High Court Of Bombay
CIT vs. Shri Bhogawati Sahakari Sakhar Karkhana Ltd.
Section 28(i)
Dr. S. Radhakrishnan & J.H. Bhatia, JJ.
IT Appeal No. 88 of 1999
8th August, 2005
Counsel Appeared
Dr. P. Daniel & A.S. Rao, for the Appellant
JUDGMENT
J.H. Bhatia, J. :
This appeal is preferred by the Revenue under s. 260A of the IT Act against the order of the Tribunal. The following substantial question of law is raised in the said appeal : “Whether, on the facts and in the circumstances of the case, the Tribunal relying upon the Special Bench in the case of Shri Chatrapati Sahakari Sakhar Karkhana Ltd. vs. Dy. CIT (1992) 43 TTJ (Pune)(SB) 90 : (1992) 198 ITR 78 (Pune)(SB)(AT) was right in deleting the additions made on account of non-refundable deposits, CM’s Relief Fund, Area Development Fund, Cane Development Fund, Hutment Fund, Education Fund, Shri Y.B. Chavan Memorial Trust Fund and interest on non- refundable deposits by holding that various funds/deposits collected by the assessee-society out of sugarcane purchase price payable to the cane growers are not the trading receipts of the assessee ?”
Heard the learned counsel for both the parties. Admittedly, the subject is squarely covered by the authority of the Supreme Court in CIT vs. Shri Chatrapati Sahakari Shakar Karkhana Ltd. (2004) 191 CTR (SC) 66 : (2004) 270 ITR 1 (SC), authority of the Division Bench of this Court in Krishna Sahakari Sakhar Karkhana Ltd. vs. CIT (1998) 229 ITR 577 (Bom) and judgment of this Court dt. 28th June, 2005 in a group of income-tax appeals including IT Appeal No. 9 of 1999, CIT vs. Malegaon Sahakari Sakhar Karkhana Ltd. [reported at (2005) 199 CTR (Bom) 658—Ed.]. In Shri Chatrapati Sahakari Shakar Karkhana Ltd.’s case (supra), the Supreme Court clearly held that in view of the provisions of Co-operative Societies Act and Rules in Maharashtra, non-refundable as well as refundable deposits are not the trading receipts and cannot be added to the income of the society. It also held that interest payable on refundable and non-refundable deposits is also an expenditure of the society and is liable to be deducted from income taking into consideration Maharashtra Co-operative Societies Act, bye-laws and the Government directives. It was also held that the deductions on account of Chief Minister’s Relief Fund, Y.B. Chavan Memorial Trust Fund, Hutment Fund are also not the trading receipts for the society because the society has to make over the same to the concerned funds. In Krishna Sahakari Sakhar Karkhana Ltd.’s case (supra), this Court specifically held that the deductions on account of Education Fund cannot be treated as trading receipts and are not liable to be added in the income of the society.
The Supreme Court specifically held that the amounts realised on account of Cane Development Fund reach the assessee-sugar factory as its income and are utilised by it for the benefit of itself and its members, and therefore, deductions made for Cane Development Fund should be treated as the income of the assessee. The Supreme Court held that the receipts in the form of Area Development Fund always remain with the assessee-society. As there was no material as to how that amount is spent, their Lordships left this point open for the fresh determination by the Tribunal. Following the Supreme Court authority in the group of income-tax appeals decided by this Court on 28th June, 2005, this Court also gave direction that the question about the Area Development Fund be decided afresh by the Tribunal taking into consideration all the facts and relevant directions.
In the result, appeal is partly allowed. Order of the Tribunal to the extent of non-refundable deposits, interest on non-refundable deposits, CM’s Relief Fund, Hutment Fund, Education Fund and Shri Y.B. Chavan Memorial Trust Fund is maintained. The impugned order of the Tribunal to the extent of Cane Development Fund and Area Development Fund is set aside. The Tribunal is directed to decide the question of Area Development Fund afresh after taking into consideration the material placed before it including the bye-laws and directives issued by the Government in respect of use of Area Development Fund. No order as to costs.
[Citation : 283 ITR 374]
