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The company shall not make directly or indirectly to any political party or for any political purpose to any person, any contribution or subscription or make available any facilities, material.

The provisions of Section 581ZH of the. Companies Act, 1956 shall apply to this company.

21 With reference to the above legislative provisions and its Articles of Association, it was submitted that the entire procurement price would not be paid immediately at the time of supply; part of the procurement price is withheld and paid at a later stage as per Board Resolution and (M/s. Vijaya Visakha Milk Producer Company Ltd.) this is authorized under the statute and under its Articles of Associatio; the payment of the withheld price through allotment of equity shares / donation is also authorized in the statute and the Articles of Association of the company. The Authorized Representative for the assessee also contended that the assessee has not adopted any tax evasion device in payment „withheld price‟ through equity allotment partly and through contribution to trust partly.

The copies of resolutions filed by the assessee also show that the payment made initially is on a tentative/adhoc price. The AO also refers to such resolutions in his assessment order. Further the AR has filed details showing that procurement price was paid by way of initial payment and withheld price in the earlier years also. In the light of these discussions with reference to the details filed, I am of the view that there was no infirmity in the assessee's practice of procuring milk through initial payment and withheld price, and such practice is consistent with its Articles of Association and relevant statutory provisions governing the producer company. The payment of withheld price is also consistent with the principles of cooperative societies. It can also be said as seen from the assessment order that the AO has also accepted such practice adopted by the assessee-company; however the AO's objection relates to the mode of payment and the want of commercial element in such mode of payment.

(M/s. Vijaya Visakha Milk Producer Company Ltd.) 7.22 The next issue for consideration would be whether the payment of price by allotment of shares would amount to employing a device by the assessee company to increase its capital without paying taxes which are due to the exchequer. At the outset, it is relevant to note that the AO has not questioned the quantum of withheld price determined by the assesse company. There was no discussion in the order that the withheld price/final price fixed was not in accordance with market price and higher than any comparable price. It is in this context, the payment made to the producers directly was accepted and allowed. I find that as no infirmity has been found out on the quantum of withheld price determined, an alternative mode of payment of such price cannot be a ground for its disallowance. The assessee. has filed details of shares allotted to the individual members of the society with reference to the additional withheld price of Rs.41,20,66,000/-. The copy of form-2 filed with Registrar for such allotment was filed. The AR also submitted the relevant extract of the bank statement of the assessee showing the payment of contribution of Rs.5,72,83,783/- to the trust, and also extract of bank statement of the MPEEAMWT-trust showing receipt of the said amount. It was also submitted that the amount is utilized by the trust to expand the hospital facilities and educational facilities rendered to the member of the assessee company. In the light of these details, I find that the genuineness of the payment is established. I have also perused the details submitted relating to the comparative price position in the industry in the nearby areas. The price paid by the assessee do not appear to be excessive or unreasonable. The payment of withheld price is authorized under the articles of association and is done as per resolution passed by the Board and hence it cannot be said to be a tax avoidance device. 7.23 The next issue for consideration would be whether the decision in the case of CIT Vs. Mehsana District Cooperative Milk Producers Union Ltd 282 ITR 24, would be applicable to the facts of the case or whether the decision relied on by the Assessing Officer in the case of Budhewal Cooperative Sugar Mills Ltd and Shahabad Cooperative Sugar Mills Ltd. would be applicable. The AR has filed a detailed comparative analysis to substantiate that the decision in the case of CIT vs. Mehsana District Cooperative Milk Producers Union Ltd would be applicable to the facts of the case, I have gone through the above case-laws and also considered the submissions made. It is seen that in the case of Shahabad Cooperative Sugar Mills Ltd the increase in cane sugar price was found to be beyond the price fixed by Government and the transaction was found to be not bonafide. Out of increase of Rs.20 per quintal only Rs.2/- was paid to the members. In the case of Budhewal Cooperative Sugar Mills Ltd, there was unilateral enhancement of price which the members were not aware, no payment was made to the farmers, the bye-laws relating to fixation of additional sugar cane price was not complied with and was not in accordance with the formula provided in the bye-laws there was no cash payment to the sugar cane producers indicating that the sole purpose was to enhance the capital, the additional price was fixed-in only those years when the assessee had earned huge profits. However in the assessee's case the facts are different. The payment of procurement price by way of initial payment and additional price/withheld price is in (M/s. Vijaya Visakha Milk Producer Company Ltd.) accordance with the articles of association, substantial portion of the withheld price was paid to the milk producers; the amount transferred to the equity account has resulted in actual allotment of shares to the milk producers indicating that transaction was genuine. The practice of payment of withheld price was found to be followed in the earlier years. Another distinguishing feature is that the assessee is a producer company governed by the provisions of the Companies Act, which allow payment of withheld price and allotment of equity shares out of the withheld price/ The fixation of withheld price and allotment of equity shares out of withheld price is as per Board's resolution which are published and was not unilateral act of the company. Thus decisions in the case of Shahabad Co-operative Sugar Mills Ltd and Budhewal Cooperative Sugar Mills Ltd are distinguishable" and are not applicable to the factual matrix of the assessee's case.

