TaxTMI 
TaxTMI 
2005 (6) TMI 31
X X X X Extracts X X X X
X X X X Extracts X X X X
....hether on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal relying on the decision of the Special Bench of the Income-tax Appellate Tribunal in the case of Shri Chatrapati Sahakari Sakhar Karkhana Ltd. [1992] 198 ITR (AT) 78 (Pune), was right in deleting the addition of Rs. 27,01,937 made on account of interest on NRD holding that the various funds/deposits deducted by the assessee-society out of the sugarcane purchase price payable to the cane growers are not trading receipts of the assessee." In Income-tax Appeal No. 10 of 1999 arising out of Income-tax Appeal No. 66/PN/91 pertaining to the assessment year 1987-88, the following substantial question of law is raised: "Whether on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal relying upon the Special Bench in the case of Shri Chatrapati Sahakari Sakhar Karkhana Ltd. reported in [1992] 198 ITR (AT) 78 (Pune) was right in deleting the following additions by holding that various funds/deposits collected by the assessee-society out of sugarcane purchase price payable to the cane growers, are not the trading receipts of the assessee as held by the Supreme Court i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pati Sahakari Sakhar Karkhana Ltd. reported in [1992] 198 ITR (AT) 78 (Pune) was right in deleting the additions made on account of non-refundable deposits, C.M's relief fund, area development fund, cane development fund and interest on non-refundable deposits by holding that various funds/deposits collected by the assessee-society out of sugarcane purchase price payable to the cane growers are not the trading receipts of the assessee?" In Income-tax Appeal No. 24 of 1999 arising out of Income-tax Appeal No. 310/PN/94 pertaining to the assessment year 1991-92, the following substantial question of law has arisen: "Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal relying upon the Special Bench of the Income-tax Appellate Tribunal Pune's decision in the case of Shri Chatrapati Sahakari Sakhar Karkhana Ltd. reported in [1992] 198 ITR (AT) 78 was right in deleting the following additions, by holding that various funds/deposits collected by the assessee-society out of sugarcane purchase price payable to the cane growers are not the trading receipts of the assessee as held by the hon'ble Supreme Court in the case of CIT v. Bazpur Co-oper....
X X X X Extracts X X X X
X X X X Extracts X X X X
....edly, under the bye-laws and rules of the co-operative societies and the sugar factories in the State of Maharashtra, certain deductions are made from the price of sugarcane supplied by the members of the societies for different purposes. The deductions are made for one or the other purposes noted below: 1. Non-refundable deposit. 2. Interest on non-refundable deposit. 3. C.M's relief fund. 4. Famine relief fund. 5. Hutment fund. 6. Y.B. Chavan Memorial fund. 7. Eduation fund. 8. Cane development fund. 9. Area development fund. 10. College fund. 11. Water scarcity fund. In the matter of Bazpur Co-operative Sugar Factory Ltd. [1988] 172 ITR 321 (SC), in view of the rules and bye-laws of the Co-operative sugar factory in U.P. laying down the terms and conditions of deductions on account of non-refundable deposits, the Supreme Court laid down that the non-refundable deposits deducted from the price of sugarcane supplied by the farmers was income or trading receipt for the sugarcane factory and therefore, it could not be deducted from income. The Assessment Officers added these deposits in the income relying upon the authority in the matter of Bazpur....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ton of sugarcane supplied by them. It also provides as to how the deposits shall be used and also about the rate of interest to be paid on the deposits. Bye-law No. 61-B provides for deductions as non-refundable deposits after a certain period not exceeding 5 years. After analysing all the said bye-laws, the hon'ble Supreme Court pointed out the following salient features: "1. The price of sugarcane is fixed every year by the board of directors, on a consideration of relevant factors. 2. However, so long as the share capital contribution of the State Government and/or the loans taken on capital account from IFCI and other Central financial institutions remain outstanding, the price as fixed by the State Government is liable to be paid by the society. 3. Every year the society shall collect from the members supplying sugarcane a non-refundable deposit at the minimum rate of Re. 1 per ton. In fixing the rate, the board of directors has to take into account the liabilities towards the loan due to IFCI and other loans borrowed for capital expenditure and the repayment of time deposits received from the members. 4. The society should continue to collect the deposits so long ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ine relief fund and the society cannot retain that amount, and therefore, the same cannot be treated to be a trading receipt or income of the society. In view of the above the Supreme Court judgment in Shri Chatrapati Sahakari Shakar Karkhana Ltd. [2004] 270 ITR 1 it is settled that deductions towards non-refundable deposits, interest on non-refundable deposits, Chief Minister's relief fund, famine relief fund, hutment fund and Y.B. Chavan Memorial Fund are not trading receipts or income. Therefore, they cannot be included in the income of the society. It should be noted that the Supreme Court also considered the provisions about the collection of amounts towards area development fund and cane development fund. Having considered the scheme, the Supreme Court held that the amounts realized on account of the cane development fund reach the assessee as his income and are utilised by the assessee for the benefit of it and its members. And therefore, the deductions made from cane price towards the cane development fund should be treated as income of the assessee. As such, this point is also covered by the Supreme Court. Their Lordships of the Supreme Court observed that on June 21....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion, the question about the water scarcity fund may also be left open for fresh consideration by the Tribunal. In view of the above finding in Appeal No. 9 of 1999, we answer the question in the affirmative; that is, in favour of the assessee and dismiss the appeal. In Appeal No. 10 of 1999, we hold that the Tribunal was right to the extent of non-refundable deposits, famine relief fund and education fund, however, it was not correct as far as sugarcane development fund is concerned and we answer the question accordingly. In the result, the appeal is partly allowed. In Appeal No. 12 of 1999 we hold that the Tribunal was right in refusing to add non-refundable deposits, interest on non-refundable deposits and Chief Minister's relief fund. However, it was not correct to the extent of the cane development fund. As there was no material about the manner of utilisation of the water scarcity fund, we remand the matter to the Tribunal for fresh consideration after hearing of the parties. In the result, the appeal is partly allowed. In Appeal No. 19 of 1999, we hold that the Tribunal was right in refusing to add the non-refundable deposits, interest on non-refundable deposits, ....