we hold that H T expenses paid by the assessee are to be allowed as expenditure incurred wholly and exclusively for the purpose of business. Status of assessee to be adopted - assessee had claimed itself to be Cooperative Society and the authorities below have assessed the status as Association of Persons - HELD THAT:- AR pointed out that status to be adopted is Co-operative Society and not AOP. We find merit in the plea of assessee and the said issue raised is thus, allowed. Allowability of cane grant - Allowable business expenditure - HELD THAT:- Assessee claimed the said expenditure as deductible as the same was compensation paid to the cane suppliers for not crushing their cane after cutting and harvesting as per agreement entered into with the aforesaid parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 600, 601/PUN/2014, 626 & 627/PUN/2014, 958 & 960/PUN/2014, 1225/PUN/2017 & 1227/PUN/2014, 1230/PUN/2014 TO 1232/PUN/2014, 1073/PUN/2015, 282/PUN/2016, 167/PUN/2013 TO 170/PUN/2013, 1666/PUN/2016, 1090/PUN/2016, 1500/PUN/2016, 1498/PUN/2016, 2192/PUN/2016, 2193/PUN/2016, 1199/PUN/2016, 734/PUN/2016, 1256/PUN/2016, 2496/PUN/2016, 2852/PUN/2016, 2897/PUN/2016, 2768/PUN/2016, 1497/PUN/2012, 1541/PUN/2012 Shri Pandurang SSK Ltd., Karmyogi Shankarraoji Patil SSK Ltd., Vaidyanath SSK Ltd. Versus The Jt. Commissioner of Income Tax, Range-2, Aurangabad The Dy. Commissioner of Income Tax, Circle-1, Jalgaon Versus Bhaurao Chavan SSK Ltd., Chopda Shetkari SSK Ltd., Kumbhi Kasari Sahakari Sakhar Karkhana Ltd., Shri Tatyasaheb Kore Warana Sahakari Sakhar Karkhana Ltd., Shri Chh. Sahu SSK Ltd., Kadwa SSK Ltd., Shri Ashok SSK Ltd. Versus The Income Tax Officer, Ward-3, Ahmednagar Shivajirao NilangekarPatil Sahakari Sakhar Karkhana Ltd., Dyaneshwar SSK Ltd., Sadashivrao Mandlik Kagal Taluka SSK Ltd., Sahkarmahrshi Bhausaheb Thorat SSK Ltd., Satpuda Tapi Parisar SSK Ltd., Shri Vithal SSK Ltd., Shree Rameshwar SSK Ltd., Pd. Dr. Vithalrao Vikhe Patil SSK Ltd., Sahakar Maharshi Shankarrao Mohite P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of appeals:- Sr. No. Issue 1 Excess Cane Price 2 Sale of sugar at concessional rates to members 3 Area Development Fund 4 Late deposit of Employees Contribution to PF, ESIC, etc 5 Provision of VSI Contribution 6 Contribution to Chief Minister‟s Fund 7 Khodki Charges 8 Deduction u/s. 80P(2)(d) on Interest and Dividend 4. Shri Pramod Shingte, the learned Authorized Representative pointed out that several issues have arisen relating to different assessee. It was pointed out that the Hon'ble Supreme Court in DCIT Vs. Shri Satpuda Tapi Parisar S.S.K. Ltd. and others (2010) 326 ITR 402 (SC) had directed verification in the hands of assessee as to whether there was any distribution of profits. However, the matter was then referred to larger bench in CIT Vs. Tasgaon Taluka S.S.K. Ltd. and others. With lead order in Civil Appeal No.8890 of 2012, the Hon'ble Supreme Court vide judgment dated 05.03.2019 had observed that in DCIT Vs. Shri Satpuda Tapi Parisar S.S.K. Ltd. and others (supra), the earlier decision of the Hon‟ble Supreme Court had not been considered and hence, the issue was referred to larger bench. The larger bench in CIT Vs. Tasgaon Taluk ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Desai Sahakari Sakhar Karkhana Ltd. Vs. DCIT in ITA Nos.2065 to 2075/PN/2012, relating to assessment years 1991-92 to 2001-02, order dated 28.02.2014 and there was no need to set aside the issue to the file of Assessing Officer. Our attention was drawn to para 18 of the said decision and it was submitted that expenditure is to be allowed as "business expenditure‟ in the hands of assessee. 8. Another point which was raised by Smt. Shubhada A Koppa, the learned Counsel that after assessment year 2009-10 the business scenario of payment of Cane Price of sugarcane had undergone change and there was no Statutory Minimum Price (in short "SMP‟), but basis was Fair and Remunerative Price (in short "FRP‟), which was different from SMP. So, the ratio of the Hon'ble Supreme Court in CIT Vs. Tasgaon Taluka S.S.K. Ltd. and others (supra) cannot be applied from assessment year 2009-10 and in such circumstances, it would be difficult to give effect to the decision of the Hon'ble Supreme Court. It was further pointed out by her that in some cases instead of monthly concessional sugar to be given to the Members, sugar was being given at particular quantity, free of cost, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ized Representative for the assessee pointed out that the said addition has to be confirmed in the hands of assessee but the matter is to be set aside to the Assessing Officer to allow the deduction under section 80G of the Act, after due verification. 15. Other Authorized Representatives supported the submissions made by these Counsels and took us through individual grounds of appeal raised. 