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Shri Someshwar Sahakari Sakhar Vs. Income-tax Officer - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Pune
Decided On
Judge
Reported in(1985)11ITD335(Pune.)
AppellantShri Someshwar Sahakari Sakhar
Respondentincome-tax Officer
Excerpt:
1. all these appeals were heard together as they were concerned with a common point dealing with the assessability of certain amounts received by these assessees in connection with the sale of sugar. the appeals are, therefore, consolidated. this main point at issue is considered with reference to the facts of shri someshwar sahakari sakhar karkhana ltd. the facts of this particular assessee are considered. the decision would apply to all the other cases, since the facts are similar.2. shri someshwar sahakari sakhar karkhana ltd. is a co-operative society limited running a sugar factory during the year of account. the members of the society are mostly agriculturists being sugar-cane growers from whom sugar-cane is purchased. after the manufacture of sugar, the same is sold out under the.....
Judgment:
1. All these appeals were heard together as they were concerned with a common point dealing with the assessability of certain amounts received by these assessees in connection with the sale of sugar. The appeals are, therefore, consolidated. This main point at issue is considered with reference to the facts of Shri Someshwar Sahakari Sakhar Karkhana Ltd. The facts of this particular assessee are considered. The decision would apply to all the other cases, since the facts are similar.

2. Shri Someshwar Sahakari Sakhar Karkhana Ltd. is a co-operative society limited running a sugar factory during the year of account. The members of the society are mostly agriculturists being sugar-cane growers from whom sugar-cane is purchased. After the manufacture of sugar, the same is sold out under the schemes propounded by the Ministry of Agriculture and Irrigation dealing with the price fixation, etc. Production of sugar begins generally in the month of November and goes right on to April of even May. The Government fixes the price of sugar at two levels : the levy sugar price applicable to 65 per cent of the sugar produced, which has to be sold to the Government or its nominees such as the Food Corporation of India, who distribute the sugar to fair price shops ; 35 per cent, viz., the balance called free sugar which the factory can sell at any price. Since there could be a loss in the sale of levy sugar on account of the price fixation, the factories could make up for the loss by fixing their own prices for the sale of free sugar. This latter also enables the consumers to get their needed quantity of sugar even though at higher prices.

3. The price of sugar is fixed by the Government in the Ministry of Agriculture through the publication of orders in this regard. Thus, on 28-11-1974, Sugar (Price Determination for 1974-75 Production) Order, 1974 was passed fixing the price of sugar for the 1974-75 season. For the category of sugar designated 'D-29', the ex-factory price was fixed by this order at Rs. 156.99 per quintal. Subsequently, on 14-7-1975, another order was passed varying price with effect from 12-7-1975. The revised prices were to apply to the production of 1974-75 delivery after 12-7-1975. For the quota of sugar 'D-29', the revised price fixed came to Rs. 140.31 per quintal. Likewise for the sugar produced in 1975-76 season, by its order dated 29-11-1975, the Government fixed the price at Rs. 140.31 per quintal.

4. It would appear that according to the sugar factories during the year 1974-75, cost of production had gone up substantially. The earlier order of the Government fixed the price at Rs. 156.99. The later order fixed the price for 1975-76 at Rs. 140.31 per quintal. Thus, not only did the factories not get a higher price which they expected in the wake of enhanced cost of production, but the price fixed was even lower. The assessee, therefore, approached the High Court in a writ petition praying for fixation of the price at the minimum amount of Rs. 187. The High Court admitted the writ petition. An interim order was passed on 18-12-1975 pending disposal of the petition. The Court stayed the operation of the Sugar (Price Determination for 1975-76 Production) Order, 1975, dated 29-11-1975. The High Court also ordered the respondents, viz., Union of India and others to pay to the petitioners, the assessee, Rs. 156.99 per quintal for'D-29' grade of sugar being paid under the Sugar (Price Determination for 1974-75 Production) Order, 1974, dated 28-11-1974. Subsequently, by consent of the parties incorporated in the consent terms of interim order dated 25-1-1976, the interim order dated 18-12-1975, staying the operation of the orders, was set aside. The relevant portions of the consent terms are as under : 2. By consent, the respondents, their servants, agents and officers are restrained from enforcing and/or implementing the operation of the Sugar (Price Determination for 1975-76 Production) Order, 1975, dated 29th November, 1975, pending the hearing and final disposal of the petition.

3. By consent, the respondents to purchase from the 1st petitioners all levy sugar of 1975-76 season's production at Rs. 156.99 per quintal of 'D-29' grade sugar fixed under the Sugar (Price Determination for 1974-75 Production) Order, 1974, dated 28th November, 1974.

4. By consent, the respondents to pay the difference between the rate of Rs. 156.99 per quintal of 'D-29' grade sugar and/or at the corresponding rates of other sugar fixed under the Sugar (Price Determination for 1974-75 Production) Order, 1974, dated 28th November, 1974, and the rate of Rs. 140.31 per quintal of 'D-29' grade sugar and/or at the corresponding rates of other sugar fixed under the order of 1975, dated 29th November, 1975, for the levy sugar out of the production of 1975-76 season purchased by the respondents from the commencement of the said season on the petitioner's furnishing the bank guarantee as hereinafter mentioned.

