In Brief
A sugar co-operative society paid higher cane prices to growers than the statutory minimum, citing state-determined prices. The department treated the excess as profit distribution, taxing it as income. The assessee claimed it was allowable business expense. The Supreme Court held that while the state-determined price (SAP) under Clause 5A of the Sugar Cane (Control) Order, 1966, does contain a profit-sharing element (following Bhargava Commission recommendations), not all of the SAP excess above the statutory minimum constitutes profit. The Court remitted the matter for the assessing officer to separately identify the legitimate cost and profit components, allowing only the profit portion as non-deductible appropriation.", <parameter name="cited_cases">[ { "raw_citation": "1995 Supp. (3) SCC 475", "case_name": "Maharashtra Rajya Sahkari Sakkar Karkhana Sangh Limited v. State of Maharashtra", "cited_year": "1995", "paragraph": "7.4, 9.4", "treatment": "relied", "treatment_by": "this_court", "treatment_quote": "It is submitted that as observed by this Court in the aforesaid decision, the additional price determined under Clause 5A is at the end of the season. It is submitted that as observed, the Bhargava Commission had recommended payment of additional price at the end of the season on 50:50 profit sharing basis between the growers and factories to be worked out in accordance with Schedule II to the Control Order, 1966... The entire scheme/mechanism while determining the additional purchase price under Clause 5A has been dealt with and considered by this Court in detail in the case of Maharashtra Rajya Sahkari Sakkar Karkhana Sangh Limited (supra)." }, { "raw_citation": "(2008) 301 I.T.R. 191 (Bom.)", "case_name": "Commissioner of Income Tax v. Manjara Shetkari Sahakari Sakhar Karkhana Limited", "cited_year": "2008", "paragraph": "6, 5", "treatment": "distinguished", "treatment_by": "this_court", "treatment_quote": "The learned CIT(A), relying upon and considering the decision of a Special Bench, Mumbai ITAT in the case of Manjara Shetkari Sakhar Karkhana Limited dated 19.08.2004 allowed the appeal... However, the Supreme Court's reasoning in the present appeals distinguishes this position by holding that the entire/whole amount of difference between the SMP and the SAP per se cannot be said to be an appropriation of profit." }, { "raw_citation": "Special Bench, Mumbai ITAT decision of Manjara Shetkari Sakhar Karkhana Limited dated 19.08.2004", "case_name": "Manjara Shetkari Sakhar Karkhana Limited", "cited_year": "2004", "paragraph": "5", "treatment": "referred", "treatment_by": "this_court", "treatment_quote": "The learned Commissioner of Income Tax (Appeals), relying upon and considering the decision of a Special Bench, Mumbai ITAT in the case of Manjara Shetkari Sakhar Karkhana Limited dated 19.08.2004 allowed the appeal preferred by the assessee" } ]
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