16. It may be pointed out thereafter the cases of each of the assessee were taken up and in some cases, beside the above issues, certain other issues were also raised, which we shall deal with after deciding common issues raised in all the appeals. 17. The learned Departmental Representative for the Revenue fairly admitted that the issues stand covered by the order of the Hon'ble Supreme Court and needs revisit by the Assessing Officer as per directions of the Hon'ble Supreme Court in respect of excess cane price paid by S.S.K. group. In respect of other issues, he placed reliance on the orders of authorities below. 18. We have heard the rival contentions and perused the record. At the outset, it may be pointed out that appeal in 242/PUN/2013 is late by 49 days, against which the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich deals with all aspects of production of sugarcane and sales thereof including the price to be paid to the cane growers. Clause 3 of the Sugar Cane (Control) Order, 1966 authorizes the Government to fix minimum sugarcane price. In addition, the additional sugarcane price is also payable as per clause 5A of the 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 factories, to be worked out in accordance with the Second Schedule to the Control Order, 1966. Their Lordships noted that at the time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, the same can be dealt with and/or considered applying Section 40A (2) of the Act, i.e., the assessing officer on the material on record has to determine whether the amount paid is excessive or unreasonable or not........ 9.5 Therefore, the assessing officer will have to take into account the manner in which the business works, the modalities and manner in which SAP/additional purchase price/final price are decided and to determine what amount would form part of the profit and after undertaking such an exercise whatever is the profit component is to be considered as sharing of profit/distribution of profit and the rest of the amount is to be considered as deductible 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 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 Supr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emit this issue of deductibility of excess cane price to the file of Assessing Officer with necessary directions to apply the ratio laid down by the Hon'ble Supreme Court in the years to which it is so applicable and for the balance years i.e. after the modification of the Rules from assessment year 2009-10, to consider the changed guidelines and decide the same after allowing reasonable opportunity of hearing to the assessee. 23. It is contended by the learned Counsels before us that in addition to the issue before the Hon'ble Supreme Court in respect of excess cane price, there are in some cases, sugarcane was purchased on contracted rates / price out of area of operations. It was pointed out by them that this issue was not considered by the Hon'ble Supreme Court but the said deduction is to be allowed in the hands of assessee, which admittedly, is not covered by SMP price. Since the matter has been set aside to the file of Assessing Officer, then in the hands of relevant assessee, this issue may be looked into by the Assessing Officer. It was pointed out that in such cases, SMP would not have any role to pay. Consequently, such appeals are not governed by the ratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no merit in sending the issue back to the file of Assessing Officer. The relevant para 18 reads as under:- "18. Now the question before us is whether this collection made towards "ADF" by the assessee sugar factory is impressed with the specific obligation or assessee hold this money as a trustee as held in the case of Bijlee Cotton Mills (P.) Ltd. (supra)? Our answer is yes. In this case, even if initially it was by way of discretion the Sugar Co-operative factories were collecting the fund and spending the same on the different projects undertaken in the area of operation but subsequently the collection and use of fund was regulated by the intervention of the Govt. by issuing the order u/s. 79A of the Maharashtra Co-operative Society Act. The assessee has maintained the separate account in respect of this fund and as per the statement filed before us it is seen that the assessee sugar factory is utilizing the ADF on different projects as per the approval given in the annual general meeting (AGM). The assessee has to submit the report every year in respect of the collection and utilization of the amount under the ADF to the Government. Nowhere, it is the case of the Revenue t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against the confirmation of disallowance of contribution to Vasantdada Sugar Institute (VSI). The AO observed that the assessee made provision for Vasantdada Sugar Institute (VSI) contribution and claimed weighted deduction at 125% u/s.35(1)(ii) of the Act. The said amount was not paid to the institute. The same being only in the nature of provision, the AO did not allow deduction u/s.35(1)(ii). The ld. CIT(A) decided this issue in favour of the assessee by following an order passed by the Pune Benches of the Tribunal in the case of Bhima S.S.K. Ltd. (ITA No.1414/PUN/2000). 