5. By consent, the petitioners to furnish periodically to the satisfaction of the Registrar of the High Court and in the draft form hereto annexed and with such variations therein, as the case may require a guarantee of a scheduled bank effective from date of commencement of the production season 1975-76 for the repayment of the amount with interest at the rate of 12 per cent per annum being the difference between the price fixed by the Sugar (Price Determination for 1974-75 Production) Order, 1974, dated 28th November, 1974, viz., Rs. 156.99 per quintal of 'D-29' grade sugar and for corresponding, rates of other sugar fixed by the said order and the price fixed by the Sugar (Price Determination for 1975-76 Production) Order, 1975, dated 29th November, 1975, viz., Rs. 140.31 per quintal of 'D-29' grade sugar and/or corresponding rates of other sugar fixed under the said order dated 29th November, 1975, of all estimated sugar production of 1975-76 season. The petitioners agree to furnish such guarantee within four weeks from the date of this order and also further agree to renew the bank guarantee from time to time until the hearing and final disposal of this petition.

6. In the event of the impugned order dated 29th November, 1975, being held to be fully valid or to the extent of difference of price notified under the Sugar (Price Determination for 1974-75 Production) Order, 1974, dated 28th November, 1974, and such other price which may be held to be proper or reasonable by the Court or as directed by the Court, then the petitioners shall pay to the respondents the said difference, as stated above, with interest at 12 per cent per annum from the commencement of the production season 1975-76 from the date the payment is made.

7. In default of the petitioner's furnishing the bank guarantee within the time specified in Clause No. 5 above or not renewing it within fifteen days of its expiry, this interim order passed herein shall automatically stand vacated.

8. In the event, the bank guarantee furnished is not found adequate at the end of crushing season 1975-76 to cover the levy sugar for 1975-76 production, by consent the petitioners to furnish such additional bank guarantee within one month from the end of crushing season of the petitioners. In default of the petitioners furnishing such bank guarantee, the interim orders passed herein shall automatically stand vacated.

9. By consent, the respondents undertake to pay to the petitioners the difference between the price notified under the order dated 28th November, 1974, and the price that may be finally fixed by the Honourable Court or under its direction by any authority ; with 12 per cent interest thereon in case such fixed price is found higher than the price notified under the order dated 28th November, 1974.

In case the Union of India issues permits or releases orders to anybody, those orders shall be issued with a clear understanding of the liability to pay the difference as aforesaid. By consent, the parties are at liberty to ask for the direction about the time within which the payment is to be made at the time of final decision if occasion arises.

10. The petitioners are paying Central Excise duty on the sugar sold by them to the respondents on the price at the rate of Rs. 156.99 per quintal of 'D-29' grade sugar and the corresponding rates of other sugar fixed by the said order dated 28th November, 1974, as per the Central Excise department's orders. In the event of the impugned order being held valid or the Court fixing any other rate higher than Rs. 140.31 but lower than Rs. 156.99 per quintal, the petitioners shall apply to Central Excise authorities for refund of the difference of excise duty and if such refund is granted and received, the amount of such refund will be paid immediately on receipt by the petitioner to the respective respondents to whom the sugar is sold. If, however, the Court fixes a rate exceeding Rs. 156.99 per quintal for 'D-29' grade sugar and/or corresponding rates of other sugar fixed under the said order dated 28th November, 1974, and the petitioners are required to pay excise duty on the difference between the said two rates, the same will be made good to the petitioners by the respondents concerned immediately.

5. As a result of the consent terms, the assessee was to collect an amount of Rs. 156.99 per quintal for the sugar sold as under the previous orders of the Government. The sum of Rs. 140.31 for 'D-29' grade sugar was credited to the sales account but the balance of Rs. 16.68 was credited to the sugar sales suspense account. It was claimed before the ITO that this amount being disputed in the Court, did not constitute the assessee's trading receipts or income. In case the assessee lost the case before the Courts, the entire amount had to be refunded to the Government. The ITO, however, noted that the amount recovered of Rs. 156.99 per quintal was the sale price fixed by the Government earlier and the assessee had also collected excise duty on such sales. Since the notification dated 29-11-1975 had been vacated by its interim order, according to the ITO, there was no legal liability for refunding the above amount to the Government. The collection of the difference on levy sugar partook of the character of sale price till the decision went against the assessee at any stage. Relying on the Supreme Court decision in Chowringhee Sales Bureau (P.) Ltd. v. CIT [1973] 87 ITR 542, the ITO brought to tax the difference credited to the sugar sales suspense account by Rs. 25,27,126.

6. On appeal, the Commissioner (Appeals) upheld the addition. On the question of bringing to tax the difference between the price paid for the earlier season and the currently fixed price of Rs. 140.31 per quintal, different views were held by different Benches of the Tribunal. The matter has, therefore, been referred to a Full Bench and, thus, the matter is before us. The same question of taxing the difference has come up in other cases also mentioned above.

