In the High Court of Judicature at Madras Dated : 21.07.2008 Coram :- The Honourable Mr.Justice K.RAVIRAJA PANDIAN and The Honourable Mr.Justice P.P.S.JANARTHANA RAJA Tax Case (Appeal) Nos.974 to 976 of 2008 AND M.P.Nos.1 of 2008 in T.C.A.Nos.975 and 976 of 2008 The Commissioner of Income Tax-I Coimbatore. .. Appellant Vs. M/s Bannari Amman Sugars Limited 252, Mettupalayam Road Coimbatore 641 043. .. Respondent TAX CASE (APPEALS) filed under Section 260A of the Income Tax Act against the order of the Income Tax Appellate Tribunal Madras '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. 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 order of the Income Tax Appellate Tribunal Madras ‘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, by formulating the following substantial questions of law:-
“1. Whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal was right in holding that the additional income derived from sale of free sugar was capital receipt and, therefore, not taxable?
2. Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in holding that the closing stock of incentive sugar has to be valued at levy price and not at cost price?”.
2. The material facts culled out from the statement of facts in the memorandum of grounds go as follows:-
The assessee is a company. The assessment of the assessee company for the assessment years 1995-96 to 1997-98 were completed as under:-
Asst. Year
Date of order u/s 143(3)
Total Income assessed
1995-96
19.12.1997
Nil (after adjusting b/f loss and unabsorbed depn.)
1996-97
10298
..do..
1997-98
20.03.2000
Nil (Taxable income u/s 115JA Rs.4,03,07,880)
3. In the returns filed, the assessee had claimed that incentives given by way of free sale of sugar was capital in nature and was not assessable as income. It was also contended that closing stock should be valued on the basis of levy price and not at cost price. The assessee’s contention was that the incentive by way of free sale of sugar was given by the Government with the intention that the interest on term loans and instalments of principal amounts should be paid out of the said incentives. The Assessing Officer has elaborately dealt with the Sampath Committee Report and pointed out that the assessee by claiming the incentive as capital receipt and interest payments as revenue expenditure, has claimed double deduction, which is not permissible. The Assessing Officer held that the income from free sale of sugar was revenue receipt. The assessee had valued closing stock incentive sugar at levy price and not at cost price. For reasons discussed in assessee’s own case for assessment years 1989-90 to 1994-95, the closing stock was valued at cost price. While doing so, the value of opening stock of incentive sugar was also adopted at cost price. The Assessing Officer accordingly adjusted the value of closing stock for all the three assessment years under consideration.
4. Aggrieved by the order of the Assessing Officer, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals), who by his order dated 18.12.2001, pointed out that in the assessee’s own case when the matter came up before the High Court for the assessment years 1987-88 and 1989-90, the High Court following its earlier order in CIT vs. M/s Tamilnadu Sugar Corporation Ltd., (TC.NOs.777 and 778 of 1995) answered the questions against the revenue and following the same, allowed the assessee’s appeals.
5. Aggrieved by the order of the Commissioner of Income tax (Appeals), the revenue filed appeals before the Income Tax Appellate Tribunal and the Tribunal by order dated 26.04.2005 following the decision of the High Court referred to above, dismissed the appeals. The correctness of the said order of the Income-tax Appellate Tribunal is now canvassed before this Court by the Revenue in this appeal.
6. Learned counsel appearing for the revenue has fairly submitted that the issue involved in these appeals is covered by the judgement of this Court in T.C.Nos.777 and 778 of 1995 in the case of Commissioner of Income Tax, Tamil Nadu I, Madras vs. M/s Tamilnadu Sugar Corporation Ltd., Madras.
7. In the above referred case, this Court has held as follows:-
“Similar questions have been considered by this Court in the decision reported in CIT vs. South India Sugars Ltd., reported in 248 ITR 92). The questions have been answered against the revenue and in favour of the assessee. Applying the same principle, we answer these questions in favour of the assessee and against the revenue”.
8. The said decision has also been followed by this Court in T.C.Nos.582 and 583 of 1995 dated 15.10.2001 in the assessee’s own case for the assessment year 1989-90, dismissing the appeal preferred by the revenue.
9. In the light of the above decisions, the questions raised in these appeals are answered in favour of the assessee and against the revenue. The appeals are dismissed. Consequently, connected miscellaneous petitions are also dismissed.
rg To 1.The Assistant Registrar, Income-Tax Appellate Tribunal, 'D' Bench, Madras. 2. The Commissioner of Income Tax (Appeals),I Coimbatore