Business expenditure deduction fails where enhanced sugarcane price is found to be a unilateral tax-avoidance device.

Enhanced sugarcane price claimed as business expenditure was rejected because the Tribunal found, on the record, that no actual payment was made to growers, the amount was merely credited to a share deduction account, the arrangement was used only in profit-making years, and growers were not informed. Those findings were treated as pure findings of fact, showing a unilateral device to strengthen capital without corresponding cash outflow and to avoid tax on the related amount. As no substantial question of law arose from those factual findings, the disallowance of deduction was maintained and the assessee's challenge failed.

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Issues: Whether the assessee was entitled, under section 260A of the Income-tax Act, 1961, to challenge the Tribunal's disallowance of the claim for deduction of additional sugarcane price as business expenditure, and whether the Tribunal's finding that the arrangement was a unilateral device to augment share capital and avoid tax gave rise to a substantial question of law.

Analysis: The Tribunal had found, on appreciation of the record, that the enhanced sugarcane price was not actually paid to the growers but was credited to the share deduction account, that the arrangement was adopted only in profit-making years, that the growers were not informed, and that the real purpose was to strengthen the assessee's capital base without corresponding cash outflow. The court treated these findings as pure findings of fact. It further held that the assessee's attempt to claim deduction on this basis was not a bona fide commercial transaction but a unilateral device to avoid payment of tax on the related amount. In such circumstances, no substantial question of law arose for consideration.

Conclusion: The disallowance of deduction for additional sugarcane price was upheld and the assessee's appeal failed.

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