7. The Full Bench heard the parties in Shri Someshwar Sahakari Sakhar Karkhana Ltd. The other sugar factories were also represented by inter-veners at the hearing.

8. According to the learned counsel for the assessee, the excess amount was not taxable at all. In order to become taxable, a receipt must be received as income. Relying on the provisions of sections 4 and 5 of the Income-tax Act, 1961 ('the Act'), it is pointed out that it must accrue or arise also as income. That the assessee did not receive the amount of difference as part of its income was clear from many circumstances. The learned counsel has laid stress in this context on the fact of the assessee paying interest to the Government if the amounts were to be refunded to them. No one will pay interest on his own amounts. The receipt in this case was not at all in the form of income.

9. According to the learned counsel, the crucial question to be asked was whether the assessee received this amount as income. In the alternative, did the amount accrue or arise to him as income during the year. The questions relevant in this connection relate to the person to whom income accrues, the time when it accrues, the source from which it accrues and lastly, where it accrues. Referring to the Supreme Court decision in the case of E.D. Sassoon & Co. Ltd. v. CIT [1954] 26 ITR 27, it is pointed out that the right to claim this amount has not arisen in the assessee's case. Even though the assessee received an excess amount and kept it in a suspense account, the position of the assessee was merely as a trustee or as a person who had merely kept the amount in deposit with him to be returned in either case with interest.

There was no accrual of income. The learned counsel has, in this connection, referred to the decision of the Punjab and Haryana High Court in the case of Salig Ram Kanhaya Lal v. CIT[1982] 133 ITR 915, which followed the decisions in E.D. Sassoon & Co. Ltd.'s case (supra), CIT v. Jai Par/cash Om Parkash Co. Ltd. [1961] 41 ITR 718 (Punj.) and CIT v. Ashokbhai Chimanbhai [1965] 56 ITR 42 (SC), all supporting the assessee on his argument about accrual. It is pointed out that the special leave petition filed in this connection was rejected by the Supreme Court in Salig Ram Kanhaya Lal's case (supra). A similar problem came up for consideration before the Andhra Pradesh High Court in the case of CIT v. Nizam Sugar Factory SLP (Civil) No. 8499 of 1980, dated 25-11-1983 ([1984] 145 ITR (St.) 5).

10. The sum in question does not constitute trading receipts of the assessee. According to the learned counsel, the decision in the case of Chowringhee Sales Bureau (P.) Ltd.'s case (supra) was clearly distinguishable. In that case, the question of return of the amounts was uncertain. Nobody knew to whom the amount, if at all, was to be returned. In the case of the assessee, the amount has to be returned to the Government. In this connection, the learned counsel has also referred to the provisions of the Levy Sugar Price Equalisation Fund Act, 1976, under the provisions of which the surplus receipts have to be deposited in the fund within 30 days of accumulation thereof. The assessee had also to pay interest on these amounts kept with it. All these clearly indicated that this was at best a suspense amount with the assessee having nothing to do with the price fixed, which could alone convert the receipt into income.

11. Dealing with the provisions of section 145 of the Act, to which reference was made by the Commissioner (Appeals), it is pointed out that section 145 deals with the computation of income which comes long after the taxability was determined. The excess cannot be regarded as the price received either. Price is the money consideration for the sale. The ownership in the sugar has already passed in the present case. A sale can take place even without determining the price. In the present case, the party who determined the price was the Government.

The assessee had no part in this at all. The only way the assessee could raise any protest or objection was by fighting it out in the High Court. What the assessee actually got was Rs. 140.31 per quintal as the price as fixed by the interim order plus an additional amount, whatever be its nature with several conditions attached. Certainly against this background, this could not constitute the assessee's income taxable during the year.

12. Shri Inamdar, one of the interveners, pointed out that the right to determine the price is vested with the Government. A trader cannot unilaterally charge the price especially when a customer would dispute the same. If the assessee challenged the price fixed and an ad interim arrangement was arrived at, the extra amount received in an interim settlement cannot be said to be part of the price or even trading receipts at all. Reference is made to the decision in CIT v. Tollygunge Club Ltd. [1977] 107 ITR 776 (SC), especially certain passages at pages 779-780. According to the learned counsel, accrual implies a vested and complete right. Apart from the possibility of the trader receiving an amount, the vesting of the right as well as its being complete, according to the learned counsel, are important ingredients. Reference is made in this connection to the decision of the Gujarat High Court in Topandas Kundanmal v. CIT [1978] 114 ITR 237, the Bombay High Court in CIT v. Associated Commercial Corpn. [1963] 48 ITR 1, the Calcutta High Court in CIT v. Hindusthan Housing & Land Development Trust Ltd. [1977] 108 ITR 380 and the Allahabad High Court in Lakshman Prakash v. CIT [1973] 92 ITR 492. The decision in the case of Addl. CIT v. New Jehangir Vakil Mills Co. Ltd. [1979] 117 ITR 849 of Gujarat High Court is also referred to.

