IN INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM ITA No.1408/PUN/2017 Assessment Year : 2012-13 Loknete Baburao Patil SSK Ltd., Laxminagar, A/P Angar, Tal. Mohol, Dist. Solapur 413214 Appellant PAN: AAAAL2719C Vs. Asst. Commissioner of Income Tax, Solapur Respondent Appellant by : Ms. Shubhada A. Koppa Respondent by : Ms. Nandita Kanchan // Date of Hearing : 23.07.2019 Date of Pronouncement: 19.08.2019 / ORDER PER SUSHMA CHOWLA, JM: appeal filed by assessee is against order of CIT(A)-7, Pune, dated 02.01.2017 relating to assessment year 2012-13 against order passed under section 143(3) of Income-tax Act, 1961 (in short Act ). 2. assessee has raised following grounds of appeal:- (A) Disallowance out of Sugarcane Purchases 1 Ld. CIT(A) ought to have followed judgement of ITAT, Mumbai dated 16/5/1968 in Pravara SSK in ITA No.10939-42 upheld by Hon'ble Supreme Court, 94 ITR 321, accepted by IT Dept. for over 3 decades, and as held by Supreme Court in Radhasoami Satsang, 193 ITR 321, it ITA No.1408/PUN/2017 2 Loknete Baburao Patil SSK Ltd. would be inappropriate to allow this position to be changed in subsequent year, as re-confirmed by Supreme Court in Municipal Corporation of Thane v. Vidyut Metalics (2007) 8 SCC 688. 2 AO erred in making disallowances for: a) Season 2010-11 Rs 13,37,81,571 being Rs 756.37/Mt out of Avg. price paid of Rs 2017.95/Mt for 1,76,873 Mt of sugarcane purchased from farmers, both members and non-members; and b) Season 2011-12 Rs 21,68,98,395 being Rs 750.42/Mt out of price paid of Rs 2025/Mt for 2,89,036 Mt of sugarcane purchased from farmers, both members and non-members aggregating to Rs.35,06,79,966 and reasons given by Ld. CIT(A) for confirming above disallowances are wrong and incorrect. 3 Ld. CIT(A) has stated facts on pages 16 to 40 which are not related to appellant, which are materially different to submissions of appellant and has ignored appellant's submissions while rejecting its pleas on premeditated basis. 4 Ld. CIT(A) ought to have held that price determined by appellant co- operative for purchase of cane for its sugar factory is different from that done by private businessman. 5 Ld. CIT(A) ought to have held that price of cane purchased by appellant from its members and other farmers was contractually fixed as permitted by section 9 of Sale of Goods Act and said purchase price was deductible in computing co-operative society's profits and gains from its business. 6 Ld. CIT(A) ought to have held that while computing profits of assessee society price to be allowed as deduction for sugarcane supplied by farmers is price fixed on co-operative principles as is required to be paid as per its bye laws and same cannot be restricted to notified statutory minimum price called Fair and Remunerative Price (FRP) which is support price. 7 Ld. CIT(A) erred in holding that uniform cane price paid to its members, to its non-members and to its gate-cane farmers, in excess of notified FRP was distribution of appellant society's profits to them. 8 Justification relied upon by Ld. CIT(A) and extensively quoted from another order of CIT(A) is totally out of place and is factually incorrect for year under appeal. 9 CIT(A) erred in ignoring justifications given: a) for season 2010-11 as per settlement with Shetkari Sanghtana at instance of State Govt. Rs 1850/Mt was paid as initial advance and thereafter on basis of cane prices paid in its area of operation and Board of Directors resolved to pay price of Rs 2025/Mt for sugarcane supplied by farmers and members in area of operation and Rs 1800/Mt for gatecane; b) for season 2011-12 appellant's Board of Directors resolved to pay Rs 2025/Mt; and holding that these payments were not wholly and exclusively incurred for purposes of business of assessee society. ITA No.1408/PUN/2017 3 Loknete Baburao Patil SSK Ltd. 10 Ld. CIT(A) erred in ignoring judgement of Hon'ble Supreme Court in 1995 Suppl 3 SCC 475 wherein it was held that what was paid by co- operative sugar factories in Maharashtra to farmers was "price" for their cane and Court had upheld cane price fixation orders of Commissioner of Sugar. 11 Ld. CIT(A) erred in ignoring fact that same AO had allowed comparable cane prices paid by private sector sugar mills as deductions in their assessments but cane price in excess of FRP was disallowed in hands of co-operative sugar factories. 12 Without prejudice to above, Ld. CIT(A) erred in holding that actual cane harvesting and transport cost incurred and paid by appellant to contractors and not to farmer cane suppliers be reduced from FRP. B) Concession Given in Sugar Sales to Members On facts and in circumstances of case, Ld. CIT(A) erred in holding that concession of Rs 15,68,412 in price given to members for sugar sold to them was "income" in hands of appellant. 