Tax Tribunal remits case for fresh assessment per SC rulings. Deduction for sugarcane price allowed. Sale price adjustment criteria clarified.

The Tribunal remitted the matters to the Assessing Officer for fresh determination in line with Supreme Court judgments. The Assessing Officer was directed to allow deduction for sugarcane price paid under specific clauses and determine profit components. Regarding the sale of sugar at a concessional price, the Tribunal instructed the Assessing Officer to add the difference between market and concessional prices only if the sale price was below the cost price. The appeal was allowed for statistical purposes, with the order pronounced on 05th November 2019.

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Issues Involved:
1. Deletion of addition on account of excessive sugarcane price paid.
2. Restriction of addition in respect of sale of sugar at concessional price.

Detailed Analysis:

1. Deletion of Addition on Account of Excessive Sugarcane Price Paid:

The first issue concerns the deletion of an addition amounting to Rs. 90,62,25,959/- on account of excessive sugarcane price paid. The Tribunal noted that a similar issue had been previously addressed in a batch of 75 appeals led by Manganga Sahakari Sakhar Karkhana Ltd. Vs. ACIT. The Tribunal had referred to the judgment of the Hon’ble Supreme Court in CIT Vs Tasgaon SSK Ltd. (2019) 412 ITR 420 (SC), which dealt extensively with the issue of excessive sugarcane price paid over and above the Fair and Remunerative Price (FRP) fixed by the Government. The Supreme Court had directed that the difference between the Statutory Minimum Price (SMP) and the State Advised Price (SAP) should be examined to determine the component of profit appropriation. The Tribunal, following this precedent, remitted the matter to the Assessing Officer (AO) to carry out an exercise to determine the profit component and deductible expenditure based on the accounts, balance sheet, and material supplied to the State Government. The AO was directed to allow deduction for the price paid under clause 3 of the Sugar Cane (Control) Order, 1966, and determine the component of distribution of profit embedded in the price paid under clause 5A.

2. Restriction of Addition in Respect of Sale of Sugar at Concessional Price:

The second issue pertains to the restriction of addition concerning the sale of sugar at a concessional price. The Tribunal observed that this issue had also been previously considered in the batch of appeals led by Manganga SSK Ltd. The AO had noted that the assessee sold sugar to its members at a concessional rate, which was considered as distribution of profit and not deductible as expenditure. The Tribunal referred to the judgment in CIT Vs. Krishna Sahakari Sakhar Karkhana Ltd. (2012) 254 CTR 638 (SC), where the Supreme Court had restored the matter to the CIT(A) to determine whether the difference between the market price and the concessional price should be added to the total income. The Tribunal reiterated that the difference between the market price and the concessional price could be considered as appropriation of profit only if the sale price was below the cost price. The Tribunal directed the AO to ascertain the cost price of sugar and make an addition only to the extent of the concessional sale price below the cost price. The AO was instructed to consider all direct and indirect costs in determining the cost price.

Conclusion:

The Tribunal set aside the impugned orders and remitted the matters to the AO for fresh determination in line with the Supreme Court's judgments. The AO was directed to provide a reasonable opportunity of hearing to the assessee in the fresh proceedings. The appeal was allowed for statistical purposes, and the order was pronounced in the Open Court on 05th November 2019.

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