13. Shri V.S. Patil, the intervener, pointed out that all receipts do not necessarily constitute income. Before a particular receipt can be said to constitute the income of an assessee, it must accrue to him in that capacity, i.e., as income. Even if an amount is received, unless there is a right to receive that amount as such income, that receipt never becomes income. It is also pointed out that a mere claim, thus, cannot constitute income, unless it is accepted by the other side.

Reference is made to the decisions in CIT v. Smt.Geeta Sanghi [1983] 142 ITR 834 (MP), CIT v. Hercules Trading Corpn. [1983] 143 ITR 504 (Cal.), CIT v. Syed Khadruddin Ali Khan [1983] 144 ITR 266 (AP) and certain passages in Kanga and Palkhivala's The Law and Practice of Income-tax, Seventh edition, page 171.

14. An alternate ground is also taken, assuming that under the general law, the disputed amount is a case of accrual or receipt or arising of income, the same can be taxed only if it is taxable according to the method of accounting adopted by the assessee. Section 145 settles this problem. The learned counsel has urged in this connection that it is open to the assessee to adopt a method of recording in the accounts uniformly in respect of even particular items of receipts or expenditure. The reference obviously is to the recording of the disputed receipts as income after the dispute is settled. Reference is made in this connection to the decisions in Gappumal Kanhiyalal v. CIT [1961] 42 ITR 446 (All.), CIT v. Western India Engg. Co. [1971] 81 ITR 712 (Guj.), CITY.E.A.E.T. Sundararaj [1975] 99 ITR 226 (Mad.) and Boorugu Nagaiah Rajanna v. CIT [1978] 114 ITR 350 (AP). Certain passages at page 870 of Kanga & Palkhivala's The Law and Practice of Income-tax are also referred to.

15. According to Shri Bhomkar, the intervener, a receipt becomes income only in the year when it is received as such. Mere negotiations as to price cannot make the amounts recovered during the negotiations or the difference in price claimed by the parties the income of the respondent. That the income in a matter of negotiation accrues only at the respective stages where decisions are concluded, would, according to the learned counsel, be clear from the decisions of the Supreme Court in CIT v. A. Gajapathy Naidu [1964] 53 ITR 114 and CIT v.Swadeshi Cotton & Flour Mills (P.) Ltd. [1964] 53 ITR 134. These cases clearly lay down that the extra price fixed at the end of negotiationswhich will apply also to a suit contested before a Courtbecame income only at the time when they are settled and received.

Reference is also made to the decisions in Smt. Geeta SanghVs case (supra), Syed Khadruddin Ali Khan's case (supra), K. Sadasiva Krishna Rao v. CIT [1983] 144 ITR 270 (AP) and Nizam Sugar Factory's case (supra).

16. The learned counsel for the, assessee, the main appellant in the present case, had raised a preliminary point that the assessment has become time barred when it was made. The limitation, having supervened the entire assessment, has to be struck down. This point was not raised before the authorities below. It has been raised as an additional ground of appeal before us. The learned counsel has referred to the decisions in CIT v. Mahalakshmi Textile Mills Ltd. [1967] 66 ITR 710 (SC), Hukumchand Mills Ltd. v. CIT [1967] 63 ITR 232 (SC) and CIT v. S.Nelliappan [1967] 66 ITR 722 (SC), to claim that the powers of the Tribunal are not circumscribed by the Rules. The Tribunal can admit a point where the facts are clear and do not require investigation. For the department, reliance is placed on the decision of the Bombay High Court in Ugar Sugar Works Ltd. v. CIT [1983] 141 ITR 326 to challenge the admission of this new ground.

17. The claim of the assessee in fact is that the draft order which was forwarded to the IAC having been sent back to the ITO with his direction on 29-7-1981, the limitation provided by Explanation l(iv) to section 153(1) of the Act would compel the ITO to complete the assessment before 14-8-1981 when the six months' period after the reference to .the IAC expired at any rate within the one-year period specified in section 153(1). In this case, the one-year period expired long after the six months' limit provided in Explanation l(iv). The assessment completed, therefore, on 1-9-1981 was time barred.

18. This is a matter relating to the limitation. It is settled law that limitation even if not pleaded by the parties, if known to the Court or the deciding authority, must be considered. In this view of the matter and having heard the parties, we admit the additional ground relating to the limitation.

19. At the time of the argument, however, the learned counsel for the assessee pointed out that his attempt was not so much to avoid any tax normally due but only to resist the harsh enhancement of the income unreasonably made by the ITO. If the decision on merits regarding the assessability of the sum of Rs. 25,27,126 is in its favour, the assessee is not interested in pressing the issue of limitation.

20. As we are holding below that the sum of Rs. 25,27,126 is not to be included in the total income for the year, the new ground admitted by us is treated as withdrawn by the assessee. No finding on this is, therefore, given.

21. According to the learned counsel for the department, the ground of appeal relating to limitation in the present case has no substance.

