COMMISSIONER OF INCOME TAX Vs. SHANMUGA GINNING FACTORY

JUDGEMENT

(1.) The Revenue is on appeal in respect of the assessment year 1998-99. The following is the substantial question of law raised in the above appeal:

(2.) The assessee went on appeal before the Commissioner of Income-tax (Appeals). The first appellate authority elaborately considered the issue. He pointed out that the ginning factories and traders and the growers are members of the Tiruchengode Agricultural Producers Marketing Society Ltd., to whom the assessee had paid a sum of Rs. 54,22,101 in cash. He also pointed out that a perusal of copy of the letter dated April 25, 2003, from the said co-operative society would show that there was no element of sale present in the transaction with the bidders as well as the agriculturist.

(3.) In so far as the payment made to M/s. P.K.R. Murugan Commission Mundy is concerned, the Commissioner of Income-tax (Appeals), on verifying the copy of the return filed by the said person for the assessment year 1998-99, has found that the credit side of the profit and loss account shows the receipts from agriculturists as cotton commission receipts and receipts from the bidders as merchant commission. The Commissioner of Income-tax (Appeals) also examined the sales tax assessment orders and found that the sales tax made therein was to the effect that the total turnover as per the accounts representing the local sales of the cotton kappas as agents of agriculturists/principals. Therefore, considering all these factual circumstances, and also by observing that either the genuineness of the transaction or the authentication of the sales tax order by the Sales Tax Department indicating that the society as well as the private commission mundis were only agents was not in doubt, the first appellate authority deleted the addition made by the Assessing Officer by holding that the assessee is not covered by rule 6DD(j) or rule 6DD(i). The Revenue went on further appeal before the Tribunal.