TaxTMI 
TaxTMI 
2007 (10) TMI 231
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....en up for final hearing by consent of both the parties:- 1. Whether the Appellate Tribunal was right in law in holding that provisions of Section 40A(2) (a) are not applicable to a co-operative Society ? 2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the additional payment over and above the statutory minimum price (SMP) was cane price and not diversion of profit and as such allowable as business expenditure under section 37(1) of the Income Tax Act, 1961 ? 3. Whether on the facts and in the circumstances of the case cane price / Khodki charges paid by the assessee was not "Bonus" within the meaning of 2(4) of the Maharashtra Co-op. Societies Act, 1960 and it was allo....
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.... sugar and the same is purchased by the assessee from its members as well as non members. 6. Sugar being a controlled commodity, minimum price payable to the sugarcane growers by the producer of sugar like the assessee is fixed by the Central Government under the Sugarcane (Control) Order, 1966 as modified from time to time. 7. Clause 3A of the Sugarcane (Control) Order, 1966 as modified by Sugarcane (Control) Amendment Order, 1983 to the extent relevant herein reads as under:- 3A. REBATE THAT CAN BE DEDUCTED FROM THE PRICE PAID FOR SUGARCANE " A producer of sugar or his agent shall pay, for the sugarcane purchased by him, to the sugarcane grower or the sugarcane growers' co-operative society, either the minimum price of sugarca....
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.... in unbound condition, that is without using any binding material. However, few farmers bring the sugarcane to the factories bound in bundles. The sugar factories prefer to pay the cane price to such farmers on the gross weight without deducting the costs of binding material at 0.01% permitted under the Sugarcane Control order. 9. In the assessment year in question the assessing officer was of the opinion that the assessee was bound to deduct 0.01% from the total sugarcane price towards the cost of the binding material as per the Sugarcane Control Order and since the assessee failed to deduct any amount towards the binding material, the assessing officer estimated the cost of the binding materials at 0.01% and disallowed the same. Howeve....
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....ent. He submitted that it is not open to the assessee to contend on the one hand that the directions given by the Government regarding the payment of sugarcane price is binding on them and at the same time refuse to follow the directions regarding the deduction of the cost of the binding materials from the total sugarcane price payable to the members and non members. Mr.Chatterji further submitted that the excess payment made to members and non members in contravention of the Sugarcane (Control) Order, apart from being contrary to law amounts to distribution of profits which is not permissible in law. Accordingly, Mr.Chatterji submitted that the Commissioner of Income Tax (A) as well as the Tribunal were not justified in deleting the ....
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....low rebate from the minimum price not exceeding 0.01% towards the cost of the binding material. According to the revenue, the directions given in the Sugarcane (Control) Order to deduct the cost of the binding materials @ 0.01% of the total sugarcane price is mandatory, whereas, according to the assessee it is directory. 16. On a plain reading of clause 3A of the Sugarcane (Control) Order, it is seen that the directions contained therein are directory and not mandatory. The use of the word 'may' in clause 3A(iii) of the Sugarcane (Control) Order clearly shows that the direction contained therein is directory and not mandatory. Moreover, neither the Central Government nor the State Government nor any other authorities in exercise of the p....