Reliance is placed on the decision of the Privy Council in Maqbul Ahmad v. Onkar Pratap Narain Singh AIR 1935 PC 85 and the decision in S.S.Gadgil v. Lal & Co. [1964] 53 ITR 231 (SC). The learned counsel for the department, while referring to cases where limitation is pleaded in respect of applications, appeals, suits, etc., has not been able to place before us any decision explaining the provisions of limitation imposed on an executive or judicial authority. Where there is a time bar to proceedings taken by or orders passed by an executive or judicial officer, the time bar really is a fetter on his discretion and action. We are not quite sure that the decisions dealing with limitation in respect of applications, appeals, suits, etc., which form the important subject-matter of the Indian Limitation Act, 1908, would apply to fetters placed on executive or judicial authorities for deciding a matter. Reference to cases in the former sphere can at best be made analogically when they refer to a time bar for action by an executive or judicial officer. Whether the point urged by the learned counsel for the department that in these latter cases exclusion of certain periods would automatically result in adding the excluded period to the one year provided, is not clear. The learned counsel for the assessee, however, having withdrawn this ground and since we are deciding the matter on merits in his favour, this point is not gone into.

22. On merits, the learned counsel for the department has pointed out that the sum of Rs. 25,27,126 is liable to be taxed as income during the year. Taking us through the entire procedure relating to the price fixation, the dispute before the Court, the consent order, etc., the learned counsel has pointed out that these documents themselves clearly indicate that what the assessee received was the price of commodity sold. The Government order fixed a price. The assessee wanted a higher price. Petitions were filed before the Court. The consent order indicated clearly that 'the respondents to pay to petitioners' the purchase price. According to the learned counsel, even though there was some provision for repayment of the amount, this took effect after any further decision on the price. Taking us through the several cases of the consent order, Clauses 4, 5, 6, 9 and 10, the learned counsel has pointed out that undoubtedly sugar has been sold by the assessee to the Government for a price, viz., Rs. 156.99 per quintal. What is received is the price of sugar. The Government is not bound to pay the assessee any other amount. It would be in fact incorrect to attribute to the sum any other character than as the price of sugar. The assessee received this amount as a trader and the entire amount being the price of sugar sold by him, would be trading receipts in his hands. According to the learned counsel, what the assessee is doing was to split out the prices into two parts, for which there was no justification at all. Referring to the sugar price equalisation statute and the particular definition of 'excess realisation', the learned counsel has pointed out that even this speaks of the realisation of the 'price'. The character, therefore, of the receipt is clearly fixed. Reference is made, in this connection, to the decisions in Chowringhee Sales Bureau (P.) Ltd.'s case (supra) and Sinclair Murray & Co. (P.) Ltd. v. CIT [1974] 97 ITR 615 (SC). The former decision in fact referred to the decision in Punjab Distilling Industries Ltd. v. CIT [1959] 35 ITR 519 (SC). These decisions clearly show that in the trader's hands, as the assessee is, the receipt has to be stamped with the character of income. It is also pointed out that the amount is received as part of the purchase price.

Even if the purchase price is fixed later on, the part received earlier would certainly constitute a part of the same. Actually we are not concerned with when the income accrues in this case because as trading receipts, income has already been received by the assessee. Assistance is also sought from the decisions in Uttam Singh Duggal & Co. (P.) Ltd. v. CIT [1981] 127 ITR 21 (Delhi) and Addl. CIT v. U.P. State Agro Industrial Corpn. [1982] 133 ITR 597 (All.).

23. Alternatively, it is pointed out that the 'price' under the order of the Government stood at Rs. 140.31 per quintal. In the writ petition, the assessee claimed a price of Rs. 187. The High Court fixed it at Rs. 156.99 per quintal. Looking to the uncertain, unfixed nature of the price for computing the profit, an estimate of the price has to be made. All that the ITO has done is to make this estimate of the price at Rs. 156.99 per quintal, which incidentally the High Court allowed by the consent order. There cannot be two sets of prices for a commodity. The assessee would receive only a single price. According to the learned counsel, splitting of the price was neither correct nor justified. On the basis of the receipts, the entire amount received by the assessee should be treated as the asses-see's price for goods sold and, hence, income. Authority for this is sought from the decision of the Supreme Court in Mrs. Khorshed Shapoor Chenai v. ACED [1980] 122 ITR 21. Other cases referred to in this connection are Shah Vrajlal Madhavji v. CIT [1974] 95 ITR 614 (Ker.) and CIT v. Nadiad Electric Supply Co. Ltd. [1971] 80 ITR 650 (Bom.). Even on the question of accrual, the price must be said to have accrued to the assessee.

Reference is made in this connection to the decision of the Supreme Court in the case of ED. Sassoon & Co. Ltd.'s case (supra). The decision in Hindusthan Housing & Land Development Trust Ltd.'s case (supra) is to be considered in the light of the Supreme Court's observations in Mrs. Khorshed Shapoor Chenai's case (supra). According to the learned counsel, the cases in Tolly gunge Club Ltd.'s case (supra) and CIT v. Bijli Cotton Mills (P.) Ltd. [1979] 116 ITR 60 have no application to the facts of the present case, where the assessee has clearly received a price for the commodity which by no standard can be split into several parts.

