The Tax Publishers2021 TaxPub(DT) 0105 (Pune-Trib)

INCOME TAX ACT, 1961

Section 143(3)

Where assessee purchased sugarcane from growers who were their members, as well as from non-members and used the same for manufacturing of sugar and AO alleged that assessee paid to members and non-members a final price which was in excess of that payable under clauses 3 and 5A of Sugarcane (Control) Order, 1966, issue was remanded to AO. AO would allow deduction for the price paid under clause 3 of Sugar Cane (Control) Order, 1966 and then determine component of distribution of profit embedded in price paid under clause 5A, by considering statement of accounts, balance sheet and other relevant material supplied to State Government for the purpose of deciding/fixing the final price/additional purchase price/SAP under this clause.

Assessment - Disallowance - Alleged excess sugarcane price paid to members and non-members by Sahkari Samiti -

Assessee purchased sugarcane from growers who were their members, as well as from non-members and used the same for manufacturing of sugar. For purchase of sugarcane, assessee paid to members and non-members a final price which was in excess of that payable under clauses 3 and 5A of Sugarcane (Control) Order, 1966. AO held that difference between price paid by assessee and in terms of section 3 of the Order, determined by Central Government, and the price determined by State Government under clause 5A of the Order (and consequently paid by assessee to the cane growers) was distribution of profits and not deductible as expenditure. Held: Issue was remanded to AO. AO would allow deduction for the price paid under clause 3 of Sugarcane (Control) Order, 1966 and then determine component of distribution of profit embedded in price paid under clause 5A, by considering statement of accounts, balance sheet and other relevant material supplied to State Government for the purpose of deciding/fixing the final price/additional purchase price/SAP under this clause. The amount relatable to profit component or sharing of profit/distribution of profit paid by the assessee, which would be appropriation of income, would not be allowed as deduction, while the remaining amount, being a charge against income, would be considered as deductible expenditure.

REFERRED :

FAVOUR : Matter remanded.

A.Y. : 2014-15



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