TaxTMI 
TaxTMI 
2020 (12) TMI 591
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....yment is in the nature of distribution of profits without paying due taxes though there is no obligation to tax a final price. 3) Any other ground of appeal that may arise at the time of hearing. " 4. Facts of the case are in brief are that assessee is in the business of production of dairy and related milk products, filed its return of income declaring total loss of Rs. 1,84,64,418/-. There was a search conducted u/sec. 132 of the Income Tax Act, 1961 (hereinafter referred to as 'Act') on 25/10/2016. During the course of search, certain documents and loose sheets were found and seized. Some of the documents/loose sheets have bearing on the determination of the total income of the assessee. In response to the notice u/sec. 153A of the Act, the assessee filed a return of income electronically on 28/10/2017 declaring loss of Rs. 1,84,64,418/-. In the assessment order, the AO has noted that assessee is procuring milk from milk producers and sale of the same. The price of such milk procured was paid by the assessee at the end of each fortnight basing on the price published in the circulars issued by the assessee. The Circular dated 28/10/2015 the price and withheld price are....
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....(A) that the procurement price, normal price normally comprise an initial payment and withheld price, the latter price may be paid in cash or in kind or allotment of equity shares as determined by the Board. The copies of resolution filed by the assessee also show that the payment made initially is on a tentative/adhoc price and the CIT(A) is of the opinion that there is no infirmity in the assessee's practice of procuring milk through initial payment and withheld price and such practice is consistent with its Articles of Association and relevant statutory provisions governing the producer company. The payment of withheld price is also constituent with the principles of cooperative societies." Observing in the above manner the CIT(A) finally concluded that the withheld price paid to the members cannot be said to the excessive and also cannot be said that this practice is to avoid tax. 9.2) As already observed above, the ITAT in its order cited above, is in full agreement with the observations made by the CIT(A) in his appellant order as extracted above by stating at page-32 of its order that as per the provisions of Companies Act section 581E, 581D, 581R & 581S and Articles....
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....ry, it was explained to the Assessing Officer that in addition to the above procurement price, the milk producers were also paid additional price/withheld price on 28/03/2010 and submitted the details of such additional price to the Assessing Officer vide letter dated 18/10/2013 that withheld price for buffalo milk Rs. 49,27,19,254/-, for cow milk Rs. 47,32,93,574/-, totalling to Rs. 96,60,12,828/-. The Assessing Officer asked the assessee what is the basis for the withheld price paid by the assessee. It was submitted before the Assessing Officer that rate per kg for buffalo milk and total solids for cow milk paid by competitors, rate per kg fat and total solids paid by cooperative dairies in AP and other states and the competition prevailing in the market and producers demand for prices before finalization of the final price for payment of milk price from farmers. The assessee also filed a comparative prices from website of NABARD. Thereafter, the Assessing Officer has asked the assessee company to furnish the details of the withheld price of Rs. 96,60,12,828/- paid to the milk producers that the amount actually paid to the suppliers of milk of Rs. 49,64,10,534.61, equity shares i....
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....oods supplied by any member to the producer company; and as withheld by the producer company for payment on a subsequent date.". The above definition is incorporated in the Articles of Association of assessee Company. As per section 581E of the Companies Act the Articles of a producer company shall stipulate how the consideration for the produce delivered by a member will be settled and paid; and every member shall initially received such value for the produce supplied as the Board of the producer company may determine. The section further provides that the price withheld may be disbursed to seller member in cash or by allotment of equity share in proportion to the produce supplied during the concerned financial years to such extent as may be decided by the Board. Thus, the concept of withheld price is not alien in the conduct of business of a producer company. As per the Articles of Association of the assessee company, Board of Directors may determine from time to time the benefits that may be conferred on members by way of limited return, patronage bonus and determination of withheld price and such other benefits as the Board may deem fit in the larger interest of the members of ....
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.... that assessee company decided the withheld price after resolution passed by the Board of Directors and accordingly the amount of Rs. 49,64,10,534.61 cash payment made to the milk suppliers was not objected by the Assessing Officer. The only objection raised by the Assessing Officer in respect of equity shares issued to the tune of Rs. 41,23,18,509.91, contribution to the assessee's trust of Rs. 5,72,83,783.48. Insofar as, the issue of equity shares is concerned, clause 10(b) of the Articles of Association of the assessee company provides each member shall receive initial payment as may be determined by the Board for the produce/products. Every member shall receive withheld price (remaining price) which will be disbursed in cash or in kind or by allotment of equity shares in proportion to the quantity of milk supplied to the assessee company. Even as per section 581 of the Companies Act, the price withheld may be disbursed to the seller member in cash or through allotment of equity shares in proportion to the milk supplied during the financial year to such extent as may be decided by the Board. We find that the assessee company as per section 581 of the Companies Act and also A....