3. Both learned Authorized Representatives fairly pointed out that issues raised in present appeal stands covered by earlier order of Tribunal on aforesaid issues, as in case of other Sahakari Sakhar Karkhana (SSK) cases. 4. first issue raised in present appeal is against disallowance on account of Excess Cane Price paid to sugarcane suppliers. 5. We find that said issue is squarely covered by order of Tribunal in bunch of appeals with lead order in case of Siddheshwar Sahakari Sakhar Karkhana Ltd. Vs. DCIT in ITA No.1210/PUN/1997, relating to assessment year 1992-93, order dated 01.05.2019. Tribunal has set aside issue of Excess Cane Price to file of Assessing Officer to follow guidelines issued by Hon ble Apex Court in CIT Vs. Tasgaon Taluka S.S.K. Ltd. and others in Civil Appeal No.8890 of 2012, judgment dated 05.03.2019. Further in respect of Fair and Remunerative Price (FRP) it was held as under:- 22. However, after assessment year 2009-10, scenario of payment of cane price to farmers has undergone change and distribution is on basis of Fair and Remunerative Price, which was different from SMP. Control Order, 1966 and working of SAP under clause 5A of said order ITA No.1408/PUN/2017 4 Loknete Baburao Patil SSK Ltd. does not govern payment of cane price to farmers after assessment year 2009-10. In such scenario, Assessing Officer is directed to re-look into claim of assessee as per amended guidelines issued in this regard and decide allowability of said expenditure in hands of S.S.K. group. Since SMP factor is not basis for allowing said expenditure, it would be difficult to calculate additional purchase price under clause 5A of Control Order, 1966. Accordingly, in present bunch of appeals, we remit this issue of deductibility of excess cane price to file of Assessing Officer with necessary directions to apply ratio laid down by Hon'ble Supreme Court in years to which it is so applicable and for balance years i.e. after modification of Rules from assessment year 2009-10, to consider changed guidelines and decide same after allowing reasonable opportunity of hearing to assessee. 23. It is contended by learned Counsels before us that in addition to issue before Hon'ble Supreme Court in respect of excess cane price, there are in some cases, sugarcane was purchased on contracted rates / price out of area of operations. It was pointed out by them that this issue was not considered by Hon'ble Supreme Court but said deduction is to be allowed in hands of assessee, which admittedly, is not covered by SMP price. Since matter has been set aside to file of Assessing Officer, then in hands of relevant assessee, this issue may be looked into by Assessing Officer. It was pointed out that in such cases, SMP would not have any role to pay. Consequently, such appeals are not governed by ratio laid down by Hon'ble Supreme Court in CIT Vs. Tasgaon Taluka S.S.K. Ltd. and others (supra). Assessing Officer is directed to decide issue after allowing reasonable opportunity of hearing to assessee. 6. Following same parity of reasoning, this issue is set aside to file of Assessing Officer. Thus, ground of appeal No.1 is allowed. 7. Now, coming to second ground of appeal raised by assessee, which is against addition made on account of sale of sugar at concessional rates. 8. learned Departmental Representative for Revenue pointed out that first issue which needs to be adjudicated is whether it is income in hands of assessee and this aspect has not been decided in case of assessee. 9. We find that Tribunal in Majalgaon Sahakari Sakhar Karkhana Ltd. Vs. ACIT in ITA No.308/PUN/2018, relating to assessment year 2013-14, vide consolidated order dated 14.03.2019 have remitted issue back to file of Assessing Officer vide its deliberations in para 11 at pages 22 to 24 of order to ITA No.1408/PUN/2017 5 Loknete Baburao Patil SSK Ltd. apply ratio laid down in CIT Vs. Krishna Sahakari Sakhar Karkhana Ltd. (2012) 211 TAXMANN 109 (SC) and determine whether difference between average price of sugar sold in market and that sold to Members at concessional rate was appropriation of profits or not. Following same parity of reasoning, this issue is also remitted back to Assessing Officer, who shall determine first aspect of case that whether any income chargeable in hands of assessee and determine quantum of income to be charged. Reasonable opportunity of hearing to assessee shall be provided by Assessing Officer in this regard. 10. In result, appeal of assessee is allowed as indicated above. Order pronounced on this 19th day of August, 2019. Sd/- Sd/- (ANIL CHATURVEDI) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER Pune; Dated : 19th August, 2019. GCVSR Copy of Order is forwarded to : 1. Appellant; 2. Respondent; 3. CIT(A)-7, Pune; 4. Pr.CIT-6, Pune; 5. DR , , B , ITAT, Pune; 6. Guard file. BY ORDER, //True Copy// Sr. Private Secretary ITAT, Pune Loknete Baburao Patil SSK Ltd. v. Asst. Commissioner of Income-tax, Solapur