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Issues Involved:
1. Deduction of interest forgone by the assessee-company. 2. Deduction of extra cane price paid to the agricultural company. 3. Admissibility of additional price payable to cane-growers under the Sugarcane (Control) Order, 1955. Detailed Analysis: 1. Deduction of Interest Forgone by the Assessee-Company: The primary issue was whether the interest forgone by the assessee-company on advances made to the agricultural company could be considered as a business expense under the provisions of the Indian Income-tax Act. - M.C.C. No. 252 of 1982: The Tribunal allowed the deduction of Rs. 50,000 interest forgone on the grounds of business expediency. The ITO and AAC had initially disallowed this deduction. The Tribunal's decision was based on the fact that the interest was surrendered to support the agricultural company, which was in financial distress, and thus, it was a commercial consideration. - M.C.C. No. 85 of 1971: The Tribunal upheld the deduction of Rs. 50,000 interest forgone, following its earlier decision in M.C.C. No. 252 of 1982, considering it a business expense. - M.C.C. No. 67 of 1971: The Tribunal deleted the addition of Rs. 50,000 interest forgone, maintaining it was a business expenditure. - M.C.C. No. 727 of 1972: The Tribunal upheld the deletion of Rs. 10,000 interest forgone, considering it a business expense. The court affirmed that the interest forgone was for business purposes, as it facilitated the carrying on of the assessee's business and was supported by commercial expediency. 2. Deduction of Extra Cane Price Paid to the Agricultural Company: The second issue was whether the extra cane price paid to the agricultural company could be treated as a business expense. - M.C.C. No. 252 of 1982: The Tribunal disallowed the extra cane price of Rs. 1,04,017 paid to the agricultural company, considering it not for business purposes. However, the court found that the extra payment was made to ensure the supply of better quality cane, which was essential for the assessee's business. - M.C.C. No. 726 of 1972: The Tribunal partly allowed the Department's appeal, allowing only Rs. 38,000 as a premium for better quality cane for the assessment years 1960-61 and 1961-62. The court held that the extra payments were made to ensure the supply of quality cane and were therefore business expenses. The court concluded that the extra payments for cane were made to ensure a steady supply of quality raw material, which was crucial for the assessee's business operations and thus qualified as a business expense. 3. Admissibility of Additional Price Payable to Cane-Growers Under the Sugarcane (Control) Order, 1955: The third issue was whether the additional price payable to cane-growers under the Sugarcane (Control) Order, 1955, could be deducted as an expenditure. - M.C.C. No. 726 of 1972: The Tribunal rejected the deduction of Rs. 10,57,462 and Rs. 2,35,130, stating that the liability arose only after the notification dated December 24, 1964. The court, however, held that the additional price was an ascertained liability and should be deducted in computing the total income for the relevant assessment years. The court concluded that the additional price payable under the Sugarcane (Control) Order, 1955, was an ascertained liability and should be allowed as a deduction. Conclusion: The court held that both the interest forgone and the extra cane price paid were allowable as business expenses under section 10(2)(xv) of the Indian Income-tax Act, 1922, or section 37(1) of the Income-tax Act, 1961. The additional price payable under the Sugarcane (Control) Order, 1955, was also an allowable deduction. The court answered all the questions in the affirmative and in favor of the assessee-company.
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