461) and held that the amount of ₹ 96,60,12,828/- which is debited to the profit & loss account, but not actually paid to the milk suppliers, taken to capital contribution and also contribution to the trust, which is not allowable expenditure hence, liable to the disallowed. Accordingly, the addition of ₹ 46,96,02,293/- was added to the total income of the assessee.

33. On appeal before the ld. CIT(A), the assessee has filed an additional evidence such as Board resolutions in respect of withheld price for the Assessment Years 2007-08, 2008-09, 2009-10 & 2010-11 and other relevant documents and the ld. CIT(A) called the comments of the Assessing Officer vide letter dated 03/12/2013 and the Assessing Officer has also filed its report dated 10/03/2014. On the comments of the Assessing Officer, the assessee filed written submissions dated 21/03/2014 & 2503/2014. The ld. CIT(A) by considering section 581E & 581D, 581R & 581S and also Articles of association of the company 10(a) to 10(f) and also clause 15 of the Articles of Assocaition has observed that the concept of withheld price as defined by the Companies Act that "withheld price means part of the price due and (M/s. Vijaya Visakha Milk Producer Company Ltd.) payable for goods supplied by any member to the producer company; and as withheld by the producer company for payment on a subsequent date.". The above definition is incorporated in the Articles of Association of assessee Company. As per section 581E of the Companies Act the Articles of a producer company shall stipulate how the consideration for the produce delivered by a member will be settled and paid; and every member shall initially received such value for the produce supplied as the Board of the producer company may determine. The section further provides that the price withheld may be disbursed to seller member in cash or by allotment of equity share in proportion to the produce supplied during the concerned financial years to such extent as may be decided by the Board. Thus, the concept of withheld price is not alien in the conduct of business of a producer company. As per the Articles of Association of the assessee company, Board of Directors may determine from time to time the benefits that may be conferred on members by way of limited return, patronage bonus and determination of withheld price and such other benefits as the Board may deem fit in the larger interest of the members of the company. It is further observed by the ld. CIT(A) that the procurement price normal price normally comprise an initial payment and withheld price, the latter price may be paid in cash or in kind or allotment of equity shares as determined by the Board. The copies of resolutions filed by the assessee also show that the payment made initially is on a tentative/adhoc price and the (M/s. Vijaya Visakha Milk Producer Company Ltd.) ld.CIT(A) is of the opinion that there is no infirmity in the assessee‟s practice of procuring milk through initial payment and withheld price, and such practice is consistent with its Articles of Association and relevant statutory provisions governing the producer company. The payment of withheld price is also consistent with the principles of cooperative societies. The ld. CIT(A) has also considered that the equity shares allotted to the members, contribution to the M/s. Milk Producers & Employees Educational Health and Medical Welfare Trust , which provides educational and medical facilities to the members and employees of the assessee company and it is approved under section 12A of the Act and it cannot be said that the above payments made by the assessee from the withheld price not in commercial lines as decided by the Assessing Officer is not correct. The ld. CIT(A) has further observed that the assessee company has allotted the shares from the withheld price to the tune of ₹ 41,20,66,000/-. Copy of Form No.2 filed with Registrar for such allotment was filed and payment to the contribution made to the Trust of ₹ 5,72,83,783/-, bank statement also filed, which shows receipt of the said amount. The amount is utilized by the trust to expand the hospital facilities provided to the members of the company. The ld. CIT(A) came to a conclusion that withheld price paid to the members by way of equity shares and also contribution to the trust, cannot be said to be excessive and also cannot be said that this practice is to avoid the tax. We find that the ld. CIT(A) has (M/s. Vijaya Visakha