ITAT Pune allows appeal on cane price, sugar sale; rules in favor of assessee for VSI Contribution.

The ITAT Pune partially allowed the appeal, remitting the disallowance of excess cane price and concessional sugar sale back to the AO for fresh consideration in line with relevant Supreme Court judgments. The ITAT ruled in favor of the assessee for the VSI Contribution disallowance, allowing the deduction based on a precedent set by the Pune Benches of the Tribunal.

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Issues:
1. Disallowance of excess cane price paid to sugarcane suppliers.
2. Disallowance of sugar sold at concessional rates to members.
3. Disallowance of VSI Contribution.

Issue 1: Disallowance of Excess Cane Price:
The appeal concerns the confirmation of disallowance of Rs.89,71,55,742 for excessive cane price paid to sugarcane suppliers. The AO disallowed the amount as it exceeded the Fair and Remunerative Price (FRP) set by the Government. The AO relied on a Supreme Court judgment to support the disallowance. However, the ITAT Pune referred to a recent Supreme Court judgment in a similar case, directing the AO to determine the profit component embedded in the excess payment. The ITAT set aside the order and remitted the matter to the AO for a fresh decision, allowing deduction for the price paid under the Sugar Cane Control Order, 1966, and considering the profit-sharing aspect separately.

Issue 2: Disallowance of Concessional Sugar Sale:
The second issue involves the disallowance of Rs.1,64,81,286 for selling sugar to members at concessional rates. The AO treated the difference between market price and concessional rate as an appropriation of profit. The ITAT Pune referred to a Supreme Court judgment in a similar case, instructing the lower authority to consider if selling sugar at concessional rates is a common practice in the cooperative sugar industry. The ITAT set aside the order and remitted the matter to the AO for fresh examination based on the Supreme Court's directions.

Issue 3: Disallowance of VSI Contribution:
Regarding the disallowance of Rs.18,92,275 for Vasantdada Sugar Institute (VSI) contribution, the AO rejected the deduction under section 35(1) as the amount was not paid to the institute. However, the ITAT Pune noted a favorable decision by the Pune Benches of the Tribunal in a similar case, where the deduction was allowed. As there was no evidence of reversal or modification of this decision by the High Court, the ITAT decided in favor of the assessee, allowing the deduction for VSI Contribution.

In conclusion, the ITAT Pune partially allowed the appeal for statistical purposes, remitting the first two issues back to the AO for fresh consideration in line with relevant Supreme Court judgments. The ITAT decided in favor of the assessee for the VSI Contribution disallowance based on a precedent set by the Pune Benches of the Tribunal.

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