TaxTMI 
TaxTMI 
1970 (1) TMI 3
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....d question -arises only in the last three years of assessment mentioned above. The relevant facts appear in the statement of the case. The facts on which reliance is placed and which require to be noticed are as follows : The primary business of the assessee-company is to manufacture sugar from sugarcane grown on its own sugarcane farms, though occasionally, it purchased small quantities of sugarcane grown by others for the purpose of manufacture of sugar. In the assessment year ending September 30, 1950, the company crushed 1,44,837 tons of sugarcane. The purchase from outsiders was only of 61 tons. In the last four years of assessment referred to above the company crushed sugarcane which varied in quantity between 1,84,892 tons and 1,63,106 tons. In the assessment year ending September, 1952, and September, 1955, quantities purchased from outsiders were respectively 22,101 tons and 11,388 tons. In the other two years very small quantity of sugarcane was purchased from outsiders. The company never sold any of its produce of sugarcane to outsiders and its entire production of sugarcane was utilised for the purpose of its sugar manufacturing business. The activities of the compan....
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....the years in question by the, circulars issued by the Deccan Sugar Factory Association for each of the above years. In connection with its case for the application of the above rates, the company relied upon the stocks of sugarcane it had purchased from outsiders and the average price which the company paid for the making above purchases. The average price at which the company purchased sugarcane stocks from outsiders for each of the above respective five years was stated by the company respectively at Rs. 48, Rs. 58, Rs. 46-4-0, Rs. 51-12-0 and Rs. 51-12-0. The company further submitted that the quality of the sugarcane grown by the company on its own farm was superior to the quality generally obtained in the market and hence 10 per cent. weightage should be given in connection with the market value of the sugarcane produced by the company. These submissions of the company were negatived by the Income-tax Officer in the assessment orders passed by him for the above five years. Before referring to the assessment orders passed, as regards the above second question of law, it requires to be stated that the facts appear in paragraph 9 of the statement of the case. The question relate....
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....ed at the rate fixed by the Association by circulars issued for each of the years. In these five years also the company relied upon the fact of the purchases made from outsiders and the average price paid in each year to these outsiders. The company also contended that the sugarcane produced by the company should be given weightage of 10 per cent. as its produce was of higher quality. These contentions of the company were rejected by the assessment orders for each of the above years made respectively on December 20, 1955, February 21, 1958, March 31, 1958, April 11, 1958, and August 22, 1958. It requires to be noticed that in rejecting the company's contentions it was observed on the question of quality and 10 per cent. weightage claimed by the company that "........ it is no use splitting hairs over effect of quality on price. What one has to see is what the cane produced on own farm would fetch in market. " The further observations were that, ordinarily, the cultivator was at the mercy of the buyers in the cane market and this market was always a buyer's market. This had been the reason for the Government's intervention for fixing floor prices from year to year. For this reason,....
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....s were very insignificant and could not be relied upon to represent any average market value. The Tribunal's criticism was : " Further, no material is placed before us as to when the assessee made purchases, whether they were fairly spread over the season or made within a short duration, and, lastly, whether they were made in an open market ". In adopting the rate fixed by the Income-tax Officer as correct, the Tribunal referred to the fact that the assessment made had been accepted in other cases and that fact established that the rate adopted was reasonable. Now, in this reference, Mr. Mehta for the company has again relied upon the following facts : That purchases of diverse quantities of sugarcane made by the company from outsiders in the above five years of assessment. The fact that the company had paid prices for these purchases and the average rate of the price paid was as claimed by the company had never been in dispute. Having regard to these facts, his submission was that there was no justification in rejecting this average price as proved by the company as irrelevant and not applicable. In that connection, he submitted that under the above rule 23(1)(a) the company was ....
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....hree of the five years in question the quantity purchased from outsiders was respectively 60 tons, 1,649 tons and 1,390 tons which was extremely small quantity and the price paid for purchase of that quantity could not be the basis for ascertaining the average price within the meaning of the above rule, In the other two years the quantity purchased was respectively 22,101 tons and 11,388 tons, but this quantity also may rightly be considered as small quantity for finding out average price within the mean ing of the above rule. The difficulty in accepting the contention of the company that the price paid by it for purchasing these quantities was average price is that the quality of the sugarcane purchased, whether the purchase was made in season and out of season and in what months has not been mentioned. Apparently, under the above rule, the market value was liable to be determined by ascertained average price of sugarcane sold in open market. In this connection, the ex-farm price and/or the price ex-factory of the purchaser was not to be relevant. The market must be one which would be nearest to the factory of the manufacturer concerned. It has been admitted at the Bar that the co....
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....rch 31, 1953, for the year of assessment 1954-55, reliance aswas rightly placed on the facts relating to the assessment of. other companies in the following words : " I have looked into other sugar company cases and found that the average fluctuates a little. In another company which is assessed here and of which the assessee is presumably aware the average purchase price of cane was Rs. 36-4-6 per ton and this gives a clear idea of the prevailing market. " The Tribunal in its order dated July 27, 1960, similarly rightly relied upon the other case. With reference to that year, the same rate has been adopted as was done in other cases and they were accepted by 3 sugarcane cultivating companies of this region. It is difficult to reject the findings made in the several orders of the authorities which we have referred to above that the rate arrived at by these authorities in the above manner was more reasonable than the rate claimed by the company. Now, in this connection, it requires to be added that as other reliable evidence of average price of sugarcane in the area in question had not been produced by the company, the authorities were justified in referring to the facts which h....