×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
These are the latest case laws decided by various Income Tax Appellate Tribunals (ITAT) of India on Income Tax which have been published recently. The case laws are open for discussion and we invite expert comments from our members on its applicability and effect on relevant issues.
05-11-2019,Sahakar Maharshi Bhausaheb, Section 92C, 40A(2), 79(A), Tribunal Pune
These three appeals filed by the assessee relate to the assessment years 2007-08, 2009-10 & 2012-13. Since common issues are raised in these appeals, we are, therefore, proceeding to dispose them off by this consolidated order for the sake of convenience.
A.Y. 2007-08 :
2. The first issue raised on merits is against the confirmation of addition of Rs.54,41,283/- being sale of sugar at concessional rate to Members/Non-members.
3. We have heard both the sides and gone through the relevant material on record. It is seen that similar issue came up for consideration before the Tribunal in a batch of 75 appeals led by Manganga Sahakari Sakhar Karkhana Ltd. Vs. ACIT in ITA No.344/PUN/2017 and others. Vide order dated 01-10-2019, the Tribunal, on this issue, has held as under :
“11. On a representative basis, we are taking up the appeal filed by Manganga SSK Ltd. in ITA No.344/PUN/2017. The factual matrix of this issue is that the Assessing Officer (AO) observed during the course of assessment proceedings that the assessee had sold/supplied sugar to its members at concessional rate. On being called upon to explain as to why the difference between the Fair Market price and the Concessional price should not be disallowed as it was nothing but distribution of profit, the assessee relied on the judgment in CIT Vs. Terna Shetkari SSK Ltd. (2008) 168 Taxman 266 (Bom.) to contend that similar issue was not pressed by the ld. DR before the Hon’ble Bombay High Court, which implied that the Department acquiesced the decision of the lower courts in allowing relief. Not convinced with the assessee’s submissions, the AO opined that the disallowance in the case of Terna SSK Ltd. (supra) was made by the AO as nonbusiness expenditure. In his opinion, supply of sugar at concessional rate as against the prevalent market price was nothing but appropriation of profit and in the nature of application of income. Considering the difference between the market price and the concessional price charged vis-a-vis the quantity supplied by the assessee to its member cane-growers, the AO worked out an addition of Rs.8,32,433/-. The assessee carried the matter before the ld. CIT(A), who noticed that similar issue has been considered by the Hon’ble Supreme Court in the case of CIT Vs. Krishna Sahakari Sakhar Karkhana Ltd. and others (2012) 254 CTR 638 (SC) in which the matter has been restored for ascertaining whether the difference between the Fair Market price and the Concessional price of the sugar supplied to farmers should or should not be added to the total income of the assessee along with consideration of certain other factors. The ld. CIT(A) took note of an order dated 01-03-2006 passed by the Commissioner of Sugar, Maharashtra State, considering the directions issued u/s.79(A) of the Maharashtra Cooperative Societies Rules, 1960 providing, inter alia, that the sugar factories shall sell a maximum of 5kg of sugar per month to its members at the rate of levy sugar plus excise duty on free sugar; the factories shall not sell sugar at concessional rate if it has crushed less than 50% during the last season. In the light of the above order of Commissioner of Sugar, Maharashtra State, the ld. CIT(A) held that maximum 5 kg per month per member can be issued at the levy price and the difference between the levy price and the concessional price actually charged from the members up to the limit of 5 kg per month per member should be taxed in the hands of the assessee; and the difference between the market price and the concessional price on the quantity of sugar sold beyond 5 kg per member per month, should also be added to the total income. To buttress his view, he took support from Nagarbail Salt Owners Co-operative Society Ltd. (2016) 238 Taxman 689 (Karnataka) in which the sale proceeds were transferred to an account called ‘Distributable Pool Fund Account’ for distribution among the members of the Society. After such transfer, the Society offered remaining income to tax, which point of view of the assessee was jettisoned by the Hon’ble High Court. Based on this panorama of facts and the legal position, the ld. CIT(A) reduced the addition to some extent. Aggrieved thereby, the assessee has approached the Tribunal.
12. The assessees under consideration were represented by various ld. Counsel, who made elaborate arguments. They, inter alia, relied on certain decisions to bolster the argument that there can be no addition on account of sale of sugar at concessional price to the members of the assessee co-operative societies. It was submitted, by mainly relying on the judgment of Hon’ble Supreme Court in the case of A. Raman and Co. (1968) 67 ITR 11 (SC), that the law does not oblige a trader to make maximum profit out of his trading transactions. Reliance was also placed on certain other decisions including CIT Vs. Calcutta Discount Co. Ltd. 91 ITR 8 (SC); H.M. Kashiparekh & Co. Ltd. Vs. CIT 39 ITR 706 (Bom.); CIT Vs. Shoorji Vallabhdas & Co. 46 ITR 144 (SC); Rogers Pyatt Shellac & Co. Vs. Secretary of State for India 1 ITC 363 (Cal.); Union of India Vs. Azadi Bachao Andolan 263 ITR 706 (SC); and Vodafone International Holdings B.V. Vs. Union of India 341 ITR 1 (SC) to contend that the profit charged to tax by the authorities below was not in accordance with law as it amounted to taxing notional income.
13. Per Contra, the ld. DR relied on the judgment of Hon’ble Supreme Court in Tasgaon SSK Ltd. (supra) to contend that the authorities below rightly treated the difference between the Fair Market price and Concessional price charged from members of the assessees co-operative societies as ‘appropriation of profit’. For supporting the charging of lower price for sugar sold to members as constituting income, the ld. DR drew an analogy from the case of Tasgaon SSK Ltd. (supra) by submitting that, in that case, the price paid over and above the statutory market price for purchase of sugarcane from the members/non-members of the societies has been held by the Hon’ble Supreme Court as ‘appropriation of profit’ and hence chargeable to tax. He submitted that there is no qualitative difference between the two situations viz., the first in which sugarcane is purchased from the members at excessive price and the differential amount is charged to tax as ‘appropriation of profit’ and the second in which sugar is supplied at concessional price and the difference between the Fair Market Price and the Concessional Price is charged to tax again as ‘appropriation of profit’.
14. We have heard both the sides and gone through the relevant material on record. Before proceeding further, we consider it expedient to mention that the issue of sale of sugar to members of a cooperative society at concessional price came up for consideration before various Benches of the Tribunal across the country. The Pune Benches of the Tribunal vide its order dated 08-08-1996 in Chhatrapati Sahu SSK Ltd. Vs. DCIT (ITA No.1924/PN/1990), a copy placed on record, decided this issue in favour of the assessee by relying on the judgment in the case of A. Raman & Company (supra). Thereafter, several orders came to be passed by various benches of the Tribunal. All such orders were challenged by the Revenue before the respective Hon’ble High Courts. In the case of Terna SSK Ltd. (supra), one of the issues raised by the Department was against the deletion of addition made on account of sugar supply to members at concessional rate. The ld. Counsel for the Revenue did not press this issue before the Hon’ble High Court, as a result of which such ground was dismissed. Various orders passed by the Tribunal came up for adjudication before the concerned Hon’ble High Courts. The Hon’ble Bombay High Court in CIT Vs. Kisanveer Satara Sahkar Karkhana