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TMI Blog2007 (10) TMI 297X X X X Extracts X X X X X X X X Extracts X X X X ..... e-tax Act, 1961 (for short "the Act"), order dated November 30, 2004, of the Income-tax Appellate Tribunal, Chandigarh Bench "A", Chandigarh (hereinafter referred to as "the Tribunal"), passed in ITA No. 847/Chd/1995 (reported as Budhewal Co-operative Sugar Mills Ltd. v. Dy. CIT [2005] 94 TTJ (Chd) 293) relating to the assessment year 1993-94 has been challenged. The assessee has claimed that the following substantial questions of law arise for consideration of this court: "1. Whether, on the facts and in circumstances of the case, the addition sustained by the Tribunal on account of additional cane price paid to the sugarcane growers was justified in law and is legally sustainable ? 2. Whether, on the facts and in circumstances of the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arch 16, 1995, allowed the appeal in part. The Commissioner of Income-tax (Appeals) allowed the assessee's claim for deduction under section 80-I of the Act amounting to Rs. 2,39,447 and sustained the disallowance of additional sugarcane price amounting to Rs. 2,53,23,741. Against the same, the assessee took the matter in appeal before the Tribunal, who, vide order dated November 30, 2004 (supra) dismissed the appeal. 5. The point that arises for adjudication in the present appeal is whether the assessee-appellant was entitled to claim deduction on account of additional sugarcane price as a business expenditure especially when no payment had been made before the end of the financial year and the liability on account of such alleged expense ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the condition of not making the payments to the sugarcane growers and instead crediting the additional price to the share deduction account. The procedure for fixation of price as provided under clause 24A of the bye-laws of the society, reproduced elsewhere in this order, has also not been followed. In this case, it is not even the case of the assessee that the fixation of the final price of sugarcane was also in accordance with the formula provided under clause 24A of the bye-laws of the society or in pursuance to any order of the Government or any other authority. It is also noteworthy that when the assessee was running in losses, the sugarcane price had not been enhanced by fixing the final price after the end of the crushing season. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lotment of additional shares. 10. In the share deduction account there is a credit of Rs. 117.10 lakhs even as on March 31, 2003. As pointed out earlier share deduction account is accumulation of additional sugarcane prices deducted by the assessee in the four financial years. Clause 24A of the bye-laws to the extent of fixation of final price seems to 'have been operative only for four years. When the requirement of enhancement of share capital of the assessee was satisfied, no need was felt to fix the final price of sugarcane after the end of every crushing season in accordance with clause 24A of the bye-laws of the society. 11. From the agenda of the meeting of board of directors and the resolution passed by the board of directors ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear. The additional price is in excess of the price fixed by the Cane Commissioner for the crushing season. In this case price has been fixed for the supply made in the preceding year but the payment on account of additional price has not been made to the growers. It would have been perhaps a different matter, if the payment had been made to the members and they had applied for allotment of additional shares as per their wishes and requirements. The fixation of additional sugarcane price and the decision of not making payments to the sugarcane growers was unilateral and, therefore, it cannot be viewed as a simple fixation of actual price for supply of sugarcane in the previous year. 13. It may be relevant to refer to the powers and duties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceeding 10 per cent. on the value of paid up shares. (b) Price fluctuation fund. (c) Common good fund. (d) Contingent fund to meet any contingent liabilities arising out of taxes or otherwise. (e) Building fund. (f) Rebate to members in proportion to the purchase of sugar-cane/beet made from them. (g) Payment of incentive to the employees beside statutory bonus. (h) Research and development fund. (i) Any surplus which remains undistributed may be carried over to reserve fund or to the profits of the next year. It is evident from clause 29 of the bye-laws of the society, quoted above, that a provision is to be made out of the profits of the society, for price fluctuation fund and for rebate to members in proportion to the purchase o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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