Vs. Shri Satpuda Tapi Parisar Ssk Ltd.  INSC 114 (20 January 2010)
APPELLATE JURISDICTION CIVIL APPEAL NO.617 OF 2010 (Arising out of S.L.P. (C)
No.11930 of 2008) Dy. Commissioner of Income Tax, Nashik ...Appellant(s) Versus
Shri Satpuda Tapi Parisar SSK Limited ...Respondent(s) With Civil Appeal
No.618/2010 @ S.L.P. (C) No.9280/2009, Civil Appeal No.620/2010 @ S.L.P. (C)
No.2862/2009, Civil Appeal No.621/2010 @ S.L.P. (C) No.28203/2008, Civil Appeal
No.622/2010 @ S.L.P. (C) No.28206/2008, Civil Appeal No.623/2010 @ S.L.P. (C)
No.28208/2008, Civil Appeal No.624/2010 @ S.L.P. (C) No.28220/2008, Civil
Appeal No.625/2010 @ S.L.P. (C) No.4764/2009, Civil Appeal No.626/2010 @ S.L.P.
(C) No.4751/2009, Civil Appeal No.627/2010 @ S.L.P. (C) No.6427/2009, Civil
Appeal No.628/2010 @ S.L.P. (C) No.7495/2009, Civil Appeal No.629/2010 @ S.L.P.
(C) No.8337/2009, Civil Appeal No.630/2010 @ S.L.P. (C) No.7501/2009, Civil
Appeal No.631/2010 @ S.L.P. (C) No.8125/2009, Civil Appeal No.632/2010 @ S.L.P.
(C) No.8127/2009, Civil Appeal No.633/2010 @ S.L.P. (C) No.8131/2009, Civil
Appeal No.634/2010 @ S.L.P. (C) No.8132/2009, Civil Appeal No.635/2010 @ S.L.P.
(C) No.8130/2009, Civil Appeal No.636/2010 @ S.L.P. (C) No.8895/2009, Civil
Appeal No.637/2010 @ S.L.P. (C) No.7757/2009, Civil Appeal No.638/2010 @ S.L.P.
(C) No.7489/2009, Civil Appeal No.639/2010 @ S.L.P. (C) No.9281/2009, Civil
Appeal No.640/2010 @ S.L.P. (C) No.9285/2009, Civil Appeal No.641/2010 @ S.L.P.
(C) No.9286/2009, Civil Appeal No.642/2010 @ S.L.P. (C) No.9287/2009, Civil
Appeal No.643/2010 @ S.L.P. (C) No.9284/2009, Civil Appeal No.644/2010 @ S.L.P.
(C) No.9132/2009, Civil Appeal No.645/2010 @ S.L.P. (C) No.12122/2009, Civil
Appeal No.646/2010 @ S.L.P. (C) No.13047/2009, Civil Appeal No.647/2010 @
S.L.P. (C) No.13049/2009, Civil Appeal No.648/2010 @ S.L.P. (C) No.13048/2009,
Civil Appeal No.649/2010 @ S.L.P. (C) No.9275/2009, Civil Appeal No.650/2010 @
S.L.P. (C) No.12132/2009, Civil Appeal No.651/2010 @ S.L.P. (C) No.12127/2009,
Civil Appeal No.652/2010 @ S.L.P. (C) No.22114/2008, Civil Appeal No.653/2010 @
S.L.P. (C) No.15947/2009, Civil Appeal No.654/2010 @ S.L.P. (C) No.15638/2009,
Civil Appeal No.655/2010 @ S.L.P. (C) No.15996/2009, Civil Appeal No.656/2010 @
S.L.P. (C) No.15634/2009, Civil Appeal No.657/2010 @ S.L.P. (C) No.7816/2009,
Civil Appeal No.658/2010 @ S.L.P. (C) No.15898/2009, Civil Appeal No.659/2010 @
S.L.P. (C) No.18044/2009, Civil Appeal No.660/2010 @ S.L.P. (C) No.18753/2009,
Civil Appeal No.661/2010 @ S.L.P. (C) No.17420/2009, Civil Appeal No.662/2010 @
S.L.P. (C) No.18752/2009, Civil Appeal No.663/2010 @ S.L.P. (C) No.18022/2009,
Civil Appeal No.664/2010 @ S.L.P. (C) No.17813/2009, Civil Appeal No.665/2010 @
S.L.P. (C) No.18524/2009, Civil Appeal No.666/2010 @ S.L.P. (C) No.18430/2009,
Civil Appeal No.667/2010 @ S.L.P. (C) No.18006/2009, Civil Appeal No.668/2010 @
