Sugar cooperative receives favorable ruling on multiple deductions including sugarcane purchases and development fund contributions

The ITAT PUNE remitted multiple issues to the AO for fresh consideration following SC precedents. Regarding excessive sugarcane purchase prices, the matter was remanded per Tasgaon Taluka S.S.K. Ltd. judgment, directing the AO to allow deductions under clause 3 of Sugar Cane Control Order 1966 while disallowing profit distribution components. The concessional sugar sale issue was also remitted to AO for reassessment under Krishna Sahakari Sakhar Karkhana principles. Area Development Fund contributions were remanded following Siddheshwar Sahakari Sakhar Karkhana guidelines. The Tribunal deleted additions for delayed ESI/EPF deposits made before return filing due date, citing Delhi HC precedent. Vasantdada Sugar Institute contributions received 125% weighted deduction under section 35(1)(ii). Chief Minister Relief Fund contributions were remitted for proper section 80G deduction. Khodki charges were allowed as deductible following Bombay HC approval. Section 80P deduction was upheld for interest/dividend from cooperative society investments, rejecting AO's reliance on subsection (4) provisions.

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Issues Involved:
1. Excessive sugarcane price paid.
2. Addition for sugar given to members at concessional rates.
3. Disallowance of contribution to Area Development Fund.
4. Disallowance for late deposit of employees' share in EPF/ESI.
5. Provision for Vasantdada Sugar Institute (VSI) contribution.
6. Contribution to Chief Minister Relief Fund.
7. Deduction towards payment of Khodki charges.
8. Deduction u/s 80P on interest and dividend.

Detailed Analysis:

I. Excessive Sugarcane Price Paid:
The main issue in most appeals was the addition made by the Assessing Officer (AO) for excessive sugarcane price paid to members and non-members. The AO determined that the excessive price paid over the Fair and Remunerative Price (FRP) fixed by the Government was a "distribution of profits" and not deductible. This view was supported by the Hon'ble Supreme Court's judgment in CIT Vs. Tasgaon Taluka S.S.K. Ltd., which directed the AO to differentiate between the Statutory Minimum Price (SMP) and the additional purchase price under clause 5A of the Sugar Cane (Control) Order, 1966. The Tribunal remitted the matter to the AO to determine the profit component and deductible expenditure, emphasizing the need to consider accounts, balance sheets, and materials provided to the State Government.

II. Addition for Sugar Given to Members at Concessional Rates:
In some appeals, the issue was the disallowance of the price difference for sugar given to members at concessional rates. The Hon'ble Supreme Court in CIT Vs. Krishna Sahakari Sakhar Karkhana Limited remitted the matter to the CIT(A) to consider if the practice was customary in the cooperative sugar industry and supported by State Government resolutions. The Tribunal restored the issue to the AO for fresh consideration following the Supreme Court's directions.

III. Disallowance of Contribution to Area Development Fund:
The issue involved the deletion/confirmation of disallowance for contributions to the Area Development Fund. The Hon'ble Supreme Court in Siddheshwar Sahakari Sakhar Karkhana Limited Vs. CIT observed that such contributions, impressed with specific legal obligations unrelated to the business, could not be treated as income. The Tribunal remitted the matter to the AO for fresh determination in line with the Supreme Court's guidelines.

IV. Disallowance for Late Deposit of Employees' Share in EPF/ESI:
The issue was the disallowance for delayed deposits of employees' contributions to EPF and ESI. The Tribunal referred to the Hon'ble Supreme Court's judgment in CIT v. Alom Extrusions Limited and the Delhi High Court's judgment in CIT v. Aimil Limited, which allowed deductions if the contributions were deposited before the due date of filing returns. The Tribunal ordered the deletion of the additions sustained in the first appeals.

V. Provision for Vasantdada Sugar Institute (VSI) Contribution:
The issue was the disallowance of the VSI contribution provision. The Tribunal upheld the CIT(A)'s decision, which followed the Pune Tribunal's order in Bhima S.S.K. Ltd., allowing the deduction.

VI. Contribution to Chief Minister Relief Fund:
The issue was the disallowance of contributions to the Chief Minister Relief Fund. The AO allowed only 50% deduction under section 80G(iiihf). The Tribunal remitted the matter to the AO to grant the deduction as per law after a reasonable hearing.

VII. Deduction Towards Payment of Khodki Charges:
The issue was the deduction of Khodki charges paid to compensate farmers for unevenly cutting cane sugar. The Tribunal referred to the Hon'ble Bombay High Court's judgment in CIT Vs. Manjara Shetkari SSK Ltd., which allowed the deduction. The Tribunal upheld the CIT(A)'s decision, allowing the deduction.

VIII. Deduction u/s 80P on Interest and Dividend:
The issue was the deduction under section 80P(2)(d) for interest and dividend income from investments with other cooperative societies. The Tribunal upheld the CIT(A)'s decision, allowing the deduction, as the assessee was a cooperative society and the income was derived from another cooperative society.

Conclusion:
All appeals were fully or partly allowed for statistical purposes, with the Tribunal remitting several issues back to the AO for fresh consideration in line with the Supreme Court's guidelines and other relevant judgments. The order was pronounced in the Open Court on 14th March 2019.

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