1996 (1) TMI 166 - AT - Income Tax

Assessee's Appeals Dismissed for 1977-82, Partially Allowed for 1983-85; Key Tax Deductions Denied, Excise Relief Non-assessable

The appeals filed by the assessee for the assessment years 1977-78 to 1982-83 were dismissed. However, for the assessment years 1983-84 and 1984-85, the ... Assessment Year, Cash Payments, Development Allowance, Weighted Deduction Issues Involved:1. Claim for weighted deductions under section 35C of the IT Act.2. Disallowance of provision for Molasses Storage Fund for the assessment years 1983-84 and 1984-85.3. Assessability of the amount shown as Excise Duty relief for the assessment year 1984-85.Issue-Wise Detailed Analysis:1. Claim for Weighted Deductions under Section 35C of the IT Act:The assessee, a co-operative society running a sugar factory, claimed weighted deduction of 1.2 times under section 35C of the IT Act on amounts paid to cane growers as 'early and late planting subsidy'. The Assessing Officer disallowed the claim, viewing that the section does not provide for weighted deduction on lump sum payments to agriculturists. The CIT(Appeals) upheld this disallowance, agreeing that the claim was not on expenditure in the provision of goods, services, or facilities specified in clause (b) of section 35C. The Tribunal noted that section 35C requires the expenditure to be incurred in the provision of specified goods, services, or facilities. Since the payments were made based on the tonnage of sugar-cane supplied outside the normal crushing season and were not related to any specific goods, services, or facilities, the Tribunal concluded that the payment did not qualify for the weighted deduction. The Tribunal distinguished this case from the Special Bench decision in K.C.P. Ltd. v. ITO, where the expenditure was indirectly on the supply of seeds. The Tribunal held that the payment made by the assessee as early and late planting subsidy does not qualify for the weighted deduction under section 35C, thus confirming the CIT(Appeals)' decision.2. Disallowance of Provision for Molasses Storage Fund:For the assessment years 1983-84 and 1984-85, the assessee claimed a deduction for the provision created towards the Molasses Storage Fund. The CIT(Appeals) disallowed this provision, relying on the Madhya Pradesh High Court decision in Jiwajirao Sugar Co. Ltd. v. CIT. However, the Tribunal noted that it has consistently allowed such provisions as deductions in computing total income. Furthermore, the Supreme Court dismissed the SLP filed by the Revenue against the Karnataka High Court's decision in CIT v. Pandavapura Sahakari Sakhare Kharkhane, which supported the deduction. Consequently, the Tribunal held that the CIT(Appeals) was not justified in upholding the disallowance, and the assessee's appeal on this ground was allowed.3. Assessability of the Amount Shown as Excise Duty Relief:For the assessment year 1984-85, the assessee contested the assessability of the amount shown as Excise Duty relief. The Tribunal referred to its decision in Tamilnadu Sugar Mills Co-operative Society Ltd., where Excise Duty rebate was regarded as a capital receipt and not part of taxable income. The Tribunal also noted that it had taken the same view in the assessee's own case for the assessment years 1988-89 to 1990-91. Following these decisions, the Tribunal allowed the assessee's appeal and directed the Assessing Officer not to include the Excise Duty rebate in computing the taxable income for the assessment year 1984-85.Conclusion:The appeals filed by the assessee for the assessment years 1977-78 to 1982-83 were dismissed, while the appeals for the assessment years 1983-84 and 1984-85 were partly allowed.