S.L.P. (C) No.19662/2009, Civil Appeal No.669/2010 @ S.L.P. (C) No.19663/2009,
Civil Appeal No.670/2010 @ S.L.P. (C) No.19830/2009, Civil Appeal No.671/2010 @
S.L.P. (C) No.19831/2009, Civil Appeal No.672/2010 @ S.L.P. (C) No.19415/2009,
Civil Appeal No.674/2010 @ S.L.P. (C) No.28523/2008, Civil Appeal No.675/2010 @
S.L.P. (C) No.28524/2008, Civil Appeal No.676/2010 @ S.L.P. (C) No.27929/2008,
Civil Appeal No.677/2010 @ S.L.P. (C) No.20176/2009, Civil Appeal No.678/2010 @
S.L.P. (C) No.2624/2009, Civil Appeal No.679/2010 @ S.L.P. (C) No.1486/2009,
Civil Appeal No.680/2010 @ S.L.P. (C) No.5172/2009, C.A. Nos.681-682/2010 @
S.L.P. (C) Nos.20384-85/2009, C.A. Nos.683-693/2010 @ S.L.P. (C)
Nos.20387-97/2009, Civil Appeal No.694/2010 @ S.L.P. (C) No.2619/2009, Civil
Appeal No.695/2010 @ S.L.P. (C) No.21776/2009, Civil Appeal No.696/2010 @
S.L.P. (C) No.1318/2009, C.A. Nos.697-698/2010 @ S.L.P. (C) Nos.24014-15/2009,
Civil Appeal No.699/2010 @ S.L.P. (C) No.2860/2009, Civil Appeal No.700/2010 @
S.L.P. (C) No.2861/2009, Civil Appeal No.701/2010 @ S.L.P. (C) No.1397/2009, Civil
Appeal No.702/2010 @ S.L.P. (C) No.30253/2009, Civil Appeal No.704/2010 @
S.L.P. (C) No.31384/2009, Civil Appeal No.705/2010 @ S.L.P. (C) No.19636/2008,
Civil Appeal No.706/2010 @ S.L.P. (C) No.8160/2009, Civil Appeal No.707/2010 @
S.L.P. (C) No.32047/2009, Civil Appeal No.708/2010 @ S.L.P. (C) No.32048/2009,
Civil Appeal No.709/2010 @ S.L.P. (C) No.32049/2009, Civil Appeal No.710/2010 @
S.L.P. (C) No.32986/2009, Civil Appeal No.711/2010 @ S.L.P. (C) No.32984/2009,
Civil Appeal No.712/2010 @ S.L.P. (C) No.32983/2009, Civil Appeal No.713/2010 @
S.L.P. (C) No.27427/2008, Civil Appeal No.714/2010 @ S.L.P. (C) No.33745/2009,
Civil Appeal No.715/2010 @ S.L.P. (C) No.33760/2009, Civil Appeal No.716/2010 @
S.L.P. (C) No.34098/2009, Civil Appeal No.717/2010 @ S.L.P. (C) No.34739/2009,
Civil Appeal No.718/2010 @ S.L.P. (C) No.34738/2009, Civil Appeal No.719/2010 @
S.L.P. (C) No.34749/2009, Civil Appeal No.720/2010 @ S.L.P. (C) No.34748/2009,
Civil Appeal No.721/2010 @ S.L.P. (C) No.35947/2009, Civil Appeal No.722/2010 @
S.L.P. (C) No.35607/2009, Civil Appeal No.723/2010 @ S.L.P. (C) No.35609/2009,
Civil Appeal No.724/2010 @ S.L.P. (C) No.35611/2009, Civil Appeal No.725/2010 @
S.L.P. (C) No.35612/2009, Civil Appeal No.731/2010 @ S.L.P. (C) No.634/2010,
Civil Appeal No.732/2010 @ S.L.P. (C) No.664/2010, Civil Appeal No.733/2010 @
S.L.P. (C) No.662/2010, Civil Appeal No.734/2010 @ S.L.P. (C) No.663/2010,
Civil Appeal No.735/2010 @ S.L.P. (C) No.1120/2010, Civil Appeal No.736/2010 @
S.L.P. (C) No.1706/2010, Civil Appeal No.737/2010 @ S.L.P. (C) No.6742/2009,
Civil Appeal No.738/2010 @ S.L.P. (C) No.6994/2009, Civil Appeal No.739/2010 @
S.L.P. (C) No.7003/2009, Civil Appeal No.740/2010 @ S.L.P. (C) No.7006/2009,
Civil Appeal No.741/2010 @ S.L.P. (C) No.7007/2009 and Civil Appeal No.744/2010
@ S.L.P. (C) No.12209/2009.
