Average price for agricultural produce must reflect actual supply-centre prices, not a notional deduction for transport rebate.

Under rule 23(2)(a), the market value of marketable agricultural produce must be based on the average of the actual prices paid at the place of supply. A Government notification fixing a minimum factory-gate price and permitting a transport rebate did not change the actual sale price received at the supply centre, and the rebate could not be deducted to compute market value unless the statute expressly allowed it. The average price therefore had to be calculated without reducing it by the notification rebate, and the issue was decided in favour of the assessee.

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Issues: Whether, under rule 23 of the rules framed under the Indian Income-tax Act, 1922, the rebate allowed by Government notification No. S.R.O. 3419 dated November 22, 1955, could be deducted in computing the average price of sugarcane for determining the market value of agricultural produce used as raw material in the assessee's business.

Analysis: Rule 23(2)(a) requires the market value of marketable agricultural produce to be taken as the average price at which it was sold during the relevant year. The notification fixed only a minimum factory-gate price and permitted a rebate for transport from outlying centres, but it did not alter the actual sale price received at the centre where the produce was supplied. The expression "average price" was held to mean the average of the prices actually paid at the place of supply, and not a notional figure obtained by reducing the minimum price by the rebate. The notification also contemplated that growers might receive more than the minimum price according to quality, so the rebate could not be treated as a universal adjustment to market value.

Conclusion: The rebate under Notification No. S.R.O. 3419 dated November 22, 1955, could not be taken into account in determining the average price under rule 23(2)(a); the question was answered in favour of the assessee.

Final Conclusion: The market value of the sugarcane had to be computed on the basis of the actual average price at the place of supply, without deducting the transport rebate provided by the Government notification.

Ratio Decidendi: For rule 23(2)(a), "average price" means the average of the actual prices paid at the centre where the agricultural produce is supplied, and a rebate under a minimum-price notification cannot be treated as a deduction in computing market value unless the statute expressly so provides.

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