INCOME TAX OFFICER Vs. PRAVARA SAHAKARI SAKHAR KARKHANA LTD
LAWS(IT)-1989-9-13
INCOME TAX APPELLATE TRIBUNAL
Decided on September 25,1989

Appellant
VERSUS
Respondents

JUDGEMENT

R.L. Sangani, Judicial Member - (1.)THESE five appeals by the department and two by the assessee are being disposed of by this common order.
(2.)We shall first deal with the appeals filed by the department. They relate to assessment years 1977-78 to 1979-80 and 1981-82 to 1982-83. The assessee society is a manufacturer of sugar which is a controlled commodity. 65% of the products is required to be sold as levy sugar to the Government or their nominee at rates notified by the Govt. from time to time and the balance 35% of production is allowed to be sold to the assessee society in markets as per orders of the Central Govt. The Central Govt. had fixed the price of levy sugar for the season 1974-75 by order dated 28-11-74 at Rs. 156.99 per bag of one quintal. However, by subsequent notification this price was modified by the Govt. for succeeding season as under:
JUDGEMENT_9081_TLIT0_19890.htm

The assessee considered the deduction in prices to be unjustified in view of the fact that the cost of production every year had increased. The assessee accordingly filed writ petitions in Bombay High Court against each of the said notifications. The High Court admitted the writ petitions and by interim order stayed operation of the subsequent notifications till the final disposal of the writ petitions and allowed the assessee to receive from the purchaser (Govt. of India or nominees) price for levy sugar sold as under:

JUDGEMENT_9081_TLIT0_19891.htm

The High Court also ordered the assessee to furnish bank guarantee for excess amount over the notified prices received from the purchasers also stipulated that in case the final price that may be fixed by the Court was less than the amount received, the assessee would be liable to repay such excess over finally decided price to the purchasers Govt. with interest at 12% p.a. from the date of receipt to the date of payment. The writ petitions for all those years were then transferred for decision to the Supreme Court. The assessee in pursuance of such interim orders of the High Court received during the various assessment years amounts in excess of notified prices as mentioned below:

JUDGEMENT_9081_TLIT0_19892.htm

and credited such amount to levy sugar suspense account and shown them in the balance sheet as liability in the respective years. The I.T.O. in assessing the income of each year, however, treated the said amounts as income of the assessee and included the same in the total income of the assessee. The assessee had pleaded that as the High Court had yet to decide whether the assessee was entitled to get higher price as mentioned in the petitions, the excess amounts received in pursuance of the interim order did not partake the character of the price or income of the assessee particularly when there was condition of payment in case the price was decided less than what was allowed to be received provisionally and also when there was further condition of furnishing bank guarantee for the excess amount and liability to pay interest at 12% p.a. According to the assessee the said amounts were deposits received pending final decision of the Court and as such did not constitute trading receipts.

It may be noted that the above prices have been fixed by the Central Govt. for all the sugar factories in the State of Maharashtra and as such almost all the sugar factories in the State have filed similar writ petitions in Bombay High Court and similar interim orders have been passed by the High Court in those cases. The question of taxability of such excess price received by the sugar factories had been considered by the Special Bench of the Tribunal in the case of Shri Someshwar Sahakari Sakhar Karkhana Ltd. v. ITO [1985] 11 ITD 335 (Pune) and it was held that such excess amounts were mere deposits till the final disposal of the writ petitions and that they did not constitute income of the assessee society in the year of receipt. AS the facts were identical with the facts in said decision given by the Special Bench of the Tribunal, the CIT(A) has allowed the appeals of the assessee and directed the ITO not to include the said amount in the total income of the assessee. The department has now come in appeals before us.

(3.)AFTER hearing the parties, we find that the point in controversy has been covered in favour of the assessee and against the department by the said decision of the Special Bench of the Tribunal. We respectfully follow the said decision and reject the grounds raised by the department


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