24. On the question of the assessee's liability to refund a portion of the cane price to the farmers, the learned counsel has pointed out that this does not make any difference. The 'price' received by the assessee is the consideration for the transfer ; if any amount has to be paid by the assessee incurred by way of expenditure, the allowability of the same would depend on other relevant facts. On the contrary, the Levy Sugar Price Equalisation Fund Act deals with excess realisation. No reduction for any anticipated payment to cane-growers can be made. The learned counsel also pointed out that the fact that in the case of Nizam Sugar Factory {supra), the S.L.P. was rejected by the Supreme Court, does not point out to any positive principle of law. In the present case, it is not a case of mere claim of money ; money by way of price has already been paid and received.

25. The facts lie within a small compass. The assessee is a manufacturer of sugar. The assessee purchases sugar-cane from farmers.

The price of sugar-cane is fixed by the Government. The assessee sells sugar at two levels. As levy sugar, 65 per cent of the sales are to be made to the Government or Government nominees. The balance of 35 per cent, called free sugar, the assessee can sell at the price fixed by it. With regard to the levy sugar, the Government periodically fixed the price. For the period 1974, the price of sugar was fixed at Rs. 156.99 per quintal. By a subsequent fixation, the price was reduced to Rs. 140.31. For the season 1975, the Government fixed the price of levy sugar at Rs. 140.31. It would appear that because of increase in prices, cost of production, etc., the manufacturer was expecting a high price from the Government. Taking, therefore, into account the fair price he ought to receive, a writ was filed before the High Court challenging the price fixed by the Government. The assessee asked for a price of Rs. 187 per quintal in the writ petition. The High Court admitted the writ petition and granted stay of the order of 1974 fixation to be continued for 1975 fixation. It, however, permitted the assessee in the consent order passed to receive the sum of Rs. 156.99 per quintal towards the sale of sugar. Certain conditions were imposed on the assessee. The assessee was to produce a bank guarantee for the difference in amount between Rs. 156.99 and Rs. 140.31 per quintal.

After the decision of the writ petition and the final fixation of the price, any excess received by the assessee was to be refunded with interest at 12 per cent. The Levy Sugar Price Equalisation Fund Act superimposed on the above an obligation on the assessee to refund the 'excess realisation' to the fund created under that Act. The excess realisation itself is defined in Section 2 of that Act as : (i) means the price realised by any producer, on the sale of levy sugar of such grade, in excess of (b) where any fair price has been fixed by a Court for levy sugar of such grade, such fair price, and (c) 'fair price', in relation to levy sugar, means the price fixed by the Court in excess of the controlled price and, where an interim price, fixed by the Court, is superseded by a price which is finally fixed by the Court, the price so finally fixed ; (ii) includes any realisation representing the difference between the controlled price and the price allowed by the Court by an interim order, if such interim order is set aside, whether by the Court which made the order or in appeal or revision ; The assessee asked for a price of Rs. 187 per quintal. The net result of the above is that if on final determination of the price it is fixed at Rs. 140.31 per quintal, the assessee should return the balance to the Government at 12 per cent interest, if such fixation takes place before 1-4-1976. If it is after that date (sic) to the Price Equalisation Fund with interest at 12| per cent and if the Court fixed the price at Rs. 156.99, the assessee was not to return any amount. If the price was fixed at a figure in-between Rs. 140.31 and Rs. 156.99, the excess over the price fixed was again to go into the Price Equalisation Fund. By implication if any price is fixed above Rs. 156.99, the assessee has to receive this amount from the Government.

26. Till date the price of sugar has not been fixed by the Court, the writ petition not having been decided. The amount fixed in the consent order is only an ad hoc amount. In fact the legal effect of this order is that while staying operation of the levy price order of the Government, the Court permitted the assessee to receive and ordered the Government on consent to give the assessee a price fixed at Rs. 156.99 per quintal. This was the figure originally fixed for 1974 order, but subsequently modified. The figure of Rs. 156.99, therefore, in the scheme of things as above has absolutely no sanctity. It is only an ad hoc figure picked up by the High Court because this was the price earlier fixed by the levy price sugar fixation order of 1974. This figure of Rs. 156.99, therefore, has absolutely no quality of price of sugar fixed on it. This stamp, as claimed by the learned counsel for the department, is simply not there.

27. On the contrary, the stipulation about the payment of interest, the provision of a bank guarantee for such payment, the writ petition remaining undecided even today that the price is not fixed by the Court, all go to indicate that the figure of Rs. 156.99 has absolutely nothing to do with any price that may be fixed in the future by the High Court. A plain reading of the situation, therefore, amounts to this : the writ petition having been admitted, the High Court took care to see that the assessee received some money during the year partly perhaps as security for the payment and partly perhaps to ease the assessee out of a bad financial position, on account of which it claimed a higher price of sugar based on the cost of production indicated. The price of sugar is fixed at Rs. 140.31, which the Government order stipulates. Any excess permitted by the High Court to be drawn under the consent order would be a mere deposit with the assessee. Lest the assessee should fritter away this money or cause loss to the Government purchaser, the High Court stipulated the production of the bank guarantee. Because the amount is not the price, the High Court also stipulated the payment of interest. We have, therefore, no hesitation incoming to the conclusion that the excess of Rs. 25,27,126 is only a deposit with the assessee to strengthen its financial position against an alleged increase in the cost of sugar production. It cannot be treated as the price of the sugar at all. A mere deposit, not constituting the price of a commodity sold, cannot become the income of the assessee.