18. We have heard both the sides and gone through the relevant material on record. It is found that the ld. CIT(A) has determined this issue in favour of the assessee by following the order passed by the Pune Benches of the Tribunal in the case of Bhima S.S.K. Ltd. (supra). No material has been placed on record to show that this order of the Tribunal has been reversed or modified in any manner by the Hon'ble High Court. Respectfully following the precedent, we decide this issue in favour of the assessee." 31. Consequently, we allow the claim of assessee in this regard and direct the Assessing Officer to treat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... milar 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 and the recent judgment of Hon'ble Supreme Court in Tasgaon Taluka Sahakari Sakhar Karkhana Ltd. (supra) does not cover Khodki charges, we hold that this issue needs to be decided in favour of the assessee." 35. Following the same parity of reasoning, we allow this claim of assessee of Khodki charges. 36. Similarly, deduction claimed under section 80P(2)(d) of the Act on account of interest and dividend needs to be allowed in favour of assessee as allowed by the Tribunal in Majalgaon Sahakari Sakhar Karkhana Ltd. Vs. ACIT (supra) vide paras 24 to 26 at pages 31 to 33 of order. The findings of Tribunal are as under:- "25. We have heard both the sides and gone through the relevant material on record. Relevant part of section 80P reads as under : - "80P. (1) Where, in the case of an assessee being a co-operative society, the gross total income includes any income referred to in subsection (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums spec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19 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 account of late deposit of employees' contribution to the Provident fund." 38. Following the same parity of reasoning, we allow this claim of assessee also. 39. Another issue which is raised in some of the appeals is H&T expenses to be allowed, as per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alue of closing molassis in process of ₹ 3,68,850/-. The claim of assessee was that there was neither opening molassis in process nor closing molassis in process. The learned Authorized Representative for the assessee pointed out that molassis, if any, were not valued and the said principle has been followed consistently, whereas the Assessing Officer made the addition in the hands of assessee in the present year. Because of recognized practice which has been consistently followed by the assessee, there is no merit in the orders of authorities below in assessing the value of molassis in process, as closing stock in the hands of assessee. We direct deletion of said addition in the hands of assessee. Consequently, the ground of appeal No.6 raised by assessee is thus, allowed. ITA Nos.2119 & 2120/PUN/2014 45. In ITA Nos.2119/PUN/2014, the learned Authorized Representative for the assessee has fairly pointed out that grounds of appeal No.1b to 1d needs to be decided. 46. The Revenue authorities had disallowed 10% out of telephone expenses and vehicle maintenance expenses and 50% out of ceremony expenses. The learned Authorized Representative for the assessee has failed to bri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce the same are dismissed as not pressed. The ground of appeal No.2 raised by assessee is consequential and hence, the same is dismissed. ITA Nos.1497/PUN/2012 & 1541/PUN/2012 55. Now, coming to cross appeals in the case of Shri Chhatrapati Sahakari Sakhar Karkhana Ltd., wherein the ground of appeal No.1 in assessee‟s appeal is against deduction on account of Excess Cane Price. We have already set aside the issue to the file of Assessing Officer and following the same parity of reasoning, this issue is set aside to the file of Assessing Officer to decide the same in line with our directions in Sidheshwar Sahakari Sakhar Karkhana Ltd. (supra) 56. Coming to second issue of payment of VSI contribution, which stands allowed by the Pune Bench of Tribunal in the case of Bhima S.S.K. Ltd. (supra) and also with lead order in Majalgaon Sahakari Sakhar Karkhana Ltd. Vs. ACIT (supra) and following the same parity of reasoning, this issue thus, allowed. 57. The next issue raised vide ground of appeal No.3 is against deductibility of Cane Development Fund. Brief facts relating to the issue are that the assessee collects amounts on account of Cane Development Fund which are spent for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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