State-fixed sugarcane price qualifies for deduction where Government-approved price includes State-level fixation under the applicable framework.

Excess sugarcane price paid by a co-operative sugar factory under a State Government price fixation was treated as deductible under section 36(1)(xvii), because the State-fixed price formed part of the legally payable purchase price and was not disallowed merely for exceeding the Central Fair and Remunerative Price. The Maharashtra Regulation of Sugarcane Price (Supplied to Factories) Act, 2013 and CBDT Circular No. 18/2021 support the view that "price fixed or approved by the Government" includes State-level price fixation through an enactment, order or similar instrument. The addition made by the Assessing Officer was deleted.

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Issues: Whether the excess sugarcane price paid by a co-operative sugar factory, in accordance with the State Government's price fixation under the State enactment, was allowable as a deduction under section 36(1)(xvii) of the Income-tax Act, 1961.

Analysis: The assessee, a co-operative sugar factory, paid sugarcane price at Rs. 2,500 per metric ton, being the rate fixed by the Commissioner of Sugar, Government of Maharashtra. The dispute was whether deduction under section 36(1)(xvii) could be denied on the ground that the amount exceeded the Fair and Remunerative Price fixed under the Central regime. The relevant statutory framework included the Maharashtra Regulation of Sugarcane Price (Supplied to Factories) Act, 2013, under which the State-fixed price is payable in addition to FRP, and CBDT Circular No. 18/2021, which clarifies that the phrase 'price fixed or approved by the Government' includes price fixation by State Governments through State-level Acts, orders or other legal instruments regulating sugarcane purchase price, including a State Advised Price higher than the Central FRP.

Conclusion: The deduction under section 36(1)(xvii) was held allowable, and the addition made by the Assessing Officer was directed to be deleted.

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