M.R. Shah, J. - (1.) Leave granted in all the special leave petitions.
(2.) As common question of law arises in this group of appeals, all these appeals are being disposed of together, by this common judgment and order.
(3.) For the sake of convenience, Civil Appeal No. 8890 of 2012 (Commissioner of Income Tax, Bombay vs. Tasgaon Taluka Sahakari Sikhar Karkhana Limited) is treated and considered as a lead case, and therefore, the facts from the said appeal are narrated and considered. 3.1 The assessee (respondent herein) is a Co-operative Society engaged in the business of production of sugarcane and sale thereof. The assessee filed its return of income for the Assessment Year 1998-99 declaring 'NIL; income. In the return, the assessee computed carry forward loss of Rs.40,00,339/- and unabsorbed depreciation of Rs.1,67,26,665/-. The return was processed under Section 143(1) (a) of the Income Tax Act, (hereinafter referred to as the 'Act'), making adjustment of Rs.2,02,242-/ relatable to Section 40A (3) of the Act. Thereafter the assessee filed a revised return wherein business loss was shown to the tune of Rs.3,32,42,426/-. 3.2 A notice under Section 143(2()/142(1) of the Act was issued to the assessee. The assessee was having manufacturing activities of white sugar. It had shown the income from business of manufacturing sugar, petrol pump station and also interest under the head "income from other sources". 3.3 After scrutiny of final accounts details along with return of income and details furnished during the course of assessment proceedings, an issue arose with respect to disallowance under Section 37(1) of the Act for excessive and unreasonable cane purchase price paid to the members of the sugarcane. 3.4 It was noticed that during the year under consideration, the assessee had crushed 189736.220 metric tones sugarcane. The assessee had paid Rs.615/- and Rs.720-/ for crushing seasons 1996-97 and 1997-98 respectively per metric tone at the time of purchase of cane and the balance amount was paid later on, as per contracted price increase of sugarcane on contract basis and as per Mantri Committee Advice in case of purchase of sugarcane from members and others. It has found as under: JUDGEMENT_18_LAWS(SC)3_2019_1.html 3.5 It was noticed that the production of sugar was covered by the Essential Commodities Act, 1955 and the Government had issued the Sugar Cane (Control) Order, 1966 (hereinafter referred to as the 'Control Order, 1966'), which deals with all aspects of production of sugarcane and sale thereof including the price to be paid to the cane growers. It was noticed that Clause 3 of the Control Order, 1966 authorises Government to fix minimum cane price. It was also noticed that in addition to this, additional cane price is also payable as per Clause 5A of the Control Order, 1966. 3.6 It was noticed that in the case of the assessee, the price paid by the assessee to the sugarcane growers, most of those are its members, was in excess than what was payable as per the above Order and accordingly the assessee was asked to furnish details of payments made for the purchase of sugarcane and also payment made later on. The assessee was also asked to explain whether the payment made later on is made at the request of the assessee or not. 3.7 It appears that the assessee furnished details of payment made, wherein it was found that the price paid for purchase of sugarcane at the rate of Rs.875/- PMT for sugarcane seasons 1996-97 and 1997-98. It was further stated that the cane price payable as per Clause 3 and Clause 5A of the Control Order, 1966, comes to Rs.537.70 for sugarcane season 1996-97 and Rs.646.50 for sugarcane season 1997-98. Therefore, the assessee was given an opportunity to explain why price paid by it to members/non-members for purchase of sugarcane, in excess of what was payable as per Clause 3 and Clause 5A of the Control Order, 1966, be not held as excessive. 3.8 In response thereto, the assessee filed written submissions. It claimed that the payment has been made as per the rate fixed by Commissionerate of Sugar, Maharashtra State, Pune, and the same is as per guidelines given by the Mantri Committee. With regard to the purchase made from non-members and members, it was the case of the assessee that payment has been made as per price agreed to at the time of purchase. It was submitted that a contract for the purchase of sugarcane has been entered into at the time of start of sugarcane and since the price is agreed at the time of purchase itself, the same is required to be allowed as deduction. It was, therefore, claimed that no disallowance be made either under Section 40A (2) of the Act or otherwise.;