1985 (9) TMI 146 - AT - Income Tax

Tribunal excludes 'sugar sales suspense account' & storage funds from assessable income

The Tribunal ruled in favor of the assessee, determining that the amounts in the 'sugar sales suspense account' and the statutory storage funds should not ... Business Income, Assessable As Issues Involved:1. Inclusion of amounts in the 'sugar sales suspense account' as part of the turnover.2. Inclusion of amounts credited into the molasses storage fund and spirit storage fund as part of the income of the assessee.Issue-wise Detailed Analysis:1. Inclusion of amounts in the 'sugar sales suspense account' as part of the turnover:The first common ground for consideration is whether the amounts credited into the 'sugar sales suspense account' should be taken as part of the turnover of the assessee for the purposes of determining the levy of income-tax. The amounts credited into this account for the assessment years in question were significant, with the highest being Rs. 51,78,748 in 1979-80. The assessee argued that these amounts represented the difference between the price paid by buyers and the price allowed under the Sugar (Price Determination) Orders. The Central Government had fixed the price of sugar produced by mills in various zones through these orders. The assessee challenged these orders in the High Court, which passed interim orders allowing the assessee to sell sugar at higher prices than those fixed by the government, subject to refund if the writ petitions were dismissed.The lower authorities included these amounts in the income of the assessee, arguing that the higher price collected formed part of the sale proceeds. However, the Tribunal found that similar issues had been adjudicated by the Andhra Pradesh High Court and the Supreme Court, which held that such credits made to 'suspense accounts' could not be considered part of the turnover. The Tribunal also referred to Special Bench decisions and other Tribunal decisions supporting this view.The Tribunal concluded that the excess collections did not represent part of the turnover and should not be included in the gross total income of the assessee for the relevant assessment years. The assessee succeeded on this common ground.2. Inclusion of amounts credited into the molasses storage fund and spirit storage fund:The next issue was whether the amounts credited into the molasses storage fund and spirit storage fund could be included in the income of the assessee. These funds were statutory funds created under government orders, such as the Molasses Control Order, 1962, and its amendments, which required a portion of the price of molasses to be set aside for storage facilities. Similar provisions applied to ethyl alcohol under the Ethyl Alcohol (Price Control) Order, 1971, and its amendments.The lower authorities had included these amounts in the income of the assessee, arguing that even though they were statutory funds, the amounts credited did not cease to be the income of the assessee. The Tribunal, however, found that these amounts were not available for the assessee's discretionary use and were subject to statutory restrictions. Therefore, they could not be considered as income. The Tribunal referred to previous decisions, including those of the Madras Bench and the Bombay High Court, which supported this view.The Tribunal held that the amounts credited to these funds should not be taken as income of the assessee in the relevant assessment years. However, any amounts directed or permitted to be spent from these funds for providing storage facilities should be considered as income in the year such direction or permission was granted. Since there was no evidence that any portion of these funds was utilized in the relevant assessment years, the Tribunal deleted the amounts from being considered as income.Conclusion:The Tribunal ruled in favor of the assessee on both issues, concluding that the amounts in the 'sugar sales suspense account' and the statutory storage funds should not be included in the income of the assessee for the relevant assessment years.