2009 (12) TMI 20 - HC - Income Tax

Deduction of an expenditure u/s 37(1) - the Development Commissioner (subsidy & commission), Society Commission, cane development expenses and fertilizers supplied to the farmers paid to the cane growers formed part of purchase price held that - the Tribunal was correct under law in holding that the commission and subsidy paid to cane growers formed part of purchase price of the cane and thus allowable for deduction under Section 37(1) of the Income Tax Act

Summary

Issues:
Interpretation of Section 37(1) of the Income Tax Act regarding deduction of certain expenses in the purchase price of cane paid to growers.

Analysis:
The High Court of Allahabad heard an appeal filed under Section 260-A of the Income Tax Act against the order of the Income Tax Appellate Tribunal related to Assessment Year 1988-89. The main question raised was whether certain expenses like Development Commissioner subsidy, society commission, cane development expenses, and fertilizers supplied to farmers, paid to cane growers, should be considered part of the purchase price of cane and thus allowable for deduction under Section 37(1) of the Income Tax Act. The Tribunal, in favor of the assessee, relied on its own previous order and the court's judgment in a similar case. The court noted that in previous cases, including one involving M/s Sir Shadi Lal Enterprises Ltd, it was decided that such expenses were indeed part of the purchase price of cane and eligible for deduction under Section 37(1) of the Act.

The court found that the Tribunal's decision was legally correct as per the interpretation of the law. It was established that the commission and subsidy paid to cane growers were integral to the purchase price of cane and thus fell within the ambit of allowable deductions under Section 37(1) of the Income Tax Act. Consequently, the appeal was dismissed, and no costs were awarded. The judgment was delivered on 1.12.2009.