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TMI Blog2020 (9) TMI 1234X X X X Extracts X X X X X X X X Extracts X X X X ..... profit. Only that part/component of profit, while determining the final price worked out/SAP/Additional price would be and/or the said to be an appropriation of profit and for that an exercise is to be done by the AO 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 fixing the final price/additional price/SAP under Clause 5A of control order 1966. We restore the file of the AO for deciding the issue as afresh in accordance with the decision to Hon'ble Supreme Court and will pass the order in accordance with law. Needless to direct that before passing the order the AO will consider the facts already available on record and shall grant opportunity of hearing to the assessee. The assessee is also directed to provide all the necessary details, evidences and information to the AO in accordance with the direction of Hon'ble Apex Court in the case of Tasgaon Taluka (supra). Appeal of the assessee is allowed for statistical purposes. - ITA No. 1190/AHD/2017, 249 and 248/SRT/2018 - - - Dated:- 29-9-2020 - Pawan Singh, Member (J) And Dr. Arjun Lal Saini, Member (A) For the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. Ld. CIT (A) erred in law and on facts in holding that 'Real Income Theory' is not applicable to the case since surplus remaining after adjusting revenue against expenditure and provisions for anticipated expenditure constitutes taxable profits that should be first offered to tax under Income Tax Act. 8. Ld. CIT (A) erred in law and on facts making irrelevant observation that the appellant has devised a colorable device to distribute the entire profit in the garb of cane price to avoid payment of any tax on its income. 9. Levy of interest u/s. 234A/234B/234C 234D of the Act is unjustified. 10. Initiation of penalty proceedings u/s. 271(1)(c) of the Act is unjustified. 2. Brief facts of the case are that the assessee is a Cooperative Society is running Cooperative Sugar Mill engaged in production of sugar and its bye-products. The assessee filed its return of income for AY. 2012-13 on 29.09.2012 declaring at 'Nil' income. During the assessment proceedings, the Assessing Officer (AO) noted that the assessee were making payment to sugarcane supplier/agriculturists over and above the SMP declared by the Central Government for particular season (crushin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whole amount of difference between SMP and the SAP per se cannot be said to be an appropriation of profit. Only that part/component of profit, while determining the final price worked out/SAP/Additional price would be and/or the said to be an appropriation of profit and for that an exercise is to be done by the AO 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 fixing the final price/additional price/SAP under Clause 5A of control order 1966. 4. The ld AR for the assessee specifically submits that the assessee is in practice to enter into the agreements with the sugar cane grower regarding the price. The agreement is made at the beginning of the each season. Thereby the sugar cane purchase expenses are being fixed well in advance and not at the end of the season. The assessee is also in practice to pass resolution in its Annual General Meeting of current financial year regarding the agreed price for upcoming season. In support of this contention the assessee has already filed copies of the agreements with the agriculturists/sugar cane grower and the copy of the resolution of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re this Court for consideration is, whether the sugarcane purchase price paid to the cane growers by the assessee-society more than the SMP and is determined under Clause 5A of the Control Order, 1966, can be said to be the sharing of profit/appropriation of profit or is allowable as expenditure? 9.2 While considering the aforesaid issue/question, the mechanism for determining the SMP and SAP under the Control Order, 1966 is required to be referred to and considered. As per Clause 3 of the Control Order, 1966, the Central Government may, after consultation with such authorities, bodies or associations as it may deem fit, by notification in the official Gazette, from time to time, fix the minimum price of sugarcane to be paid by producers of sugar or their agents for the sugarcane purchased by them. While fixing/determining the SMP under Clause 3 of the Control Order, 1966, the Central Government is required to consider the following aspects: a the cost of production of sugarcane; b the return to the grower from alternative crops and the general trend of prices of agricultural commodities; c the availability of sugar to the consumer at a fair price; d the price at wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of September [vide item 7(ii) below] which is carried forward and adjusted in the sale realisations of the following year. 6 'C' is the quantity in quintals of sugarcane purchased by the producer of sugar during the sugar year. 7 The amount 'R' referred to in Explanation 2 shall be computed as under, namely:-- i the actual amount realised during the sugar year; and ii the estimated value of the unsold stocks of sugar held at the end of 30th September, calculated in regard to free sugar stocks at the average rate of sales, namely, during the fortnight 16th to 30th September and in regard to levy sugar stocks at the notified levy prices as on the 30th September. Explanation.--In this Schedules Sugar means any form of sugar containing more than ninety per cent sucrose. 9.4 At this stage, it is required to be noted that Clause 5A was inserted in the year 1974 on the basis of the recommendations made by the Bhargava Commission. As observed by this Court in the case of Maharashtra Rajya Sahkari Sakkar Karkhana Sangh Ltd.(supra), the Bhargava Commission had recommended payment of additional price at the end of the season on 50:50 profit sharing basis b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owever, 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, members and non-members, qua the members, still the question would remain with respect to the distribution of profit/sharing of the profit. So far as the non-members are concerned, 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. However, this is not the subject matter in the present appeals. We are restricting the pres ..... X X X X Extracts X X X X X X X X Extracts X X X X
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