IN HIGH COURT OF JUDICATURE AT BOMBAY BENCH AT AURANGABAD TAX APPEAL NO.11 OF 2004 Purna Sahakari Sakhar Karkhana Ltd., Co operative Society under provisions of Maharashtra Co operative Societies Act, 1960 having its registered office at Basamtnagar, Dist Parbhani APPELLANT VERSUS Puran Lal Deputy Commissioner of Income Tax, Special Range 2, Aurangabad, Having his Office at Bansilal Nagar, Aurangabad 431 001. ...RESPONDENT WITH TAX APPEAL NO.12 OF 2004 Purna Sahakari Sakhar Karkhana Ltd., Co operative Society under provisions of Maharashtra Co operative Societies Act, 1960 having its registered office at Basamtnagar, Dist Parbhani ...APPELLANT VERSUS ::: Uploaded on - 27/03/2015 ::: Downloaded on - 07/07/2020 10:09:26 ::: ta11.04 2 Puran Lal Deputy Commissioner of Income Tax, Special Range 2, Aurangabad, Having his Office at Bansilal Nagar, Aurangabad 431 001. ...RESPONDENT ... Mr.V.D. Hon Senior Counsel for Appellant. Mr.Alok Sharma, Standing Counsel for Respondent. ... CORAM: S.V. GANGAPURWALA AND A.I.S. CHEEMA, JJ. DATE : 25TH MARCH, 2015 ORAL ORDER : 1. In both these Appeals, common issue is involved. 2. Tribunal has held that amount collected towards distillery fund is not in nature of R.R.D., as such addition made by assessing officer is confirmed. 3. Mr. Hon, learned senior counsel for Appellant contends that said amount is in ::: Uploaded on - 27/03/2015 ::: Downloaded on - 07/07/2020 10:09:26 ::: ta11.04 3 nature of deposit and as such same cannot be added to income. said amount remains in account of assessee. Learned senior counsel relies on Judgment of this Court in case of Commissioner of Income Tax vs. Chhatrapati Sahakari Sakhar Karkhana Ltd. & Rahuri Sahakari Sakhar Karkhana Ltd., reported in (2000) 245 I.T.R. 498. According to learned senior counsel, this aspect that said amount is by way of deposit, has not been considered. Even bye laws permit said amount to be kept as deposit. 4. Mr. Sharma, learned counsel for Respondent relies on Judgment of Apex Court in case of Siddheshwar Sahakari Sakhar Karkhana Limited vs. C.I.T., Kolhapur, reported in 2004(12) S.C.C. 1, and submits that said amount is for utilization of present Appellant for construction of Distillery and as such addition made of said amount is proper. ::: Uploaded on - 27/03/2015 ::: Downloaded on - 07/07/2020 10:09:26 ::: ta11.04 4 5. Apex Court in case of Siddheshwar Sahakari Sakhar Karkhana Limited, referred supra, has observed in Para 59 as under: "59. As far as Sugar Cane Development Fund is concerned, case of Revenue seems to stand on stronger footing. In paper book, we find Circular dated 18th August, 1986 in which certain directive principles have been laid down to regulate expenditure to be incurred out of Cane Development Fund. items specified in directive principles are (1) green manuring, (2) lift irrigation schemes, (3) distribution of cane seeds, and (4) construction of new wells or deepening of old wells. sugar factory is required to make sure that any project which they want to undertake out of Cane Development Fund is technically and financially sound and to send proposals in advance to Directorate of Sugar for requisite sanction. projects will directly benefit members and augment sugarcane production which will incidentally help Society in its manufacturing operations. beneficiaries under scheme are no other than members of Sugar Cooperative Society concerned and advantage of enhanced production of sugarcane will ultimately be felt by Society itself. Unlike Area Development Fund, monies out of Cane Development Fund are not spent for purposes unconnected with growth and functioning ::: Uploaded on - 27/03/2015 ::: Downloaded on - 07/07/2020 10:09:26 ::: ta11.04 5 of sugar factory. Tribunal was inclined to view it as 'compulsory levy' on depositors collected by Government through agency of sugar factory. This approach in our view is wholly unsustainable and is in realm of surmise. We do not also see any scope for application of principle of diversion of income at source in case of collections made towards Cane Development Fund. amounts realized on this account undoubtedly reach assessee as its income and is utilized by assessee for benefit of itself and its members. As already observed, supervisory role of Directorate of Sugar to ensure that amount si properly utilized to promote objectives with which fund was formed, does not make material difference on quality and character of receipt. We are therefore of view that deductions made out of cane price towards Cane Development Fund should be treated as income of assessee. We are, of course, not expressing any view whether it is permissible deduction under provisions of Income Tax Act. If any such claim is made, Tribunal shall examine same when matters are taken up by it to consider issue of tax liability in relation to Area Development Fund." 6. Here in present matter also it has been observed by Commissioner as well as Tribunal that Distillery Fund is not in nature of R.R.D. and other fund. No liability is ::: Uploaded on - 27/03/2015 ::: Downloaded on - 07/07/2020 10:09:26 ::: ta11.04 6 attached to said fund. said fund is to be utilized by assessee for constructing Distillery and funds remain within control of Appellant. 7. In light of aforesaid discussion, substantial questions of law is answered accordingly. Both Appeals are dismissed. No costs. [A.I.S.CHEEMA,J.] [S.V.GANGAPURWALA,J.] asb/MAR15 Uploaded on - 27/03/2015 ::: Downloaded on - 07/07/2020 10:09:26 Purna Sahakari Sakhar Karkhana Ltd. v. Puran Lal, Deputy Commissioner of Income-tax, Special Range-2, Aurangabad