Milk Producer Company Ltd.) considered the objects of the assessee company and also the provisions of Companies Act section 581E, 581D, 581R & 581S and Articles of Association of the assessee particularly 10 & 15, he came to a conclusion that withheld price paid by the assessee company to the milk suppliers is according to law. We also gone through the provisions of Articles of Association and also paper book at page Nos. 53 to 64 and find that assessee company decided the withheld price after resolution passed by the Board of Directors and accordingly the amount of ₹ 49,64,10,534.61 cash payment made to the milk suppliers was not objected by the Assessing Officer. The only objection raised by the Assessing Officer in respect of equity shares issued to the tune of ₹41,23,18,509.91, contribution to the assessee‟s trust of ₹5,72,83,783.48. Insofar as, the issue of equity shares is concerned, clause 10(b) of the Articles of Association of the assessee company provides each member shall receive initial payment as may be determined by the Board for the produce/products. Every member shall receive withheld price (remaining price) which will be disbursed in cash or in kind or by allotment of equity shares in proportion to the quantity of milk supplied to the assessee company. Even as per section 581 of the Companies Act, the price withheld may be disbursed to the seller member in cash or through allotment of equity shares in proportion to the milk supplied during the financial year to such extent as may be decided by the Board. We find that the assessee company as per (M/s. Vijaya Visakha Milk Producer Company Ltd.) section 581 of the Companies Act and also Articles of Association, passed the resolution dated 05/10/2009 and equity shares are issued. Therefore, the Assessing Officer is not correct in saying that it is a tax avoidance device adopted by the assessee to avoid the payment of tax. The ld. CIT(A) by considering all the details has correctly decided that out of withheld price, equity shares issued is in accordance with law. 34 Insofar as contribution paid to the trust is concerned, as per Memorandum of Association of Companies Act, it is under obligation of the assessee to establish schools, colleges, training centres & hospitals. Accordingly, the assessee has already established hospital and educational institutions and out of withheld price some portion is paid to the trust and same is received by the trust. Nowhere the Assessing Officer doubted the transaction. The only doubt expressed by the Assessing Officer is that the above payments are only made to avoid taxes. In our opinion, the assessee producer company running in the lines of mutuality basis for the benefit of the members, in the interest of the members instead of payment cash, some shares are allowed and established educational institutions and also hospitals for treatment of the members of the milk suppliers and certain payments made out of withheld price as per Companies Act and also Articles of Association followed by Board resolution. The Assessing Officer is not correct in saying that the assessee adopted device for avoidance of tax. We further observe that once the milk suppliers having shares in the (M/s. Vijaya Visakha Milk Producer Company Ltd.) company, they will be having a feeling of supplying milk to their own company. Therefore, the assessee company will be able to procure milk from the milk producers continuously. Therefore, allotment of equity shares to the milk producers for the above reason has to be considered as business expediency. So far as case-laws relied on by the Assessing Officer are concerned, they have no relevancy to the facts and circumstances of the case. Keeping in view of the above, we find no infirmity in the order passed by the ld.CIT(A) and uphold the same. 35 In the assessment order, the Assessing Officer has noted that the assessee company purchased podwer plant machinery from M/s. LYNJEF International Pvt. Ltd., Australia, in the year 2003 for ₹ 4,90,41,337/-. However, the plant was not erected and kept idle for six years and in the Financial Year 2009-10, the same was sold off to Ranger Foods Pvt. Ltd., Chandigarh for an amount of ₹ 2,65,20,000/- and the assessee has claimed the same as other manufacturing expenses. However, the Assessing Officer is of the opinion that it is a capital loss and accordingly he disallowed the same. On appeal, ld. CIT(A) confirmed the order of the Assessing Officer.