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Issues involved:
The judgment involves issues related to the additional cane price paid to sugarcane growers by a cooperative society, the legality and justification of such payments, the business purpose behind the payments, and the tax implications of the transactions. Summary: Issue 1: The petitioner, a cooperative society engaged in sugar manufacturing, contested the addition of additional cane price paid to sugarcane growers. The Assessing Officer disallowed a portion of the claimed amount, alleging it was not warranted by genuine needs and was a tax avoidance tactic. The Commissioner of Income-tax (Appeals) upheld the decision, but the Tribunal allowed a deduction of Rs. 2 per quintal to cane growers, disallowing the rest as not wholly or exclusively for business purposes. Issue 2: The Tribunal found that the petitioner's increase of Rs. 20 per quintal in cane price was not bona fide and was done for extra commercial considerations, depriving the Revenue of its dues. The Tribunal noted that subsequent years saw lower purchase prices, indicating the petitioner's actions were aimed at tax avoidance rather than legitimate business needs. Issue 3: The Tribunal determined that the petitioner's actions were not justified by business considerations and were a means of enhancing capital without paying due taxes. The increase in cane price was deemed disproportionate and unreasonable, leading to tax avoidance. The findings were held to be factual, and no legal question arose for reference. In conclusion, the Tribunal dismissed the petitioner's claims, affirming that the additional cane price payments were not bona fide and constituted tax avoidance, thereby upholding the disallowance of a significant portion of the claimed amount.
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