IN SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 8055 OF 2013 (Arisifng out of SLP(C) No. 11499/2010) |Commissioner of Income Tax-I |.. Appellant(s) | Versus |Tasgaon Taluka Sahakari Sakhar Karkhana Ltd. |.. Respondent(s) | ORDER 1. Leave granted. 2. This appeal is directed against judgment and order passed by High court of Judicature at Bombay in Income Tax Appeal (L)No. 884 of 2008, dated 18.6.2009. This Court while issuing notice to respondent was pleased to state as under : "Issue notice as to why matter should not be remitted to concerned Commissioner of Income Tax (Appeals) in terms of order of this Court in case of Deputy Commissioner of Income Tax, Nashik vs. Shri Satpuda Tapi Parisar SSK Limited [Civil Appeal No. 617 of 2010] dated 20th January, 2010." 3. It is relevant to state that in aforesaid decision this Court has remanded matter to Commissioner of Income Tax (Appeals) to decide certain issues in light of observations made by Court. 4. This Court in aforesaid decision has observed as follows: "..... applicability of Section 40A(2) of Income Tax Act, 1961 [`Act', for short] is linked to computation under Section 28 and Section 37 of Act. It is case of Department in all these cases that State Advised Price [S.A.P.] is determined on basis of price recommended by assessee(s) after finalisation of accounts and, therefore, differential amount between S.A.P. and S.M.P. would constitute appropriation of profits and not expenditure/expense under Section 37 of Act. On other hand, it is case of assessee(s) that they are bound to pay to cane growers final cane price as per S.A.P. fixed by State Government and mere fact that S.A.P. fixed by State Government is based on price recommended by assessee(s) after finalisation of accounts would not constitute appropriation of profits because appropriation would arise only after profits are determined and profits can be determined only after all expenses incurred for business are deducted from gross income. On above contentions, two questions were required to be considered by Department, which are as follows: "Whether above-mentioned differential payment made by assessee(s) to cane growers after close of financial year or after balance-sheet date would constitute expenditure under Section 37 of Income Tax Act, 1961; and whether such differential payment would, applying real income theory, constitute expenditure or distribution of profits?" In deciding above questions, Assessing Officer will take into account manner in which business works, resolutions of State Government, modalities and manner in which S.A.P. and S.M.P. are decided, timing difference which will arise on account of difference in accounting years, etc. In given case, if assessee has made provision in its accounts, then Assessing Officer shall enquire whether such provision is made out of profits or from gross receipts and whether such differential payment is relatable to cost of sugarcane or whether it is relatable to division of profits amongst members of Society? One of points which will also arise for determination by Assessing Officer will be on theory of over-riding title in matter of accrual or application of income. Therefore, in each of these cases, Assessing Officer will decide question as to whether obligation is attached to income or to its source. None of these questions have been examined by Authorities below. These questions are required to be examined because, in these case, we are not only concerned with applicability of Section 40A(2) of Act but we are primarily required to consider whether said differential payment constitutes expense or distribution of profits? Ordinarily, we would not have remitted these matters, particularly when they are for Assessment Year 1992-1993, but, for fact that this issue is going to arise repeatedly in future. It will also help assessee(s) in way that they will have to re-write their accounts in future depending upon outcome of this litigation. Therefore, in interest of justice, we remit these cases to concerned Commissioner of Income Tax (Appeals). We make it clear that both parties are given liberty to amend their pleadings before Commissioner of Income Tax (Appeals) takes up matter for final hearing. We express no opinion on merits of case. parties are at liberty to argue their respective points uninfluenced by any observations made in impugned judgments on applicability of Section 28 or Section 37 of Act. ......." 5. Keeping in view aforesaid decision, we set aside impugned judgment and order passed by High Court and remand matter to Commissioner of Income Tax (Appeals) to faithfully follow observations and directions issued by this Court in Satpuda Tapi Parisar SSK Limited case (Supra). 6. Civil Appeal is disposed of accordingly. 7. All contentions of both parties are left open. .........J. [ H.L. DATTU ] ....J. [ SUDHANSU JYOTI MUKHOPADHAYA] NEW DELHI, SEPTEMBER 10, 2013 ITEM NO. 28 COURT NO.4 SECTION IIIA SUPREME COURT OF INDIA RECORD OF PROCEEDINGS Petition(s) for Special Leave to Appeal (Civil) No(s).11499/2010 (From judgement and order dated 18/06/2009 in ITA No.884/2008 of HIGH COURT OF BOMBAY) C.I.T-I Petitioner(s) VERSUS TASGAON TALUKA SAHAKARI SAKHAR KARK.LTD. Respondent(s) Date: 10/09/2013 This Petition was called on for hearing today. CORAM : HON'BLE MR. JUSTICE H.L. DATTU HON'BLE MR. JUSTICE SUDHANSU JYOTI MUKHOPADHAYA For Petitioner(s) Mr. Arijit Prasad, Adv. Mr. T.M. Singh, Adv. Ms. Rashmi Malhotra, Adv. Mr. B.V. Balaram Das,Adv. For Respondent(s) Mr. Chinmoy Khaladkar, Adv. Mr. Vimal Dave, Adv. UPON hearing counsel Court made following ORDER Leave granted. Civil Appeal is disposed of in terms of signed order. | [ Charanjeet Kaur ] | | [ Vinod Kulvi ] | |Court Master | |Asstt. Registrar | [ Signed order is placed on file ] Commissioner of Income-tax-I v. Tasgaon Taluka Sahakari Sakhar Karkhana Ltd