1986 (4) TMI 46

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.... material for manufacture of sugar in its own factory. In the assessment year 1963-64, the corresponding accounting year ending on September 30, 1962, the assessee in its accounts debited on account sugarcane produced in its farms and utilised in the manufacture of sugar at its factory price at the rate the ex-factory gate price fixed by the Government for sugarcane, viz., Rs. 4.34 per quintal, and in addition claimed as deduction Rs. 77,288 on account of transport expenses incurred in bringing the sugarcane from the farms to the factory. The assessee was assessed to income-tax in the said assessment year. The Income-tax Officer was of the view that as the assessee had already debited the market price of sugarcane at ex-factory gate p....

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....Income-tax Rules, 1962. The Appellate Assistant Commissioner upheld the decision of the Income-tax Officer. Being aggrieved, the assessee went up on a further appeal before the Income-tax Appellate Tribunal. The Tribunal held that if the assessee proceeded on the basis that the average market price of sugarcane grown at its own farms was the ex-factory gate price fixed by the Government, there was no question of allowing any further transport expenses up to the factory gate. The Tribunal, however, noted and accepted the contention of the assessee that since the assessee had an out-centre as also its farms, the difference between the price fixed by the Government for the out-centres and that fixed at the factory gate should be permitte....

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....on to rule 7 of the Income-tax Rules, 1962, the relevant part of which is as follows : " Rule 7. Income which is Partially agricultural and Partially from business.-(1) In the case of income which is partially agricultural income as defined in section 2 and partially income chargeable to income-tax under the head 'Profits and gains of business' in determining that part which is chargeable to income-tax, the market value of any agricultural produce which has been raised by the assessee or received by him as rent-in-kind and which has been utilised as a raw material in such business or the sale receipts of which are included in the accounts of the business shall be deducted, and no further deduction shall be made in respect of any expendit....