Just a moment...

Report
FeedbackReport
Bars
Logo TaxTMI
>
×

By creating an account you can:

Feedback/Report an Error
Email :
Please provide your email address so we can follow up on your feedback.
Category :
Description :
Min 15 characters0/2000
TMI Blog
Home / RSS

2025 (6) TMI 1331

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....as expenditure incurred, as a result of Clause 5A notified under the Sugarcane (Control) Order, 1966 ('the Order' in short). Initially, assessee paid its statutory minimum price of sugarcane to the growers. Later, the Government fixed a final price for cane on 27.07.2004. As a result of this notification under Clause 5A of the Order, assessee had to pay additional cane price over and above the statutory minimum price amounting to Rs. 48.35 crores. Out of this Rs. 48.35 crores, assessee debited Rs. 23.35 crores representing the amount paid to the cane growers at the minimum statutory price (MSP) to the profit and loss account under the head 'cost of raw material' and balance Rs. 25 crores was not credited to Profit and Loss Account and not claimed in original return. Assessee filed a revised return and claimed deduction of Rs. 25 crores as cane arrears in the income-tax computation statement and the amount was debited to profit and loss appropriation account. Since clause 5A of the Order was passed on 27.07.2004, according to the Assessing Officer, the payment of Rs. 48.35 crores crystallised for payment in the Financial Year 2004-05, relevant to AY 2005-06. As the a....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....Tribunal was right in law in holding that the assessee has the option of choosing any other accounting period when the expenditure stands crystallized during the financial year 2004-05 (Assessment Year 2005-06), even though the liability has clearly crystallized in the earlier years in view of the orders passed under Clause 5A of the Sugar Cane (Control) Order, 1996 on 27.07.2004 and 29.10.2004 and following the mercantile system of accounting? 3. Whether on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding that the liability of earlier years can be deducted by treating the payment as Goodwill when the fact it represents the agreed purchase consideration between the assessee and the farmers and the amount already disbursed in the respective years, and now debited to Profit and Loss Account for the assessment years 2006-07 is valid? and 4. Whether on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding that the assessee is entitled to deduction of Rs. 25 crores of Cane Equalization Fund from nete profit while working out book profit under Section 1 15JB of the Act....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....verages division had become part of block assets and was so treated by assessee in its books of accounts. Therefore, once depreciation is allowable on entire block of assets, even if some of the assets of the block have not been used, existence of an individual asset in the block of assets itself amounts to use for the purpose of business. Therefore, the assessee would be entitled for depreciation on beverages division. 10. The first issue is answered against the Revenue and in favour of assessee. 11. As regards the second issue, that is, disallowing of expenditure due to cane price fixed vide order passed under Clause 5A of the Order, assessee company, for AY 06-07, had to pay the sugarcane price, the statutory minimum price, at initial stage to the farmers, as notified by the Central Government. The sugarcane price was finally fixed by the Government under Clause 5A of the Order. The notification under Clause 5A of the Order for the years 1997-98 to 2000-01 was issued by the Government on 27.07.2004 and 29.10.2004. As a result of the notification under Clause 5A, assessee had to pay additional cane price amounting to Rs. 48.35 crores over and above the statutory minimum price. ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....re in a different year than the year in which it actually crystallized. Therefore, we agree with the finding, in the facts and circumstances of the case, that the expenditure as a result of order passed under Clause 5A of the Order has been crystallized only when the assessee received the Government orders. 15. Accordingly, the second question of law is answered in favour of the assessee and against the Revenue. 16. As regards the third issue of disallowance of deduction claimed on an intangible asset (goodwill), the relevant facts are that for every sugar factory, the State Government demarcates an area for procurement of sugarcane. Before commencement of sugarcane season, the sugarcane growers are registered with the factory for supply of cane. For every season, the Central Government fixes the prices under the statutory minimum price to be paid to the sugarcane growers for every State. The statutory minimum price is not a final price to be paid by the sugarcane factories to farmers, but it is to be paid subject to the additional payment to be made as per the Order by the State Government. the statutory advisory price is over and above the price fixed under Clause 5A of the Ord....