TaxTMI 
TaxTMI 
TaxTMI 
2022 (5) TMI 1092
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....admit both these appeals for hearing. 3. Since, the issues involved in all the appeals are common and identical; therefore, these appeals have been heard together and are being disposed of by this consolidated order. For the sake of convenience, the grounds as well as the facts narrated in No.1735/AHD/ 2015, for assessment Year 2008-09, have been taken into consideration for deciding the above appeals en masse. 4. The grounds of appeal raised by the assessees are as follows: "(1) The learned CIT(A) has grievously erred on facts and in law dismissing appeal of the assessee confirming penalty of Rs.15,37,079/-. (2) Assessee's submission produced as para 4 of the order ought to have accepted in toto. (3) The learned CIT(A) has erred in relying his finding in para 5 alongwith previous order of CIT(A) dated 28.02.2014 for A.Y. 2007-08. (4) Similarly findings in para 5.2 to 5.7 are erroneous. (5) Appeal of the assessee ought to have been allowed in full as per facts and case law relied on by assessee and penalty ought to have been deleted. (6) The appellant craves leave to add, alter, amend any ground of appeal." 5. Brief facts qua the issue are that assessee filed its ret....
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....arlier para and is not being repeated for the sake of brevity. 9. We have heard both the parties and perused the material available on record. We find merit in the submissions of the assessee and noted that issue under consideration is squarely covered by the judgment of Hon'ble Supreme Court in the case of Siddheshwar Sahakari Sakhar Karkhana Ltd. (2004) 270 ITR 1(SC) wherein it was held as follows: "35. Applying the above test to the present case, we cannot hold that the assessee- Society had absolute dominion over the impugned deposits. Firstly, the manner of user of the deposit is limited by the bye-laws. Para (4) of bye-law 61-A makes it clear that the amount of deposits shall be utilized for the repayment of term loans taken for the capital expenditure from the banks and financial institutions. Unlike the case of Bazpur Co-operative Sugar Factory Ltd.'s case (supra) the deposited amount cannot be 'adjusted' against the term loans much less the losses though it can be temporarily utilized by the assessee to clear the loans. The fact that the depositor can seek transfer of the deposit to another member by filing an application for that purpose again highlight....
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....is an equally important purpose which cannot be overlooked. At any rate, the view taken by the Tribunal appears to be a reasonable view and the High Court need not have disturbed that finding. 37. The High Court relied on the decision of the same High Court in Shree Nirmal Commercial Ltd. v. CIT [1992] 193 ITR 694(Bom.) in order to hold that the payment of interest on the deposited amount is not inconsistent with the amount being a revenue receipt. We are of the view that the ratio of that decision cannot be pressed into service in the present case. On a consideration of the Scheme and Agreement under which non-refundable interest-bearing deposit was collected by the assessee company, it was found as a matter of fact that "the deposit was the absolute property of the Company and the provision for payment of interest was only a device for showing the amount received in the course of trade as deposit." In the instant case, the plea of device, though raised faintly before the Tribunal, was not accepted. It rejected the argument that the provision in the bye-law 61-A providing for conversion of deposits into share capital was a make believe affair and that the High Court in answer to....
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....tion, however does not appeal to us. A person by becoming the member of a Co-operative Society, volunteers to abide by the byelaws of the Society, the real object of which is to provide for internal management of the Society including rendering assistance to the members. There is an authority for the proposition that the bye-laws of the Co-operative Society constitute a contract between the Society represented by its managing body and its constituents. This legal position has been recognized in Hyderabad Karnataka Education Society v. Registrar of Societies [2000] 1 SCC 566 (vide paragraph 28). In Co-operative Central Bank Ltd. v. Additional Industrial Tribunal [1969] 2 SCC 43, this Court held that the bye-laws of the Society framed by virtue of the authority conferred by the Co-operative Societies Act were on par with Articles of Association of a Company, which, it is well settled, establish a contract between the Company and its members and between members inter se (vide paragraph 14 in Naresh Chandra Sanyal v. Calcutta Stock Exchange Association Ltd. [1971] 1 SCC 50. That apart, the mere fact that the contract has to be entered into in conformity with and subject to restrictions....
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....behalf of the Revenue we do not find these details. Despite this handicap, we have looked into some of the orders and circulars issued by the Director of Sugars and other authorities contained in the paper book submitted to the Income-tax Appellate Tribunal. 44. As regards the Chief Minister's Relief Fund, Late Y.B. Chavan Memorial Fund and Hutment Fund, no serious attempt has been made to assail the order of the Tribunal/High Court, the obvious reason being that they were required to be and in fact being remitted to the Government or to the Trustees of late Y.B. Chavan Prathisthan. The assessee merely acted as an agent in collecting the amounts and remitting the same to the Government/Trustees. In truth and in substance, the money collected by the assessee was not reaching the assessee as part of its income, but the collection was made "for and on behalf of the person to whom it is payable" to borrow the language in CIT v. Sheetaldas Tirathdas [1961] 41 ITR 367 (SC). It had no manner of right or title over the said monies. The amount collected towards Hutment Fund stands on no different footing. It was meant to be handed over to Collector for the purpose of providing shelter....
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....rposes. The Director of Sugars or other designated official, no doubt acts in a supervisory capacity to oversee that the funds are properly utilized. On that account, it cannot be said that the collection is made by the Society as an agent of the Government or the proprietary interest in the funds is vested with the Government. The conclusion has been reached by the Tribunal mainly on the basis of requirement of prior sanction of the Director of Sugars for incurring the expenditure. Such restriction prescribed in the larger interest of the Society itself does not in any way detract from the fact that the Societies concerned do exercise dominion over the fund and deal with that money subject of course to the guidelines and restrictions evolved by the Government. The Tribunal failed to approach the question in proper perspective on an analysis of the relevant circulars and orders. The High Court too fell into an error in invoking the theory of diversion of income at source. The crux of the matter is that there has never been a diversion of income to a third party (Government) before it reached the assessee. The receipts in the form of Area Development Fund always remained with the as....
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....sitors collected by the Government through the agency of sugar factory. This approach in our view is wholly unsustainable and is in the realm of surmise. We do not also see any scope for the application of principle of diversion of income at source in the case of collections made towards Cane Development Fund. The amounts realized on this account undoubtedly reach the assessee as its income and is utilized by the assessee for the benefit of itself and its members. As already observed, the supervisory role of the Directorate of Sugar to ensure that the amount is properly utilized to promote the objectives with which the fund was formed, does not make a material difference on the quality and character of the receipt. We are therefore of the view that the deductions made out of cane price towards Cane Development Fund should be treated as the income of the assessee. We are, of course, not expressing any view whether it is a permissible deduction under the provisions of the Income-tax Act. If any such claim is made, the Tribunal shall examine the same when the matters are taken up by it to consider the issue of tax liability in relation to Area Development Fund. Though the item relat....