TaxTMI 
TaxTMI 
2007 (10) TMI 297
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....owing substantial questions of law arise for consideration of this court: "1. Whether, on the facts and in circumstances of the case, the addition sustained by the Tribunal on account of additional cane price paid to the sugarcane growers was justified in law and is legally sustainable ? 2. Whether, on the facts and in circumstances of the case, the addition sustained by the Tribunal on account of additional cane price paid to the sugarcane growers on new and irrelevant basis not arising out of the order of the Commissioner of Income-tax (Appeals) was justified in law and is legally sustainable ? 3. Whether, on the facts and in circumstances of the case, the addition sustained by the Tribunal on account of additional cane price paid to the sugarcane growers being sustained on new and relevant basis not arising out of the order of the Commissioner of Income-tax (Appeals) was justified in law and is legally sustainable, this being a case of exceeding jurisdiction by the Tribunal ? 4. Whether, on the facts and in the circumstances of the case, the findings of the Tribunal in rejecting the appeal of the appellant-society in confirming the addition made on account of enhance....
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.... permissible to the assessee for enhanced price on the basis of fixation of the sugarcane price in the subsequent year. In fact, the real issue involved in this appeal is as to whether deduction is permissible to the assessee on account of unilateral enhancement of sugarcane price by crediting to the share deduction account without making any payment to the sugarcane growers. Had it been a simple case of final fixation of rates for supply of sugarcane, then perhaps the assessee could not unilaterally impose the condition of not making the payments to the sugarcane growers and instead crediting the additional price to the share deduction account. The procedure for fixation of price as provided under clause 24A of the bye-laws of the society, reproduced elsewhere in this order, has also not been followed. In this case, it is not even the case of the assessee that the fixation of the final price of sugarcane was also in accordance with the formula provided under clause 24A of the bye-laws of the society or in pursuance to any order of the Government or any other authority. It is also noteworthy that when the assessee was running in losses, the sugarcane price had not been enhanced by ....
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....o cash payment was solely with the purpose of enhancing the capital base at the cost of exchequer without payment of taxes in respect of the related amount. The assessee also does not get support from the ratification of the resolution in the general body meeting as the purpose in the said ratification is also indicated to enhance the capital base. This is evident from the resolution No. 6 reproduced hereunder: 'Resolved General body unanimously approves the decision of the board of directors/administrator of payment of additional cane price of the years 1992-93, 1993-94 and 1994-95 respectively in the order of Rs. 9, Rs. 6 and Rs. 10 per qtl. (i.e. in 1992-93 year in the form of Rs. 9 as share deduction, for the year 1993-94 in the form of Rs. 3 in cash and Rs. 3 in the form as share deduction, for the year 1994-95 in the form of Rs. 3 as share deduction and Rs. 7 in the form of cash because the same is required to strengthen the share capital of the mills.' 12. The assessee has decided to enhance the sugarcane price but has also unilaterally decided to credit the sum to the share deduction account, which was subsequently utilised for allotment of shares to the members. This....
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....cated to any one or more purposes detailed below: (a) Dividends on shares at not exceeding 10 per cent. on the value of paid up shares. (b) Price fluctuation fund. (c) Common good fund. (d) Contingent fund to meet any contingent liabilities arising out of taxes or otherwise. (e) Building fund. (f) Rebate to members in proportion to the purchase of sugar-cane/beet made from them. (g) Payment of incentive to the employees beside statutory bonus. (h) Research and development fund. (i) Any surplus which remains undistributed may be carried over to reserve fund or to the profits of the next year. It is evident from clause 29 of the bye-laws of the society, quoted above, that a provision is to be made out of the profits of the society, for price fluctuation fund and for rebate to members in proportion to the purchase of sugarcane/beet. The assessee has fixed Rs. 9 per qtl. by way of additional sugarcane price in addition to the price fixed by the Cane Commissioner of Punjab in order to enhance its capital base and no payment has been made to the sugarcane growers." 7. From the perusal of the above, it would be noticed that the Tribunal after appreciating ....