Dismissed

Purna Sahakari Sakhar Karkhana Limited v. Puran Lal Deputy Commissioner of Income Tax

Bombay HC25 Mar 2015TA/11/2004

Case brief

AI extract

What is this about?

High Court Bench at Aurangabad dismissed two tax appeals filed by Purna Sahakari Sakhar Karkhana Ltd. The court upheld the income tax addition regarding the distillery fund, holding it constitutes taxable income rather than a deductible deposit or R.R.D., relying on Supreme Court precedents.

What did the court decide?

Both appeals dismissed; addition confirmed; no costs awarded.

Purna Sahakari Sakhar Karkhana Limited Vs Puran Lal Deputy… — Income Tax | Bombay HC (2015)

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ta11.04

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY

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BENCH AT AURANGABAD

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TAX APPEAL NO.11 OF 2004

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Purna Sahakari Sakhar Karkhana
Ltd., a Co-operative Society under
the provisions of the Maharashtra
Co-operative Societies Act, 1960
having its registered office at
Basamtnagar, Dist-Parbhani

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...APPELLANT
 VERSUS

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Puran Lal
Deputy Commissioner of Income-Tax,
Special Range-2, Aurangabad,
Having his Office at Bansilal Nagar,
Aurangabad - 431 001.

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...RESPONDENT

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 WITH

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 TAX APPEAL NO.12 OF 2004

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Purna Sahakari Sakhar Karkhana
Ltd., a Co-operative Society under
the provisions of the Maharashtra
Co-operative Societies Act, 1960
having its registered office at
Basamtnagar, Dist-Parbhani

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...APPELLANT

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 VERSUS

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Puran Lal

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Deputy Commissioner of Income-Tax,
Special Range-2, Aurangabad,
Having his Office at Bansilal Nagar,
Aurangabad - 431 001.

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 ...RESPONDENT

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...

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 Mr.V.D. Hon Senior Counsel for Appellant.
 Mr.Alok Sharma, Standing Counsel for
 Respondent.

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...

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CORAM: S.V. GANGAPURWALA AND
 A.I.S. CHEEMA, JJ.

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 DATE : 25TH MARCH, 2015

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ORAL ORDER :

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1. In both these Appeals, common issue is
involved.

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2.The Tribunal has held that the amount

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collected towards distillery fund is not in the
nature of R.R.D., as such the addition made by the
assessing officer is confirmed.

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3.Mr. Hon, learned senior counsel for the

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Appellant contends that the said amount is in the

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nature of deposit and as such the same cannot be
added to the income. The said amount remains in
the account of assessee. Learned senior counsel
relies on the Judgment of this Court in the case
of Commissioner of Income Tax vs. Chhatrapati
Sahakari Sakhar Karkhana Ltd. & Rahuri Sahakari

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Sakhar Karkhana Ltd., reported in (2000) 245
I.T.R. 498. According to the learned senior
counsel, this aspect that the said amount is by
way of deposit, has not been considered. Even the
bye-laws permit the said amount to be kept as
deposit.

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4.Mr. Sharma, the learned counsel for

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Respondent relies on the Judgment of the Apex
Court in the case of Siddheshwar Sahakari Sakhar
Karkhana Limited vs. C.I.T., Kolhapur, reported in
2004(12) S.C.C. 1, and submits that the said
amount is for utilization of the present Appellant
for construction of Distillery and as such the
addition made of the said amount is proper.

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5.The Apex Court in the case of Siddheshwar

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Sahakari Sakhar Karkhana Limited, referred supra,
has observed in Para 59 as under:-

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"59. As far as Sugar Cane Development Fund
is concerned, the case of the Revenue seems
to stand on a stronger footing. In the
paper-book, we find a Circular dated 18th
August, 1986 in which certain directive
principles have been laid down to regulate
the expenditure to be incurred out of Cane
Development Fund. The items specified in
the directive principles are (1) green
manuring, (2) lift irrigation schemes, (3)
distribution of cane seeds, and (4)
construction of new wells or deepening of
old wells. The sugar factory is required to
make sure that any project which they want
to undertake out of the Cane Development
Fund is technically and financially sound
and to send the proposals in advance to the
Directorate of Sugar for requisite
sanction. The projects will directly
benefit the members and augment the
sugarcaneproductionwhichwill
incidentally help the Society in its
manufacturing operations. The beneficiaries
under the scheme are no other than the
members of the Sugar Cooperative Society
concerned and the advantage of enhanced
production of sugarcane will ultimately be
felt by the Society itself. Unlike the Area
Development Fund, the monies out of Cane
Development Fund are not spent for purposes
unconnected with the growth and functioning

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of the sugar factory. The Tribunal was
inclined to view it as a 'compulsory levy'
on the depositors 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 si 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 the 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."

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6.Here in the present matter also it has
been observed by the Commissioner as well as the

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Tribunal that the Distillery Fund is not in the
nature of R.R.D. and other fund. No liability is

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attached to the said fund. The said fund is to be
utilized by the assessee for constructing the
Distillery and the funds remain within the control
of the Appellant.

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7.In light of aforesaid discussion, the
substantial questions of law is answered
accordingly. Both the Appeals are dismissed. No
costs.

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[A.I.S.CHEEMA,J.] [S.V.GANGAPURWALA,J.]
asb/MAR15

Purna Sahakari Sakhar Karkhana Limited v. Puran Lal Deputy Commissioner of Income Tax

Case brief

What is this about?

What did the court decide?

Purna Sahakari Sakhar Karkhana Limited v. Puran Lal Deputy Commissioner of Income Tax

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Cases cited

Statutes considered

Parties & counsel

Coram

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