28. None of the decisions cited by the learned counsel for the department can alter the position that what the assessee received was an ad hoc deposit of money. The purpose of the deposit is clear. The High Court has not applied its mind to the price fixation at all.

Having stayed the operation of the earlier price fixation order, it has only in the cause of equity permitted the assessee to have the financial advantage of an excess amount. It may be noted that the High Court did not grant the amount of Rs. 187 asked for by the assessee.

Because in an earlier year Rs. 156.99 was granted by the Government itself in choosing a figure under the consent order, the figure of Rs. 156.99 was adopted. There is no question, therefore, of fixing the price at this stage. The question automatically of splitting the price also does not arise. A mere deposit paid to a seller of property in anticipation of fixing the price can, under no circumstances, be treated as part of the price.

29. The case of Chowringhee Sales Bureau (P.) Ltd. (supra) dealt with the nature of sales tax collected. The Punjab Distilling Industries Ltd.'s case (supra) dealt with the consolidated price of liquor along with the bottles. The question of accrual comes in only when a price is fixed and the seller has got a right to recover the same. The price not having been fixed at all in the present case by the High Court, such right to recover the price is restricted only to the sum of Rs. 140.31 and not the excess. The decisions in Tollygunge Club Ltd.'s case (supra) and Bijli Cotton Mills (P.) Ltd.'s case (supra) also deal with actual receipts by the assessee under a particular nomenclature. Unlike in these decisions, the present receipt by the assessee is clearly one of a deposit with its particular nature not fixed. It is neither of the nature of the sales tax disputed nor of a dharmada collected as in those cases. These are specific levies and the Courts considered their nature as receipts. When in the present case the receipt is of an ad hoc deposit returnable with interest to specified purchasers, these decisions either for or against the department cannot have any application.

30. On the contrary, the decisions in A. Gajapathy Naidu's case (supra) and Swadeshi Cotton & Flour Mills (P.) Ltd.'s case (supra) indicate that when price is under negotiation, any excess price paid subsequently would be regarded as the income of the year when the price is finally fixed and the negotiation comes to an end. It does not relate to the earlier year when the title to the goods had passed to the purchaser. We have, therefore, no hesitation in holding that the sum of Rs. 25,27,126 is not the assessee's income for the year or taxable during the year. The assessee's appeal is allowed.

32. I have perused the order of my learned brother, Dr. V.Balasubramanian, and I agree that the appellants are entitled to succeed in their appeals. However, I would like to add a few words in support of the same.

33. In para 21 (supra) of my learned brother's order, he has dealt with contentions of the learned counsel for the department relating to the question of limitation, which was raised by the appellant, Shri Someshwar Sahakari Sakhar Karkhana Ltd., Pune in IT Appeal No. 201 (Pune) of 1982 by way of an additional ground. However, in view of the fact that Shri G.L. Pophale, the learned counsel for the appellant, has withdrawn this additional ground on the question of limitation as stated in paragraphs 19 and 20 (supra), I consider that it is not necessary for us to go into that question or to state anything on this issue in paragraph 21 of the order, particularly on the arguments urged on behalf of the revenue. Even a casual observation by us on the said contentions urged on behalf of the revenue, I am afraid, is likely to be construed and interpreted, as our decision on this point is against the revenue and in favour of the assessee. I, therefore, hereby specifically refrain from expressing any opinion on the question of limitation raised by the appellant, much less, on the contentions urged on behalf of the revenue.

