The Commissioner Of Income Tax-I Coimbatore v. M/S Bannari Amman Sugars Limited

In the High Court of Judicature at Madras Dated : 21.07.2008 Coram :- The Honourable Mr.Justice K.RAVIRAJA PANDIANandThe Honourable Mr.Justice P.P.S.JANARTHANA RAJA Tax Case (Appeal) Nos.974 to 976 of 2008AND M.P.Nos.1 of 2008 in T.C.A.Nos.975 and 976 of 2008 The Commissioner of Income Tax-I Coimbatore... Appellant in all appealsVs. M/s Bannari Amman Sugars Limited252, Mettupalayam RoadCoimbatore 641 043... Respondent in all appeals TAX CASE (APPEALS) filed under Section 260A of the IncomeTax Act against the order of the Income Tax Appellate TribunalMadras 'D' Bench dated 26.04.2005 in I.T.A.Nos.203, 204,210/Mds/2002 for the assessment years 1995-96, 1996-97 and 1997-98. against the order of the Commissioner of Income Tax (Appeals)I, Coimbatore dated 18.12.2001 made in IT. Appeal Nos.09360102,10800102 against the order of the Deputy Commissioner of IncomeTax, Specical Range I, Coimbatore dated 19.12.1997, 10.2.1998 and20.3.2000 in PAN/GIR No.49-502-CT-2217 for the assessment years1995-96, 1996-97 and 1997 – 98 respectively. For Appellant : Mr.T.Ravikumar JUDGMENT JUDGMENT OF THE COURT WAS DELIVERED BY K.RAVIRAJA PANDIAN,J These appeals are filed by the revenue against the orderof the Income Tax Appellate Tribunal Madras 'D' Bench dated26.04.2005 in I.T.A.Nos.203, 204, 210/Mds/2002 for the assessmentyears 1995-96, 1996-97 and 1997-98, by formulating the followingsubstantial questions of law:-"1. Whether on the facts and in thecircumstances of the case the Income TaxAppellate Tribunal was right in holding thatthe additional income derived from sale offree sugar was capital receipt and,therefore, not taxable? https://hcservices.ecourts.gov.in/hcservices/ 2. Whether on the facts and in thecircumstances of the case, the Income TaxAppellate Tribunal was right in holding thatthe closing stock of incentive sugar has tobe valued at levy price and not at costprice?". 2. The material facts culled out from the statement of factsin the memorandum of grounds go as follows:-The assessee is a company. The assessment of theassessee company for the assessment years 1995-96 to 1997-98 werecompleted as under:-Asst. YearDate of order u/s 143Total Income assessed(3)1995-9619.12.1997Nil (after adjustingb/f loss andunabsorbed depn.)1996-9710/2/98 ..do..1997-9820.03.2000Nil (Taxable incomeu/s 115JARs.4,03,07,880) 3. In the returns filed, the assessee had claimed thatincentives given by way of free sale of sugar was capital innature and was not assessable as income. It was also contendedthat closing stock should be valued on the basis of levy price andnot at cost price. The assessee's contention was that theincentive by way of free sale of sugar was given by the Governmentwith the intention that the interest on term loans and instalmentsof principal amounts should be paid out of the said incentives.The Assessing Officer has elaborately dealt with the SampathCommittee Report and pointed out that the assessee by claiming theincentive as capital receipt and interest payments as revenueexpenditure, has claimed double deduction, which is notpermissible. The Assessing Officer held that the income from freesale of sugar was revenue receipt. The assessee had valuedclosing stock incentive sugar at levy price and not at cost price.For reasons discussed in assessee's own case for assessment years1989-90 to 1994-95, the closing stock was valued at cost price.While doing so, the value of opening stock of incentive sugar wasalso adopted at cost price. The Assessing Officer accordinglyadjusted the value of closing stock for all the three assessmentyears under consideration. 4. Aggrieved by the order of the Assessing Officer, theassessee preferred an appeal before the Commissioner of Income Tax(Appeals), who by his order dated 18.12.2001, pointed out that inthe assessee's own case when the matter came up before the HighCourt for the assessment years 1987-88 and 1989-90, the HighCourt following its earlier order in CIT vs. M/s Tamilnadu SugarCorporation Ltd., (TC.NOs.777 and 778 of 1995) answered thequestions against the revenue and following the same, allowed theassessee's appeals. 5. Aggrieved by the order of the Commissioner of Income tax(Appeals), the revenue filed appeals before the Income TaxAppellate Tribunal and the Tribunal by order dated 26.04.2005following the decision of the High Court referred to above,dismissed the appeals. The correctness of the said order of theIncome-tax Appellate Tribunal is now canvassed before this Courtby the Revenue in this appeal. 6. Learned counsel appearing for the revenue has fairlysubmitted that the issue involved in these appeals is covered bythe judgement of this Court in T.C.Nos.777 and 778 of 1995 in thecase of Commissioner of Income Tax, Tamil Nadu I, Madras vs. M/sTamilnadu Sugar Corporation Ltd., Madras. 7. In the above referred case, this Court has held asfollows:-"Similar questions have been consideredby this Court in the decision reported in CITvs. South India Sugars Ltd., reported in 248ITR 92). The questions have been answeredagainst the revenue and in favour of theassessee. Applying the same principle, weanswer these questions in favour of theassessee and against the revenue". 8. The said decision has also been followed by this Court inT.C.Nos.582 and 583 of 1995 dated 15.10.2001 in the assessee's owncase for the assessment year 1989-90, dismissing the appealpreferred by the revenue. 9. In the light of the above decisions, the questions raisedin these appeals are answered in favour of the assessee andagainst the revenue. The appeals are dismissed. Consequently,connected miscellaneous petitions are also dismissed. Rg Sd/Asst.Registrar/true copy/Sub Asst.RegistrarTo1.The Assistant Registrar, Income-Tax Appellate Tribunal, 'D' Bench, Rajaji Bhavan, Besant Nagar, Madras.2. The Commissioner of Income Tax (Appeals),I Coimbatore3. The Deputy Commissioner of Income Tax, Special Range I,Coimbatore.4. The Commissioner of Income Tax I, Coimbatore.+ 3 ccs to Mr. N. Muralikumaran, Sr Standing Counsel for IncomeTax SR Nos.39002 to 39004.T.C.A.Nos.974 to 976 of 2008BVM(CO)SR/12.8.2008