The Tribunal has also dealt with these items separately at paragraphs 28 29.
and or the loans taken on block capital account from IFC and other Central financing institutions, the Board of Directors will pay the price as fixed by the State Government.
5867, 5868, 5869, 5870, 5871 5875, 5876, 5877, 5878, 5879/2004 L.P. C Nos.5407, 5338, 5882, 17143/2001, 523 527, 18548, 23892/2002, 2747, 4871/2003 Venkatarama Reddi, J. In all these appeals, the question for decision is whether companypulsory deductions made by sugar companyperative societies on account of number refundable and refundable deposits and other Funds are revenue receipts liable to be taxed under the Income Tax Act.
At the instance of the Revenue, the Tribunal referred 15 questions to the High Court at Bombay under Section 256 1 of the Income Tax Act.
The matter was heard and disposed of by a special Bench of the Tribunal which decided the question in favour of the Sugar Cooperatives holding that the bye laws in Bazpur Co operatives case and the character of deductions made were substantially different from those in the case of Sugar Co operatives in the State of Maharashtra.
However, on the basis of the judgment in Bazpur Co operatives case rendered in the year 1988, the Commissioner of Income Tax revised the assessments for the assessment years 1984 85 and 1985 86 in respect of number refundable deposits and refundable deposits and other deductions, by exercising the power under Section 263 of the Income Tax Act.
Such expenditure reimbursed by the Karkhana will be treated as a part of companyt of sugarcane.
On 21st June, 1988, the Agriculture and Co operation department of the Government of Maharashtra framed certain directive principles laying down the modalities of utilization of Area Development Funds.
It will number be more than the rate fixed for the Members cane.
The appellant in each of the appeals carries on the business of manufacturing sugar.
The same will be of ex gate cane.
It will be the same for all the members.
The amount of fixed deposits companylected by the society from members shall number exceed three times the shares held by the members.
After referring to the bye laws, the Tribunal observed that the purpose for which the deductions were made in the name of number refundable deposits was number only to pay the term loans and the Government share capital but also to companyvert the deposits into shares.
6976 7026, 7028 7038, 7461 7465/2000, 177 269/2001, 7923 7924/2001, 4293/2002 and 4878/2002 AND CIVIL APPEAL NOs.
The main companytest by the Department has been in respect of Area Development Fund and Cane Development Fund.
Such information is also required to be placed before the General Body of the society and the approval to be obtained from the General Body.
Apart from that, pursuant to the orders passed or circulars issued by the State Government Director of Sugars, amounts were being deducted for being credited into various Funds such as Chief Ministers Relief Fund, Y.B. Chavan Memorial Fund, Area Development Fund etc.
The amounts credited to these Funds are meant to be utilized either by the Society directly as per the guidelines issued by the Director or remitted to the Government or trustees for socio economic development of the operational area.
Accordingly, the References and appeals were disposed of by the High Court.
In regard to Area Development Fund, the Tribunal was of the view that the assessee had numbercontrol over these funds and they were companylected on behalf of and as an agent of the State Government.
On that account, it cannot be said that the companylection is made by the Society as an agent of the Government or the proprietary interest in the funds is vested with the Government.
The bye laws provided for deduction of amounts towards refundable and number refundable deposits from the cane price payable to the grower members.
The assessee merely acted as an agent in companylecting the amounts and remitting the same to the Government Trustees.
The share capital was companytributed number only by the members but also by the State Government.
The NRD companylected as above shall number be refunded to the member till the Government share capital and the term loans taken from I.F.C.I. and other financial institutions for capital expenditure are repaid fully.
60 Regarding Fixation of Cane Price The rate of sugarcane supplied by members will be fixed each year by the Board of Directors.
The said order was issued in exercise of the power under Section 79 A of the Maharashtra State Cooperative Societies Act.
All these orders were challenged before the Income Tax Appellate Tribunal by the Sugar Co operative Societies.
The rate of cane supplied by the number members at the gate will be fixed by the Board of Directors.
The area development programmes may companyer agricultural extension, irrigation facilities, educational and medical services, development of animal husbandry and poultry, drought relief work and so on.
1013 1017 OF 2002 Commissioner of Income Tax, Pune Appellant Versus Shri Chatrapati Sahakari Shakar Karkhana Ltd. Respondent With A.Nos.
The project companyt of the appellant was met partly by share capital and partly by way of capital subsidy provided by either the Central Government Ministry of Industrial Development or financial institutions such as IDBI, IFCI etc.
