R.K. Agrawal, J. - (1.) The Tribunal, Delhi, has referred the following questions of law under Section 256(2) of the IT Act, 1961 (hereinafter referred to as 'the Act') for opinion to this Court "1. Whether, on the facts and in the circumstances of the case, the learned Tribunal was right in law in holding that the amount of Rs. 12,66,429 being excess levy sugar price was not taxable in the hands of the assessee-company in the year under consideration ?
(2.) Whether, on the facts and in the circumstances of the case, the learned Tribunal was right in law in deleting the interest of Rs. 2,89,026 and also in confirming the deletion of interest of Rs. 1,43,282 on the amount of excess levy sugar price claimed by the assessee-company ?" 2. The present reference relates to the asst. yr. 1974-75 for which the relevant previous year ended on 30th Sept., 1973. The assessee is a public limited company engaged in the manufacture and sale of crystal sugar. The Government of India vide notification dt. 15th June, 1972, issued under Section 3 of the Essential Commodities Act. 1955, fixed the price of levy sugar of D-30, grade (exclusive of excise duty) for the Central Zone at Rs. 1.38.87 per quintal. The assessee was required to supply the sugar to the nominees of the Government at the above rate. The assessee felt that the price fixed was low. It, therefore, filed a writ petition before this Court wherein an interim order was passed on 27th July, 1972, whereby the Government of India was restrained from giving effect to the impugned notification dt. 15th June, 1972, on the condition that the assessee furnishes bank guarantee before the Registrar of this Court in respect of the difference between the price fixed by the Government and the price at which the sugar was actually sold. The assessee was, therefore, allowed to charge the higher price of Rs. 188.21 per quintal for the sale of the levy sugar from the nominees of the Government. The assessee complied with the above requirement of the order of this Court. The assessee collected a sum of Rs. 23,12,210 upto 30th Sept., 1972, during the asst. yr. 1973-74 in excess of the amount as per the price fixed by the Government. During the assessment year in question for which the accounting year was 1st Oct., 1972 to 30th Sept., 1973, the assessee collected another amount of Rs. 12,66,429 from 9th Oct., 1972 to 30th March, 1973, in excess of the price fixed by the Government. The question before the ITO arose regarding the assessability of this amount of Rs. 12,66,429. It was pointed out to the ITO that the assessee's writ petition has been dismissed by this Court vide order dt. 13th March, 1975. It was made clear by this Court that the dismissal would not effect the right of any person entitled to claim any relief with regard to any excess price charged by the assessee in appropriate proceeding- It was, therefore, claimed before the ITO that the assessee became liable to refund the amount to the persons from it was charged in excess of the price fixed by the Government. It was further pointed out to the ITO that since then the Government of India had passed the Levy Sugar Price Equalisation Fund Act, 1976 (hereinafter referred to as 'the Levy Act') which came into effect on 1st April, 1976. Under the Levy Act, the Government had created Levy Sugar, Price Equalisation Fund. Under Section 3 of the Levy Act, the assessee was required to transfer the excess sugar price to the fund along with interest (c) 12.5 per cent per annum from the date of realization of the amount to the date of its transfer. It was urged before the ITO that in view of the aforesaid provisions the amount was to be transferred to the Levy Sugar Price Equalisation Fund with interest @ 12.5 per cent per annum from the date of realization to the date of transfer and, therefore, the amount of Rs. 12,66,429 did not belong to the assessee. It was further claimed before the ITO that the assessee was also entitled to the deduction of interest on the above amount which was payable to the aforesaid Fund. It was also stated before the ITO that in the asst. yr. 1972-73, a similar amount was taxed by the ITO but the addition was deleted by the AAC and his order was upheld by the Tribunal. In the asst. yr. 1973-74, the ITO himself did not tax it. The ITO rejected the assessee's contention. He observed that in the year under appeal, the amount was realised as part and parcel of the sugar price and, therefore, it formed part of the sale proceeds of sugar and was liable to be taxed as the assessee's income. The ITO further observed that the order of the Tribunal had not been accepted by the Department and the matter had been taken in reference to this Court. The ITO, as a corollary, also rejected the assessee's claim for deduction of interest. The assessee appealed to the AAC who accepted its claim that the amount of Rs. 12,66,429 did not form part of the assessee's income. The AAC also found that the Supreme Court in its judgment dt. 6th Nov., 1972 in the case of Panipat Sugar Mills had upheld the validity of the fixation of price of levy sugar by the Government of India. He further found that the Supreme Court, vide order dt. 8th July, 1975, in the case of L.H. Sugar Factories & Oil Mills Ltd. v. Union of India, had also confirmed that the excess money realized by the assessee should be made over to the Government which would in turn disburse the same to the respective claimants. He also took note of the fact that the Levy Act provided that all such excess realization made before or after the commencement of the Levy Act was to be credited to the Levy Sugar Price Equalisation Fund. He, therefore, held that the excess amount realized by the assessee represented its liability and that it did not acquire any right over it. He accordingly directed the deletion of Rs. 12,66,429. The AAC then dealt with the claim of the assessee for the deduction of interest. He agreed in principle that the assessee was entitled to such deduction. He accordingly allowed the interest on the above amount of Rs. 12,66,429 which came to Rs. 1,43,282. It was claimed before the AAC that the assessee was also entitled to the deduction of another interest of Rs. 2,89,026 on the amount of Rs. 23,12,210 collected upto 30th Sept., 1972. The AAC rejected this claim observing that this was not relevant for the assessment year under consideration. The Department challenged the findings of the AAC with regard to the deletion of Rs. 12,66,429 as also with regard to the allowance of interest amount to Rs. 1,43,282. The assessee, on the other hand, challenged the disallowance of interest of Rs. 2,89,026.
(3.) The Tribunal upheld the deletion of the amount of Rs. 12,66,429 on the ground that it was not taxable in the hands of the assessee as its income. It further held that interest of Rs. 2,89,026 and Rs. 1,43,282 is allowable as deduction in view of the provisions of Section 3 of the Levy Act.;