34. On the merits of the case about the true nature and character of the amounts received by the appellants in excess of the levy price of sugar fixed by the Government, I agree that the appellant's contentions have to be accepted. These payments are ad interim amounts received by the appellants in terms of the consent order passed by the Court pending final adjudication of the dispute about the additional price to be paid for the levy sugar by the Government or its agencies by the Court. Among the various decisions that were cited at the Bar, the decision of the Calcutta High Court in Hindusthan Housing & Land Development Trust Ltd.'s case (supra), comes nearest to the facts of the case of the present appellants before us. In fact, in the case before the Calcutta High Court, there was an adjudication of the dispute regarding the compensation payable to the assessee by the Court of the arbitrator, as a result of which enhanced compensation had been awarded by the said Court, but the said enhanced compensation was the subject-matter of further appeal by the State Government to the High Court. Other facts were that the State Government deposited a sum of Rs. 7,36,691, which the assessee withdrew after executing a security bond on 9-5-1966. Their Lordships of the Calcutta High Court held that the extra amount of compensation amounting to Rs. 7,24,914 was not income which accrued or arose during the previous year relevant to the assessment year 1956-57. Their Lordships held that the compensation amount could be considered to have accrued or arisen only when the said amount has become determinate or payable. The amount awarded by the Collector, in the first instance, was clearly a determined amount and was payable and the said amount had already suffered tax. With regard to the enhanced amount which was, subsequently, fixed by the order of the arbitrator, their Lordships held as follows : ... With regard to the enhanced amount which was subsequently fixed by the order of the arbitrator, the said amount cannot be said to be a determinate amount as the said amount is now pending appeal in the High Court. The enhanced amount may be affirmed by the High Court, may be reduced by the High Court or the entire enhanced amount may be disallowed. In the instant case the claim for the said further amount is in jeopardy and the right of the assessee to receive any further amount is also clearly unsettled. Unless the question of payment of any enhanced compensation is decided and the amount of enhanced compensation becomes determinate and payable, the said amount cannot, in our opinion, be said to accrue or arise. The further amount awarded by the arbitrator forms in reality at this stage the subject-matter of a mere claim or an assertion on the part of the assessee to receive the said amount, but the said claim has yet to be accepted by the Court. The facts that the assessee was allowed to withdraw the said amount after furnishing the security bond, does not, in our opinion, affect the position and does not make the amount of compensation either determinate or payable. Apart from the question that actual payment is not a material consideration in the matter of compensation in a case where the accounts are maintained on the mercantile system, in the instant case the said payment received by the assessee cannot be considered to be a payment of any compensation, as the right of the assessee to receive any further compensation or the amount of the further compensation has not yet been adjudicated upon and decided. The said receipt is really the receipt of a particular sum pursuant to an order of Court on the security bond executed by the assessee and on the basis of terms and conditions mentioned in the said bond. We are, therefore, of the opinion that the Tribunal in the instant case was right in coming to the conclusion that the said extra amount of compensation amounting to Rs. 7,24,914 was not income which accrued or arose during the previous year relevant to the assessment year 1956-57 . . .

35. The learned counsel for the revenue, Shri Joshi, sought to distinguish this decision of the Calcutta High Court by relying on the decision of the Delhi High Court in Fazilka Electric Supply Co. Ltd. v.CIT [1983] 143 ITR 551 at pages 574 to 576, wherein the Delhi High Court has relied on certain observations of the Supreme Court in Mrs.

Khorshed Shapoor Chenai's case (supra). But, I am of the view that this decision of the Delhi High Court is inapplicable to the facts of the.

present case. In the case before the Delhi High Court, there was no doubt or dispute about the true nature and character of the receipt being interest, which was chargeable to tax and the dispute was only about the year of chargeability. On the contrary, we are here called upon to decide the nature of the receipt itself, whether it is receipt of an income character.

36. The precarious nature of the right of the present appellants to the excess amounts received by them under the orders of the Court, pending final adjudication of the dispute by the Court, will be clear when we study the facts of the case set out in the case of Topandas Kundanmal (supra) at pages 239 to 241. In that case, as a result of the judgment of the Gujarat High Court, in the land acquisition case, the award of the civil judge (S.D.) enhancing the compensation was set aside by the High Court in the appeal preferred by the State Government and the assessee became liable to repay to the State Government the amount of Rs. 50,000 with interest at 4 per cent per annum from the date of withdrawal to the date of such repayment. In that case, the State Government had deposited the compensation amount in the High Court and the assessee was allowed to withdraw only a portion, i.e., Rs. 50,000 out of it, on furnishing solvent security. It is on these facts, their Lordships of the Gujarat High Court held that it is only when the amount of compensation is adjudicated upon by the Court and it is only when the Court awards interest on such enhanced amount of compensation, that the assessee has an enforceable right to the principal amount of compensation as well as to the interest. Their Lordships further held that if an assessee has got an inchoate right and has not acquired any vested right to enhanced or additional compensation over and above what has been offered to him by the Land Acquisition Officer, it cannot be said that he has a vested and complete right as to the interest on such amount. This case illustrates the true nature of the additional amounts paid under orders of the Court in terms of the consent order and received by the present appellants before us. It shows that this extra amount is paid as a provisional or interim payment pending the final decision of the Court on the price payable to the assessees. It does not have or get the element of a revenue or income or trading receipt till the final decision of the Court.

37. The learned counsel for the appellants also relied on [1984] 145 ITR (St.) 5, 'From our Reporter at the Supreme Court', wherein it is reported that the Hon'ble Supreme Court has dismissed the special leave petition filed by the department against the order dated 9-4-1980 of the Andhra Pradesh High Court in ITC 94 of 1979, whereby the High Court declined to call for a statement of the case on the question whether an amount representing the difference in prices of levy sugar due from the Government, which was not actually received by the assessee and kept in a suspense account pending determination of the dispute by the High Court, may be said to form part of the assessee's income for that yearNizam Sugar Factory's case (supra). This also supports the case of the appellants before us, even though the revenue contended that it was not a decision on the merits of the case.

38. For the reasons discussed above, I agree that the appellants are entitled to succeed in their appeals and, accordingly, the appeals are allowed.


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