Additional price payable to cultivators of sugarcane allowed as deduction in year in which additional liability arises. - Income Tax - 1194/CBDT

INSTRUCTION NO. 1194/CBDT Dated : December 13, 1978 Section(s) Referred: Rule 7 Statute: Income - Tax Act, 1961 Reference is invited to Board's Instruction No.745 (F.No.228/28/74-ITA.II) dated 30th August 1974 wherein it was clarified that the additional price payable to the cultivators of sugarcane is to be allowed as deduction in the year in which the additional liability arises and not in the year to which it relates because the liability is ascertained only on the date of the order of the price fixation authority. 2. While the above view holds good in case of sugarcane purchased from the market it would not be applicable in the case of sugarcane grown in the assessee's own agricultural farm since the concept of liability does not come in the picture as the assessee does not own any amount to a third party. In the case of self grown sugarcane, it is the market value of such sugarcane which is to be allowed as a deduction in the year in which the same has been utilised as raw material. The market value of the sugarcane for a particular year would obviously be the price fixed for that year by the Ministry of Agriculture and Irrigation Any revision of the prices at a later date would be referable to the year in which such sugarcane was utilised as a raw material and as such allowable in the relevant assessment year. 3. As regards the claim for deduction of the enhanced price of self-grown sugarcane, the Board are advised as under:- i) If the assessment proceedings have not been completed by the I.T.O. a revised return claiming the deduction at the revised price can be filed by the assessee and the ITO would consider such claims. ii) If the assessment proceedings are pending with appellate authorities such a claim can be made by the assessee before those authorities. iii) In case of completed assessments application u/s.264 can be entertained by the CIT. In suitable cases, the provisions of sec.119(2)(b) can be invoked to relieve genuine hardships.