O R D E R
granted in special leave petitions.
heard learned counsel at length on the applicability of Section 40A(2) of the
Income Tax Act, 1961, as it stood at the relevant time, we are of the view that
large number of questions have remained unanswered in these cases.
applicability of Section 40A(2) of the Income Tax Act, 1961 [`Act', for short]
is linked to computation under Section 28 and Section 37 of the Act. It is the
case of the Department in all these cases that the State Advised Price [S.A.P.]
is determined on the basis of the price recommended by the assessee(s) after
the finalisation of accounts and, therefore, the differential amount between
S.A.P. and S.M.P. would constitute appropriation of profits and not
expenditure/expense under Section 37 of the Act. On the other hand, it is the
case of the assessee(s) that they are bound to pay to the cane growers the
final cane price as per the S.A.P. fixed by the State Government and the mere
fact that S.A.P. fixed by the State Government is based on the price
recommended by the assessee(s) after finalisation of accounts would not
constitute appropriation of profits because appropriation would arise only
after the profits are determined and profits can be determined only after all
the expenses incurred for the business are deducted from the gross income.
above contentions, two questions were required to be considered by the
Department, which are as follows:
the above-mentioned differential payment made by the assessee(s) to the cane
growers after the close of the financial year or after the balance-sheet date
would constitute an expenditure under Section 37 of the Income Tax Act, 1961;
and whether such differential payment would, applying the real income theory,
constitute an expenditure or distribution of profits?"
deciding the above questions, the Assessing Officer will take into account the
manner in which the business works, resolutions of the State Government, the
modalities and the manner in which S.A.P. and S.M.P. are decided, the timing
difference which will arise on account of the difference in the accounting
years, etc. In a given case, if the assessee has made a provision in its
accounts, then the Assessing Officer shall enquire whether such provision is
made out of profits or from gross receipts and whether such differential
payment is relatable to the cost of the sugarcane or whether it is relatable to
the division of profits amongst the members of the Society? One of the points
which will also arise for determination by the Assessing Officer will be on the
theory of over-riding title in the matter of accrual or application of income.
Therefore, in each of these cases, the Assessing Officer will decide the
question as to whether the obligation is attached to income or to its source.
these questions have been examined by the Authorities below. These questions
are required to be examined because, in these case, we are not only concerned
with the applicability of Section 40A(2) of the Act but we are primarily
required to consider whether the said differential payment constitutes an
expense or distribution of profits? Ordinarily, we would not have remitted
these matters, particularly when they are for Assessment Year 1992-1993, but,
for the fact that this issue is going to arise repeatedly in future. It will also
help the assessee(s) in a way that they will have to re-write their accounts in
future depending upon the outcome of this litigation. Therefore, in the
interest of justice, we remit these cases to the concerned Commissioner of
Income Tax (Appeals). We make it clear that both the parties are given liberty
to amend their pleadings before the Commissioner of Income Tax (Appeals) takes
up the matter for final hearing. We express no opinion on the merits of the
case. The parties are at liberty to argue their respective points uninfluenced
by any observations made in the impugned judgements on the applicability of
Section 28 or Section 37 of the Act.
appeals filed by the Department, accordingly, stand disposed of with no order
as to costs.
January 20, 2010.