9911796707
TMI Blog2009 (4) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... aid to be dividend to the members or shareholders or payment in the form of bonus as bonus also has to be paid from the accrued profits. We are in agreement with the views taken by the tribunal and the question at present has to be answered in the affirmative in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... content or source of milk, quality of milk, period of milk procurement. (b) It was paid only to member societies and not to other suppliers; (c) It was not linked to the price paid by government or other cooperative societies; (d) It was made on the basis of the accrued profits of the year and hence the amounted to distribution of profits; 6. Against the order of the A.O. an appeal was preferred by the assessee. The C.I.T. (Appeals) affirmed the claim of the assessee that the prices fixed provisionally were not found supported by any documentary evidence. The C.I.T. (Appeals) also observed that the assessee's arguments that such payment are made to keep an edge over its competitors and attract more and more members to supply milk to the assessee is without any merit. It was also held that the assessees has been unable to establish that the final market rate difference was paid at a fixed price per litre irrespective of the quality of the milk fat and its content. The C.I.T. (Appeals) substantially agreed with the reasoning of the A.O. and accordingly dismissed the appeal. 7. The assessees aggrieved preferred an appeal to the I.T.A.T. in respect of the findings recorded by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the resolution of final rate difference in the same case was passed after expiry of the relevant financial year. There was no legal obligation on the assessee society to make payment of final rate difference to member cooperative societies. Our attention is drawn to the fact that the C.I.T.(Appeals) has recorded a finding that in some cases the assessee paid commercial purchase price by even excluding the amount of final rate difference to milk producers as compared by the purchase price of milk to government and some other cooperative societies. It is submitted that there is also a finding of C.I.T. (Appeals), that in some cases the apex societies purchased milk under consideration at a fixed purchase price and not at provisional price. For these reasons, the appeals ought to be dismissed. 9. The entire argument sought to be advanced on behalf of the revenue is that what in fact is paid to the milk suppliers whether they be members or non-members is out of the profits of the society; The resolution to pay may be passed before the accounts are approved, but nevertheless, it is out of profits. That being the case the order of the A.O. as affirmed by the C.I.T. (Appeals) was ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es Act, 1960 (M.C.S.Act) sets not that no part of the funds other than the dividend equalisation or bonus equalisation funds as may be prescribed or the net profits of the society shall be paid by way of bonus or dividend or otherwise distributed among its members. Under section 65 the society shall construct its relevant annual financial statements and arrive at its consequent net profit or loss in the manner prescribed. The proviso explains that no part of the profits shall be appropriated except with the approval of the annual general meeting and in conformity with the Act, rules and bye-laws. From a reading of this provision, it is apparent that the net profits have first to be determined and then only can be appropriated after the approval of the annual general meeting. The net profits do not accrue from day to day or from month to month and profits have to be ascertained by comparison at two stated points of time. The assessee when it decided to pass a resolution to pay the price difference had not ascertained the net profits nor was a resolution passed at its A.G.M. to distribute the profits as by way of higher price difference. In the instant case, admittedly the decision t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause the board resolved to fix the final purchase price and pay on the last day of the accounting period it would not amount to application of profits. The Court also noted that the profits to be assessed have to be the " real profits " and are required to be determined on the ordinary principles of commercial trading and commercial accounting. The Court further noted as under : a) The expenditure in question cannot be termed to be application of income in absence of any evidence as to accrual of profits in light of settled legal position; (b) The payment of additional/final price made on the last day of the accounting year is allowable under section 28 of the Act being a necessary deduction for ascertaining the real profits on principles of commercial accounting and ; (c) The payment in question is alternatively allowable under section 37 of the Act having been incurred wholly and exclusively for the purpose of business carried on by the assessee in light of the evidence which has come on record ; 13. Coming to our case, (as we have noted this is not the case of distribution of profits) as the amount to be paid was not out of the profits ascertained at the annual general meeti ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
