2015 (10) TMI 64

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....s erred on facts and in law in confirming the action of learned A.O. in making disallowance of Rs. 14,49,563.25 on account of non refundable deposit received during the year as appellant income. 2. The learned Commissioner of Income Tax (Appeals) Bareilly has also erred on facts and in law in confirming the action of A.O. in not correctly appreciating the facts of the case if Sideheshwar Sahkari Sakkar Karkhana Ltd. Vs. CIT & Others 270 ITR page No.1 (Supreme Court) on which facts the honorable IT AT, B-Bench, Lucknow has restored the matter to the file of A.O. for decision. 3. The learned CIT(A) Bareilly is not justified in giving the alternative approach on the issue that the amount of deduction is liable to be taxed as income of th....

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.... that the amounts deducted from the cane price towards the non-refundable deposits were not trading receipts of the assessee. The relevant observations of the Hon'ble Apex Court are extracted hereunder for the sake of reference:- "The assessee was a co-operative society, which carried on the business of manufacturing sugar. Its members were predominantly sugarcane farmers. The share capital of the society was contributed not only by the members but also by the State Government. Its bye-laws provided for deduction of amounts towards refundable and "non-refundable" deposits from the cane price payable to the grower members. Under bye-law No. 61-A, (i) the non-refundable deposits were not to be refunded till the Government share capital....

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....non-refundable deposits and the refundable deposits (term deposits) could not be treated as the income of the assessee and the amounts deducted for being credited to the funds were not trading receipts of the assessee. The High Court held that the amounts collected towards the non-refundable and refundable deposits were trading receipts of the assessee but the amounts deducted towards the funds were diverted by overriding title and were not its income. On cross appeals to the Supreme Court : Held, (i) reversing the decision of the High Court, that the line of enquiry, in order to determine the true nature and character of the receipts, did not stop at ascertaining the mere fact whether the realization was in the course of trading. Althou....

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....ceipts of the assessee." 4. The jurisdictional High Court in the case of CIT vs. Ramala Sahkari Chini Mills Ltd. (supra) has also examined the same issue and has held that the amount of Rs. 7.50 per tonne of sugarcane, collected by the respondent-assessee from its member-cane growers, was towards deposit in terms of clauses 41 to 44 of the bye-laws and was to be adjusted on conversion into shares. The excess amount was to be refunded. Thus, it was a clear case of collection of amount towards issuance of shares in future and could not be termed as trading receipts. The relevant observations of the Hon'ble High Court are extracted hereunder:- "The assessee was a co-operative sugar mill. It had obtained a loan of Rs. 80,00,000 from t....