The Gurdaspur Co-Operative Sugar Mill Ltd., Panipur, Gurdaspur v. Commissioner Of Income Tax-Ii, Amritsar And Another

ITA No. 419 of 2009 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 419 of 2009 (O&M) Date of Decision: 20.10.2015 The Gurdaspur Co-operative Sugar Mill Ltd., Panipur, Gurdaspur ....Appellant. Versus Commissioner of Income Tax-II, Amritsar and another ...Respondents. 1.Whether the Reporters of the local papers may be allowed to see the judgment?the judgment? 2.To be referred to the Reporters or not? 3.Whether the judgment should be reported in the Digest? CORAM:-HON'BLE MR. JUSTICE AJAY KUMAR MITTAL.HON'BLE MR. JUSTICE RAMENDRA JAIN. PRESENT: Mr. M.R. Sharma, Advocate for the appellant. Mr. Denesh Goyal, Advocate for the respondent. AJAY KUMAR MITTAL, J. 1.This order shall dispose of two appeals bearing ITA Nos.419 and 560 of 2009 as the Income Tax Appellate Tribunal, AmritsarBench, Amritsar (hereinafter referred to as “the Tribunal”) has decidedboth the cases by one consolidated order and the issues involvedtherein are identical. For brevity, the facts are being extracted from ITANo. 419 of 2009. 2.This appeal has been filed by the assessee under Section260A of the Income Tax Act, 1961 (in short “the Act”) against the orderdated 31.12.2008 (Annexure P-1) passed by the Tribunal in ITA No.344/Asr/2008 for the assessment year 2003-04, claiming the following ITA No. 419 of 2009 substantial questions of law:- (i)Whether in the facts and circumstances of thecase the orders (Annexure P-1), (Annexure P-2)and (Annexure P-3) are legally sustainable?case the orders (Annexure P-1), (Annexure P-2)and (Annexure P-3) are legally sustainable? (ii)Whether in the facts and circumstances of thecase the ITAT has grossly erred in upholdingthe order of the Assessing Officer and CIT(A)holding the amount of Rs.22,15,00,000/-advanced as loan by the Punjab RuralDevelopment Board during the period from1991-92 to 2001-02 and converted into grantsduring the year under consideration is arevenue receipt and can be subjected to taxunder the provisions of Section 28(iv) of theIncome Tax Act? (iii)Whether in the facts and circumstances of thecase the ITAT has grossly erred in upholdingthe order of the Assessing Officer and CIT(A)disallowing the amount of Rs.29,07,740/- paidas salary to the employees, rates and taxesetc.? (iv) Whether in the facts and circumstances of thecase the ITAT has grossly erred in upholdingthe order of the Assessing Officer and CIT(A)disallowing the depreciation amounting to` 3,87,637/- in respect of distillery unit havingcommon management, premises, employees, electricity supply etc. etc. can be disallowed? (v)Whether in the facts and circumstances of thecase the ITAT has grossly erred in denying thededuction to the appellant being a cooperativesociety from the marketing of agricultureproduce being sugarcane of its growermembers u/s 80P(2)(a)(iii) of the Income Taxcase the ITAT has grossly erred in denying thededuction to the appellant being a cooperativesociety from the marketing of agricultureproduce being sugarcane of its growermembers u/s 80P(2)(a)(iii) of the Income Tax Act? electricity supply etc. etc. can be disallowed? (v)Whether in the facts and circumstances of thecase the ITAT has grossly erred in denying thededuction to the appellant being a cooperativesociety from the marketing of agricultureproduce being sugarcane of its growermembers u/s 80P(2)(a)(iii) of the Income Taxcase the ITAT has grossly erred in denying thededuction to the appellant being a cooperativesociety from the marketing of agricultureproduce being sugarcane of its growermembers u/s 80P(2)(a)(iii) of the Income Tax Act? 3.Briefly stated, the facts necessary for adjudication of theinstant appeal as narrated therein may be noticed. The assessee filedits return of income on 29.11.2003 for the assessment year 2003-04declaring net loss of ` 24,43,73,547/- and agricultural income at` 1,94,830/-. Along with the said return, the assessee filed a computationchart showing the statement of income. The assessment was completedunder Section 143(1)(a) of the Act by the Assessing Officer