Allahabad H.C : Whether, on the facts and circumstances of the case, the Tribunal is correct in law in holding that the assessee is not entitled to deduction for liability for market fee on the sale of sugar and molasses ?

High Court Of Allahabad

Motilal Padampat Udyog Ltd. vs. CIT

Section 37(1)

Asst. Year 1976-77 & 1977-78

R.K. Agrawal & Vikram Nath, JJ.

IT Ref. No. 81 of 1990

26th September, 2006

Counsel Appeared :

R.S. Agarwal, for the Assessee : R.K. Upadhyaya, for the Revenue

JUDGMENT

By the court :

The Tribunal, Allahabad, has referred the following question of law under s. 256(1) of the IT Act, 1961, (hereinafter referred to as “the Act”), for the opinion of this Court : “Whether, on the facts and circumstances of the case, the Tribunal is correct in law in holding that the assessee is not entitled to deduction for liability for market fee on the sale of sugar and molasses ?” The reference relates to the asst. yrs. 1976-77 and 1977-78. Briefly stated the facts giving rise of the present reference are as follows : During the asst. yr. 1976-77, the assessee had claimed deduction for Rs. 6,72,294 being the liability for payment of market fee. According to the assessee, market fee is payable to the Government of Bihar on purchase of sugarcane and sale of sugar and molasses under the Bihar Agricultural Produce Markets Act, 1960. The AO had observed that the assessee has not proved its claim. He had also noted that the liability for payment of the amount has not been admitted by the assessee. In the circumstances, he had held that this liability is neither contingent nor real and was, therefore, disallowed. This disallowance was upheld in appeal by the CIT(A). Aggrieved by his order, the assessee carried the matter in appeal before the Tribunal. During the hearing of the appeal before the Tribunal, the learned Authorised Representative for the assessee had submitted that similar issue had arisen in the appeal relating to the asst. yr. 1980-81. It was pointed out that vide order passed in ITA No. 586/All/1984, relating to the asst. yr. 1980-81 the Tribunal had held that the assessee is liable to pay the market fee only on cane purchased by it in the market area.

It was also submitted that in the said appeal, necessary facts had not come on record to show as to what was the amount of purchases made by the asses-see in the market area and, therefore, the matter had been restored to the AO to investigate that aspect of the matter and determine the purchases of agricultural produce. But it was submitted that during the year in question, the assessee had filed details of purchases and/or sales of cane, sugar and molasses in respect of which the liability for payment of market fee was claimed. Referring to the said details, it was submitted that in view of the order of the Tribunal passed in the appeal for the asst. yr. 1980-81, the market fee in respect of sugar and molasses sold by the assessee is not allowable, but the assessee wants to keep the matter alive. The assessee’s representative had also pointed out that the assessee had purchased sugar cane for Rs. 2,38,95,498 and on account of such purchases, the market fee at 1 per cent comes to Rs. 2,38,954 and the claim to the extent is allowable. It was also pointed out that the liability for the year in question stands quantified because the Agricultural Produce Market Committee, Bettiah, had issued demand notice, which was brought on record. The Tribunal after taking into account its order for the asst. yr. 1980-81 had accepted the assessee’s claim only to the extent of Rs. 2,38,581.26 by recording the following findings : “We have given due consideration to the rival submission. In the appeal relating to the asst. yr. 1980-81, after considering the legal provisions, the Tribunal had concluded that the assessee is liable to pay the market fee on the cane purchased by it in the market area. We see no reason to take a different view. The demand notice indicates that the market fee to the tune of Rs. 2,38,581.26 had been levied for the period under consideration on account of the sugarcane purchased by the assessee in the market area. We, therefore, accept the assessee’s claim to that extent and direct the AO to allow the liability for payment of market fee to the extent of Rs. 2,38,581.26.” Thus the deduction claimed for liability for market fee on the sale of sugar and molasses was not accepted by the Tribunal as well. During the asst. yr. 1977-78, the assessee claimed deduction of Rs. 6,55,759 on the ground of liability for payment of market fee, which was disallowed by the authorities below. In the second appeal, the Tribunal, following its order for the asst. yr. 1976-77 accepted the assessee’s claim only to the extent of Rs. 1,74,259.23 which is relatable to the market fee on account of the sugarcane purchased by the assessee in the market area. The claim relatable to the sale of sugar and molasses was rejected.

We have heard Sri R.S. Agarwal, learned counsel appearing for the applicant and Sri R.K. Upadhyaya, learned standing counsel appearing for the Revenue. Learned counsel for the applicant submitted that the applicant was liable to pay market fee on the sale of sugar and molasses effected by it in the State of Bihar and, therefore, was entitled for deduction for market fee on such sale. However, learned counsel has not been able to substantiate his case as to whether sugar and molasses had been notified under the provisions of the Bihar Agricultural Produce Markets Act, 1960, on which any market fee was payable. In the absence of any such provision, the Tribunal was justified in holding that there is no liability for payment of market fee on the sale of sugar and molasses. We, accordingly, answer the question referred to us in the affirmative, i.e., in favour of the Revenue and against the assessee. There will be no order as to costs.

[Citation : 293 ITR 182]

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