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[2008] 168 Taxman 21 (Punjab & Haryana)/[2009] 316 ITR 461 (Punjab & Haryana)/[2008] 215 CTR 152 (Punjab & Haryana) [2008] 168 TAXMAN 21 (PUNJ. & HAR.) HIGH COURT OF PUNJAB AND HARYANA Budhewal Co.-Op. Sugar Mills Ltd. v. Commissioner of Income-tax, Ludhiana* AJAY KUMAR MITTAL AND M.M. KUMAR, JJ. C.M. NO. 1200-CII OF 2006 AND IT APPEAL NO. 84 OF 2006 OCTOBER 16, 2007 Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of - Assessment year 1993-94 - Assessee-co-operative society claimed deduction of additional sugarcane price paid to sugarcane growers as a business expenditure - Claim was disallowed by lower authorities - On appeal, Tribunal found that assessee unilaterally enhanced sugarcane price and created an additional liability in that respect by making a provision towards additional sugarcane price, without, however, making any actual payment to sugarcane growers; that such additional liability was shown only in those assessment years when assessee had earned huge profits; and that said liability was directly taken to share capital account with a view to enhance its capital base, but without payment of taxes in respect of related amount - On basis of said findings, Tribunal upheld disallowance, holding that action of assessee was not bona fide and was employed to avoid payment of dues to exchequer - Whether there was any infirmity in order of Tribunal - Held, no FACTS The assessee was a co-operative society. For the relevant assessment year, it claimed deduction of additional sugarcane price paid to the sugarcane growers as a business expenditure. The Assessing Officer disallowed the assessee's claim. On appeal, the Commissioner (Appeals) upheld the order of the Assessing Officer. On further appeal, the Tribunal found that the assessee had not made any payment on account of additional sugarcane price before the end of the relevant financial year and the liability on account of such alleged expenses was directly taken to share capital account without payment of taxes in respect of the said profits. Therefore, the Tribunal sustained the disallowance made by the Assessing Officer. On appeal under section 260A :…

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