vide orderdated 20.1.2004 accepting the returned income. However, theassessment order was not served upon the assessee. Subsequently,the assessee filed a revised return on 31.3.2004 declaring business lossof ` 26,22,91,189/- and agricultural income at ` 1,94,830/-. The saidrevised return was processed under Section 143(1) of the Act at thedeclared loss on 15.7.2004 as is evident from the perusal of theassessment order passed in this case. A notice under Section 148 ofthe Act was issued on 10.5.2006 to the assessee for reopening theassessment already completed. Respondent No.2 being the AssessingOfficer completed the assessment under Section 143(3)/147 of the Actvide order dated 27.7.2007 (Annexure P-2) and made an addition of` 25,15,00,000/- being the amount of grant-in-aid received from State Government. The Assessing Officer disallowed ` 29,07,740/- out ofexpenses and ` 3,87,637/- being the amount of depreciation claimed ondistillery unit and assessed ` 4,08,47,650/- as net income after settingoff the losses. Respondent No.2 also did not allow deduction underSection 80P(2)(a)(iii) of the Act and levied the income tax on the saidamount. Feeling aggrieved, the assessee filed an appeal under Section246 of the Act before the Commissioner of Income Tax (Appeals) [forbrevity “the CIT(A)”] who vide order dated 28.3.2008 (Annexure P-3)upheld the order of respondent No.2 with regard to the disallowance ofexpenditure as well as taxing ` 25,15,00,000/- being the amount of loanconverted into grants-in-aid under Section 28(iv) of the Act and alsodisallowed the claim of the assessee for deduction under Section 80P(2)(a)(iii) of the Act. Still dissatisfied, the assessee filed an appeal beforethe Tribunal. The Tribunal vide order dated 31.12.2008 (Annexure P-1)upheld the orders passed by respondent No.2 and the CIT(A) anddismissed the appeal. Hence, the present appeals by the assessee. 4.Learned counsel for the appellant-assessee argued that the legal position in Karnal Cooperative Sugar Mills Ltd. v. CIT (2002)253 ITR 659 on the basis of which the case was decided against theassessee was over-ruled by a Full Bench of this Court in The BudhewalCo-op. Sugar Mills Ltd. v. Commissioner of Income-Tax, (2009) 315ITR 351 (P&H). It was contended that in view thereof, the Tribunal hadwrongly disallowed the claim under Section 80P(2)(a)(iii) of the Act.Learned counsel for the revenue could not controvert the aforesaidposition. 5.No other point was urged by learned counsel for the parties.6.The Tribunal had relied upon the decision of this Court in the ITA No. 419 of 2009 -5- 4.Learned counsel for the appellant-assessee argued that the legal position in Karnal Cooperative Sugar Mills Ltd. v. CIT (2002)253 ITR 659 on the basis of which the case was decided against theassessee was over-ruled by a Full Bench of this Court in The BudhewalCo-op. Sugar Mills Ltd. v. Commissioner of Income-Tax, (2009) 315ITR 351 (P&H). It was contended that in view thereof, the Tribunal hadwrongly disallowed the claim under Section 80P(2)(a)(iii) of the Act.Learned counsel for the revenue could not controvert the aforesaidposition. 5.No other point was urged by learned counsel for the parties.6.The Tribunal had relied upon the decision of this Court in the ITA No. 419 of 2009 -5- case of Karnal Cooperative Sugar Mills Ltd's case (supra) to denythe benefit of deduction under Section 80P(2)(a)(iii) of the Act to theassessee. However, Full Bench of this Court in The Budhewal Co-op.Sugar Mills Ltd's case (supra) had overruled the said judgment againstwhich the Supreme Court in Deputy Commissioner of Income-Tax v.Budhewal Co-operative Sugar Mills Ltd. (2015) 373 ITR 35 (SC)following its judgment in Morinda Co-operative Sugar Mills Ltd. v.Commissioner of Income Tax (2013) 354 ITR 230 (SC) remanded thematter back for adjudicating the issue afresh. 7.In view of the above, the matter is remitted to the Tribunal toadjudicate the issue afresh in accordance with law after affording anopportunity of hearing to the parties. The appeals stand disposed ofaccordingly. (AJAY KUMAR MITTAL)JUDGE October 20, 2015gbs (RAMENDRA JAIN) JUDGE