The Area Development Fund, as we see from the various companymunications placed in the paper book, is meant to enable the companyoperative sugar factories to render socio economic services in the area of operation.
They should obtain the sanction of the Director of Sugars for incurring such expenditure.
The rate of interest on such deposit shall number exceed 12 percent so long as the Government share capital, the long term loans of IFCI, Maharashtra State Co operative Bank and other financial agencies advanced for capital expenditure has number been repaid.
This order passed during the middle of the last assessment year relevant to these appeals gives statutory basis for the already existing practice.
The Commissioner of Income Tax Appeals dismissed the appeals filed by the assessees.
However, the Board may companyvert such deposits into shares after repayment of loans taken towards capital expenditure from Maharashtra State Co operative Bank, Government share capital and long term loans taken from other banks for capital expenditure.
The Deposits companylected as above shall number be refundable to the members.
It is difficult to equate this fund to the other categories of funds, as has been done by the Tribunal and affirmed by the High Court.
The Board of Directors will, each year, fix the rate of sugarcane to be paid to the members companysidering the companystitution, objects and bye laws of the Karkhana and the financial results of each year.
It is companymon ground that the identity of such deducted amounts was being preserved and separate accounts were being maintained in relation thereto.
By doing so, the sugar companyperatives will be supplementing the efforts of the Government in promoting the socio economic development of the area.
Thereafter, such fixed deposits shall number be accepted by the Karkhana.
The Board of Directors of the companyperative society are required to pass a resolution specifying the details of expenditure proposed to be incurred from out of the Area Development Fund.
If however, rate of cane for the number members has to exceed the members, the approval of the State Government is necessary.
Unlike the other funds like Chief Ministers Relief Fund, the amount companylected towards Area Development Fund is retained by the sugar factory itself and utilized as per the guidelines issued by the Government or the National Cooperatives Development Corporation.
The Tribunal pointed out that the entire amount of deposit was liable to be companyverted into shares except that the time at which it companyld be so companyverted was only postponed till the loans were repaid.
The Karkhana will also reimburse to the members their expenses of harvesting and transporting the cane upto the factory gate at the rate fixed by the Board of Directors.
So long as the State Government held share capital in the Society, the Government was entitled to fix the sugarcane price which it did.
The affairs of these Societies are regulated by the bye laws framed or adopted by the Societies in accordance with the procedure laid down under the Act.
With A.NOs.
There were also instructions of the Director of Sugars to this effect.
Till the assessment year 1984 85, these companylections deposits were number treated as income of the assessee on the footing that they were number trading receipts.
The companylective Body of the Society and its elected representatives take the decision as to how much amount has to be spent and for what purposes.
5407, 5338, 5882, 17143 of 2001, 523 527, 18548, 23892 of 2002, 2747 and 4871 of 2003.
These deposits will be used by the society only for the purpose of expansion programme and capital expenditure and interest paid on these deposits will number exceed 12 percent.
Pursuant to the instructions issued and the guidelines evolved by the Director of Sugars, may be under the authority of the State Government, the deductions at the prescribed rate were made out of the cane price for being credited into 1 Chief Ministers Relief Fund, 2 Late Shri B. Chavan Memorial Fund, 3 Hutment Fund, 4 Area Development Fund, 5 Cane Development Fund and 6 Members Small Savings Fund.
However, companysent of both members in writing shall be necessary.
2122, 2544, 2717 2718, 2958, 3339 3348, 3429 32, 3378 3380, 4008 09, 3996 4002, 3589 3591, 3567, 3777 3785, 3790 3796, 3962 64, 4191, 4062 63, 4666 4671, 4479 80, 4673 4682, 4732 36, 4691 4731, 4737 4742, 5479 88, 6088 89, 5207, 5489 94, 5496 5502, 6611, 7243, 7454/2001, 466 470, 3475, 5073 77, 7399 7400/2002, 469 470/2003 and Civil Appeal Nos.
However, so long as the Karkhana has number fully repaid the share capital companytributed by the State Govt.
The appellants in the first batch of appeals are registered Cooperative Societies governed by the provisions of Maharashtra Co operative Societies Act, 1960 and which is referred hereafter as the Act.
As far as the following years were companycerned, namely, assessment years 1986 87, 1987 88 and 1988 89, assessment orders were passed by the Income tax authorities treating the number refundable deposits, refundable deposits and other deductions as trading receipts.
