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TMI Blog2022 (1) TMI 1063X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 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 provisions of section 40A(2) of the Act, as has been held by the Hon ble Supreme Court supra. Thus the grounds of appeal raised by assessee are restored back to the file of Assessing Officer to decide the issue afresh in accordance with law to follow the decision of coordinate Bench of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate Government and hence, not justified. As per Sr. No. 1 above 3 On the facts and in the circumstances of the case as well in law, both the lower authorities have overlooked to see and appreciate that while computing profits of appellant society, the price to be allowed as a deduction for sugarcane supplied by farmers is the price fixed by its Board of Directors giving reasons for payment of competitive price, being approved/certified by the State Government authorities and hence, the action of the C.I.T.(Appeals) confirming the inferences of the AO to restrict the claim of sugarcane purchase price to the notified Statutory Minimum Price called FRP, which is a support price, is without jurisdiction, perverse, arbitrary, subjective, conjectural, illegal, invalid, bad in law and therefore, liable to be quashed. As per Sr. No.1 above 4 On the facts and circumstances of the case as well in law, the order of the C.I.T.(Appeals) ought to have held that the price of cane (main raw material) purchased by the appellant co.operative society from its members and other farmers (unregistered/nominal members) at the competitive price, was contractually fixed as permitted by Section 9 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rejecting the detailed various submissions made during the course of assessment/appeal proceedings including the Statutory Audit reports of the Govt. Auditors, the Statement of Accounts, audited Balance Sheet and Manufacturing reports, other relevant materials submitted to the State Government for approval of the final cane price, other State's approve cane price, opportunity cost/cost of cultivation to the farmers per supplying sugarcane to the appellant co.operative society as well as strong agitations by farmers demanding higher prices much more than FRP and hence, the order passed by the C.I.T.(Appeals) confirming the action of the AO making disallowance to the extent of ₹ 1,47,21,71,832/- arbitrarily, capriciously and based on lopsided, imaginary and factually incorrect inferences, deserves to be annulled or nullified. As per Sr. No. 1 above. Total tax effect 61,86,90,640/- 2. The Revenue in its cross-appeal has raised the following grounds of appeal:- 1 Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing the AO to recomputed the FRP taken by the AO was as per the order dated 22.10.2013 of the Ministry of Consu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue. The Ld. AR for the assessee submits that the grounds of appeal raised by assessee is covered by the decision of co-ordinate Bench of this Tribunal in the case of Shree Khedut Sahakarai Khand Udyog Mandli Ltd. Vs. ITO for assessment year 2012-13 in ITA No.1206/AHD/2017 reported viz; (2019) 108 taxmann.com 258 (Surat-Trib.) and in the case of Shree Chalthan Vibhag Khand Udyog Sahkari Mandli Ltd. vs. Income Tax Officer, Ward- 1, Bardoli in ITA No.1205/AHD/2017 order dated 19.07.2019. Further the aforesaid order was followed in the case of Shree Ganesh Khand Udhyog Sahakari Mandli Ltd., vs. Income Tax Officer, order dated 29.09.2020. the Ld. AR for the assessee submits that Tribunal while restoring matter back to the file of assessing officer followed the order of Hon'ble Supreme Court in CIT Vs Tasgaon Taluka SSK Ltd ( 2019) 103 taxmann.com 57/ (412 ITR 240 SC) 5. On the other hand, Ld. Commissioner of Income-tax- Departmental Representative (DR) for the Revenue submits that he supports the order of Assessing Officer and considering the decision of Hon'ble Supreme Court (supra) the matter may be restored to the file of Assessing Officer to pass the order afresh in accordance with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder 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 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, ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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." 9. Both the sides are unanimously agreeable that the extent issue of deduction for payment of excessive price for purchase of sugarcane 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 AO for deciding it afresh as per law in consonance with the articulation of law by the Hon'ble Supreme Court in the afore noted 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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